That article is full of the same incorrect points put forth by a GME exec recently.
"many games are around 50 gigabytes"
Not true. I just checked for torrents of PS3 games and one is 22GB, another 19GB, and most are under 7GB. The largest 360 games including GTA4, Fallout 3, Halo 3, Gears 2, are all 9GB or less. Large Wii games are half that size. Large PSP games are 1.5GB. Large DS games are 0.1GB.
It's standard practice to include some files multiple times in disk images to reduce seek times, which for downloading purposes you wouldn't do. Also right now so long as it fits the physical media, developers have no incentive to make it smaller. If they knew they were targeting digital, they'd try.
"people would buy a game, and then have to wait for days to weeks for it to download"
Not true. No reason at all you couldn't download the first level of a game, play it for an hour or so, and be downloading the second level in the background. If you didn't play level 2 until the next day, that's 24 hours to download a fraction of the game.
"many consumers would rather buy a CD instead of downloading an album from iTunes"
LOL. Tell that to the music industry and to Apple execs.
"game makers would have to reduce prices to compensate consumers for the lack of trade-in value and also for the other shortcomings mentioned above."
No mention given to the added convenience of not having to drive to a store, paying for the gas, dealing with store opening hours and shelf inventory issues, or the benefit of having instant access to that game and others every time you press the ON switch.
"OnLive will only send content in 720p HD resolution, which for gamers currently getting their games in 1080p is not an exciting prospect."
Not true. Only a couple of retail games run in 1080p. There was Virtua Tennis 3 I think, and actually that's all I can think of. The latest Wipeout on PS3 (digital only) is 1080p. Practically every game on PS3 and 360 runs in 720p, and actually a few run at 640p.
That article makes no mention that there's a clear trend going on, and as you can see, it's full of grandiose arguments which have litte or no basis in facts.
You make a pretty convincing argument. So it's a when it happens, not an if. That may be true. But here is an article with 6 fairly good reasons that the Digital Downloading threat is overblown and will not happen. The 6 reasons that the author comes up makes sense. Here is the article. Take a look. Not trying to argue with you. Just facilitating some discussion. Thank you.
Wedbush Morgan Securities analyst Michael Pachter expects Microsoft to experiment with pricing options for its new Xbox 360 Games On Demand service “until it gets it right.”
The service launches tomorrow as part of the platform holder’s latest Xbox 360 dashboard update with games set to be individually priced at 1600-2400 MS Points ($19.99-$29.99 / £13.60-£20.40).
Numerous consumers have questioned the wisdom of setting the cost of Games On Demand titles above the prices they carry at stores or online retailers, but Pachter said that even at relatively high price points downloadable titles will appeal to ‘convenience’ customers.
“It’s pretty clear that Microsoft is working with publishers to generate incremental sales,” he told us. “The games are all fairly old so demand is probably pretty light for most of the games. Mass Effect will get a boost when ME2 comes out early next year, and NFS Carbon could get a small boost when NFS Shift comes out.
“I think that the point of pricing at or above catalogue prices at retail is to capture the convenience customer, who wants the game and doesn’t plan to make a special trip to the store to buy it… The Games On Demand service should be popular with convenience focused customers, as some people will value the immediate gratification of a download, the ability to download 24/7, etc."
Pachter also said that if trade-in values are as low as $5, “even the value-conscious trade-in customer may sacrifice resale for convenience.” In addition, he expects Microsoft and publishers to “figure out a way to provide exclusive content" with Games On Demand titles.
“Microsoft is going to experiment with pricing until it gets it right. It’s harder to start low and raise price than it is to start high and cut price. Microsoft can start at $20–30 per download, and if demand is light, can cut to $15–25, then can cut again if necessary. My guess is that as they build a library, Games On Demand will have a variety of pricing from $10–30.”
Microsoft executive Shane Kim noted recently that simultaneous retail and digital releases via the Games On Demand service are some way off. Pachter said they could become a reality by late 2010.
“Ultimately, when we all upgrade to the 500GB Xbox 360+, they’ll have all games available day and date, and pricing will range from $10–60. I think that the hang-up holding back day/date downloads has more to do with disc drive space and less to do with any disagreement with publishers. Once we see a significant number of Xbox 360 owners with Elite (120GB) models and once the Xbox 360+ is introduced, I think you’ll see day/date downloads. That should be some time year-end 2010 or early 2011.”
i agree it will take some time for a transformation, the future could be several years and i think Gamestop must be taken all that into consideration, there will be probably several channels base don how Gaming technology Hardware/Software evolve.
maybe it is not fare to compare it with Music industry but still could be some resemblance as the technology evolve, still there are Specialty retailers in the music industry. Still some one need to Sell HIFI and Portable music devices and accessories.
Lets see how the next few years takes us.
Console publishers need their retail network. Both MS and Nintendo have come out recently saying digital distribution fo full games at the same time as retail is far, far into the future and is not even on the horizon. Someone has to sell their consoles and peripherals and they can not risk alientating their retail channel to any great extent. It's a symbiotic relationship.
I agree that growth in retail gaming will be slower in the future due to rapid growth in the DLC space. But there is no reason GME can't continue to do well for a long time as long as the industry as a whole continues to grow and expand.
Storage keeps getting cheaper though. I can buy a 1TB drive for around $100 and that could fit 50-100 AAA games on it, which is more than most people play in the lifetime of a console. That's fine for PS3, though for the 360 it's more inconvenient and pricey because you can only use their custom expensive peripherals. I'm sure they're looking at solutions for that, since Live is such a big part of their business.
When a new Call of Duty map pack comes out and 2M hard core gamers buy it online, and spend weeks playing it, that's time they're not going to a brick and mortar store to buy anything. Those sales also don't show up in NPD reports, which makes sector growth comparisons look weaker than they are in reality.
It's a question of "when" not "if".
No, I don't think DLC will kill GME. Or OnLive. Or free2play games. Or PSPGo. Or Best Buy's used game kiosks or new game price matching with used. Or publishers putting first use coupons in games to encourage buying new instead of used. Or any of the other threats to GME's business model. I do however believe it's a case of death by a thousand cuts.
my feeling is that streaming games is so far down the line that it just isn't relevant at this point, they can't even get movies to stream perfectly, most online games run into lag issues, so I think seamlessly playing a game streaming to your XBOX or PS3 is possible, but having it rival the experience of an on disc game is pretty far fetched with the technology available. Being able to download full retail games is very realistic, I don't know how many people would do it though, I for one don't like to use up the hard drive space, so unless the game was discounted pretty heavily, I wouldn't even consider it. I am almost 100 percent certain that the games would be offered directly by the publishers over XBOX live or the PSNetwork because that would maximize their profits by cutting out as many middlemen as possible (think Itunes model, not to mention it makes illegal downloading much more difficult), and the only real goal of doing online distribution would be to make the absolute highest amount of profit possible. The only action I could see GME getting off of this would be selling the pre-paid MS points cards and stuff like that, that could be used to purchase the games online later. I don't know if they see much of a profit on those, I doubt it. Ultimately, I think online distribution could catch on, and could be successful, but I don't think it is the threat that everyone believes that it is at this point. Its not the same threat that the music industry faced, thats for sure, unfortunately it didn't turn out so well for the music industry.
This earnings isn't going to be great. There is no real catalyst, most of the good games are pushed back, and the price drop for the PS3 and subsequently for ever other system has yet to happen. I will reaffirm the position I have had for quite awhile. Long term this stock is great, in the short term, probably not.