End of 2012 and traditional business models

29 12 2012
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Nuke Explosion Courtesy of Deviant Art – Kingsandji

So naturally this time of year people reflect upon their lives, decisions made, experiences had, and then inevitably begin to look forward to the New Year and what it might bring. Since my blog is strictly about video games (for now at least) I want to talk about what I’ve observed.

As an individual working in the industry, mass consumer of industry news, and avid gamer my entire life, I’ve observed several interesting patterns and here’s my predictions. I know I’ve said it before, but retail will soon be finished, and if consoles do not change their business models, then they will not survive past another console generation. I believe Sony and Microsoft realize this, and that’s why I believe the next two pieces of hardware that hit us next year, will not be what the core gamer audience expects. They are most likely going to be an “All-in-one” media entertainment box”, I say this because Microsoft is a metric compiling and consuming beast, and when their metric data is telling them that the majority of XBOX 360 owners are NOT playing video games, but streaming Netflix, music, and video, that something has changed. This is due to a number of variables, which I will not get into; I’d rather talk about the business model for selling games, and what has recently happened to me.

Let me start by saying, “I LOVE MY XBOX 360”, and until now I’ve been incredibly dedicated to it, only switching to PC to play a strategy or MMO game on occasion. I however, woke up one day and realized that slowly I was being sucked back into playing games on my PC, and for one major reason, it was a better deal. Yes Steam, I’m looking at you. Steam is literally the digital crack needle of video games for me. I find myself getting around to playing games that weren’t on the top of my list, JUST because they were on sale, or I find myself delving into new experiences because of a lower price point. Here is my point, the traditional “Purchase a physical copy of a video game at a brick and mortar store for +/- $60” is dying and will soon be dead. This is mainly for two reasons, one is a matter of convenience to the consumer, and the other is it is a better business model for developers. Consider the following, for a developer releasing a game through Steam (an online digital distribution service by Valve) they keep 70% of the profit from those sales versus selling in the traditional model of a physical copy at retail where they maybe see 30% of a $60 purchase, maybe.

Why, you ask, will things go this way? It’s because currently, the development costs for AAA games is NOT sustainable anymore. Most of the AAA games you see on the market that are sold cross platform, need to sell upwards of 5 million (or much more) copies just to break even, or begin to see a ROI or return on investment. The golden age of consoles has long since been done, and it’s time for something new. I am not predicting the death of consoles outright, more along the lines of their inevitable evolution. In closing, I’ll deal with the inevitable comment of “Well PC’s are too expensive, that’s why consoles will never die yaarg!” (Sorry about the pirate)

Yes, a quality PC gaming rig is more expensive outright than a console. However, the game has changed (see what I did there?) Due to changes in digital distribution on PC’s, I rarely paid $60 up front for a game on PC, while console gamers are still paying $30-$60 for games that I’m paying $15-$30 for. So do the math, yes PC has a higher barrier to entry on price, but you easily recoup the cost in saving on video game purchases. Just as an example, I ran a calculator service, just now, on my Steam game library, which calculates every game in my library at their regular cost (not what I purchased them for on sale) and currently my library is worth $1620.25, and I’ve only recently switched back to PC gaming. That’s already well over what I paid for my gaming PC, and it plays everything on ultra-graphics settings.

In closing, I know it sounds like this entire post was a Steam fanboy rage. Take it how you will, but it’s undeniable, that their digital distribution methods are changing the industry, and the way we consume video game technology. Sooner or later, you will have to get on the bus. So what has my rant about business models really been about? It’s about the wave of change we are about to see unfold next year, and personally, it’s going to be damn exciting, and the real purpose of this blog was to lessen the blow of any disruptive technologies that blindside the average gamer next year. The winds of change are upon us!

Thanks for reading!

-Cheers

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2 responses

10 03 2013
Sarah James

I am new to gaming and was wondering what would be the best equipment and games for a beginner to start with? Any help you can give would be very much appreciated.

10 03 2013
Randen Dunlap

Well that’s a tall order as there are so many options out there. I can’t tell you which direction to go as undoubtedly one of them will suite you and your tastes. Your current options are PC, Xbox 360, Playstation 3, Nintendo WiiU, and some handhelds like 3DS and Vita.

If you have a decent PC/Laptop and some technical savvy, I’d recommend downloading Steam from http://www.valvesoftware.com and playing some games from there. That will probably be your most cost efficient method to start exploring games, as they are typically a lot cheaper there.

If that’s not an option, you’ll have to drop about $200-$400 to get one of the consoles and some games. Just keep in mind, the next gen console systems are going to be right around the corner soon, so I wouldn’t invest too heavily in current generation consoles, as they will soon be obsolete.

Like i said though, it’s really going to depend on your tastes. If you’re more of a very social/casual gamer, there’s games you can play on Facebook and elsewhere.

Overall, I recommend the PC method, which should save you some $$ for now.

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