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It has been stated several times over, that if Microsoft of Sony try to bypass stores for selling software directly to consumers, stores like Walmart would revolt, and give them a hard time about selling a zero margin console when there is not upside for them by getting margins from the software. Basically, if you don't let us sell the software, we won't stock your hardware.

 

I don't know if that is true, but it makes sense.

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I believe that is very true Keith and that is the #1 problem with Digital Distribution. You piss off the retailers, and moving hardware will be tough. No media means the specialty shops like Gamestop and Game Crazy will be the 1st to go. No more used software means major hit in the profit margin. Only way it will work is if the hardware is marked up obscenely and even then you piss off the consumer who will make the decision not to buy anything.....IMHO, a console with no optical media is a lot farther away than 2 years from now. MS might as well swallow their pride and ante up for Blu-Ray. ;)

 

-Dean-

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It has been stated several times over, that if Microsoft of Sony try to bypass stores for selling software directly to consumers, stores like Walmart would revolt, and give them a hard time about selling a zero margin console when there is not upside for them by getting margins from the software. Basically, if you don't let us sell the software, we won't stock your hardware.

 

OK, how about this then-has the success of Steam stopped Best Buy from carrying PCs? Yes, you can't buy everything online yet, but there is a lot of PC software that's download only, and it doesn't seem to have hurt PC retail all that much. Yeah, it's not the strongest example, but it's the best we have now for digital distribution. Another thing to look at might be the cell phone market-what are the margins on hardware there?

 

How about this-if the 360 was 50 bucks more at retail, but all the download only software was 10 bucks cheaper, would that be enough to convince people? There's also still be a lot of space in retail for things like prepaid cards and accessories. I also like the idea of stores being able to set themselves up as a "download station" for games, where they can offer download to disc services for people who want something like that (maybe a special retail unit that can burn a one-off dvd of a game that can be installed once?).

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I believe that is very true Keith and that is the #1 problem with Digital Distribution. You piss off the retailers, and moving hardware will be tough. No media means the specialty shops like Gamestop and Game Crazy will be the 1st to go. No more used software means major hit in the profit margin. Only way it will work is if the hardware is marked up obscenely and even then you piss off the consumer who will make the decision not to buy anything.....IMHO, a console with no optical media is a lot farther away than 2 years from now. MS might as well swallow their pride and ante up for Blu-Ray. ;)

 

-Dean-

 

For once I agree with Dean.

 

OK, how about this then-has the success of Steam stopped Best Buy from carrying PCs? Yes, you can't buy everything online yet, but there is a lot of PC software that's download only, and it doesn't seem to have hurt PC retail all that much. Yeah, it's not the strongest example, but it's the best we have now for digital distribution. Another thing to look at might be the cell phone market-what are the margins on hardware there?

 

How about this-if the 360 was 50 bucks more at retail, but all the download only software was 10 bucks cheaper, would that be enough to convince people? There's also still be a lot of space in retail for things like prepaid cards and accessories. I also like the idea of stores being able to set themselves up as a "download station" for games, where they can offer download to disc services for people who want something like that (maybe a special retail unit that can burn a one-off dvd of a game that can be installed once?).

 

Everyone keeps thinking downloads are replacing music, movies, games, eventually TV as we know it, the list goes on an on. Before that it was books and newspapers we heard were going away.

 

What are retail stores going to sell, then, if they aren't selling music, movies and games?

 

I can see MS offering up downloads as an alternative to getting a real disc and getting some sales with it, like Steam. But I would pay a $20 or $30 premium for a disk. Because... What happens when the HDD dies? Re-download everything? Look how many problems the DRM have caused for XBLA games. I want to be able to resell games. I think long and hard before buying an XBLA game, because there is no reselling it, ever. That money is gone. There's a lot of benefits to having a real disc.

 

I sold my PS1 copy of Castlevania:SOTN for $40 on ebay. Can I do that with my XBL version? No, that's $10 spent and I can never recoup any of it.

 

To move to downloads instead of a retail product, in all forms of media, will require a massive retail and marketing paradigm shift. I doubt we will see any time soon. I anticipate physical products still being the primary form of sales for all of this stuff for at least 10-15 years.

 

Talk to me about downloads replacing games when new CDs aren't in most stores any more. I might believe it then.

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What are retail stores going to sell, then, if they aren't selling music, movies and games?

 

What are the ice-block salesmen gonna sell when we all get them refrigerators? What are the five-and-dimes gonna sell when people stop using ash trays? What are the video stores gonna sell when people start using Netflix and on-demand instead? What's Ditto, Inc gonna sell when people move to Xerox'd pages? What's Kodak gonna sell when people start using digital cameras? What are all the plate armor artisans gonna sell when people start using guns instead of swords in battle? What are slide-rule manufacturers gonna sell when we start using calculators? What's Morse gonna sell when we all start using telephones?

 

Sorry so be so snarky, but c'mon. You're not that much of a luddite. Do we care that much about the stores? Take out the drive, put in a (by then) cheap HDD, and sell the game machine / set top box at a margin. Or bypass them like the cable companies have done successfully. It's really not that hard to imagine.

 

Digital distribution will happen. Simple as that. Some people will bitch and moan, but it's inevitable. The ROI on producing a 100GB+ disk format post Blu-Ray is diminishing by the minute. Sure, someone will try to do it, some people will run out and buy $1000 players, but the drop-off will continue at a steep pace.

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I think what a lot of people tend to forget is that we are the minority. Sure, downloads sound good to most of us, but then I know people who I still have to configure their 360 because as soon as they hit that Network settings tab their brain shuts down. Most console owners are simple people. They buy a disc or rent a disc. They want to have nothing to do with downloading. Using PC software as a measuring stick is really apples to oranges since they do nowhere near the sales that consoles do and stores make money when they sell PC hardware. Plus, if Steam was doing as good as we think, how come they never show any sales numbers? If they were doing a million downloads of COD4, you better believe they would be boasting about it.

 

-Dean-

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I think what a lot of people tend to forget is that we are the minority. Sure, downloads sound good to most of us, but then I know people who I still have to configure their 360 because as soon as they hit that Network settings tab their brain shuts down. Most console owners are simple people. They buy a disc or rent a disc. They want to have nothing to do with downloading. Using PC software as a measuring stick is really apples to oranges since they do nowhere near the sales that consoles do and stores make money when they sell PC hardware. Plus, if Steam was doing as good as we think, how come they never show any sales numbers? If they were doing a million downloads of COD4, you better believe they would be boasting about it.

 

It's about the product design and usability. You're going off of the XBL design, which sucks in terms of usability. Even I hate using it and I know how to use BitTorrent and shell command lines. I'd rather use BitTorrent than that crappy interface / service.

 

Take a look at Vudu or AppleTV and you'll see it's really very, very simple for the consumer, like browsing a digital cable box's program guide. This is why on-demand is doing pretty well. Just make it easy and people's brains won't shut down.

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Making downloads easy is probably the easiest thing to do. Convincing people to sell your hardware with minimal profit is a whole other animal. I am fully aware that digital distribution is the future, and I do indeed like it for certain things (music especially and some games), but another hurdle comes into play that no one has mentioned. When I want to take my copy of Madden NFL '13 to my buddies house to play, how does that work?

 

-Dean-

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Making downloads easy is probably the easiest thing to do. Convincing people to sell your hardware with minimal profit is a whole other animal. I am fully aware that digital distribution is the future, and I do indeed like it for certain things (music especially and some games), but another hurdle comes into play that no one has mentioned. When I want to take my copy of Madden NFL '13 to my buddies house to play, how does that work?

 

-Dean-

 

I think the notion that a game console needs to be the size of a DVD player is in question here.

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But what if my friend has the same console, and we just want to play a game I bought? It's no longer as easy as plopping the disc down in the tray and going from there. We have to hope that there is no DRM (yeah right), or there is an adoption to downloads that the PSN does (5 machines per download). The problem with that is, I still have to log in, then download it, wait for it, then we play. Its a lot easier plopping the disc in the drive. :)

 

-Dean-

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Okay, let me give you a visual. Like a picture book for the slower folks, or for those suffering from debilitating fevers.

 

Here's a hard disk in the 70s compared to one today (and that one is even solid state with more storage):

 

17680.jpg

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Here is how I see DD working.

  • Eliminating the Middle man drives game prices down $15-$20 per big budget title. This in turn eliminates that desire to sell back since things are much cheaper.
  • Making the HDD portable is crucial. Also making it work in conjunction with your friends machine is mandatory. The is means that the HDD has two connections, the standard one if you plugged it into the consoles slot and a 2nd one for an optional USB cable making it essentially a giant Memory card.
  • Hardware has to be affordable. Only a small markup for the retailers or you will watch the gamers leave in droves.
  • The HDD has to be huge. Nothing short of a couple of Terabytes.

To be fair, I am playing Devil's Advocate. I am all for DD and I cannot wait for the day where all my movies and games sit on HDD's instead of cases cluttering up space.

 

-Dean-

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Digital distribution can come and go. I'm fine with that. The fiinality of digital distribution taking the place of disc media isn't going to happen overnight. High bandwidth downloads need addressed, data redundancy, DRM schemes etc. There's a great deal that needs to be worked out and I don't see a point in the near future where games are download only. At least not for a very long time.

 

When that time does come though, I still hope we don't reach a point in time where console hardware is lacking in a disc based drive. My hope is that alongside digital distribution, those of us that want disc based media are given the option to order said media for an smallish charge above the cost of the downloadable game. It would allow retail a slice of the pie as well as they can continue to sell disc based media and cater to the more collection minded folks that want hard media in thier library. It's not the perfect solution but a download only future where all of my games reside on a HDD and I have no option to pick up hard media is not something I relish (consider my thinking outdated if you like).

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When that time does come though, I still hope we don't reach a point in time where console hardware is lacking in a disc based drive. My hope is that alongside digital distribution, those of us that want disc based media are given the option to order said media for an smallish charge above the cost of the downloadable game. It would allow retail a slice of the pie as well as they can continue to sell disc based media cater to the more collection minded folks that want hard media in thier library. It's not the perfect solution but a download only future where all of my games reside on a HDD and I have no option to pick up hard media is not something I relish (consider my thinking outdated if you like).

 

That's totally fair, and has already been done with Warhawk and to-come with Socom and (probably) LittleBigPlanet.

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Sorry Keith, your arguement about Walmart and retailers just doesn't hold water.

 

Did you know that iTunes is the largest seller of music in the world, just (barely) behind Walmart? Meaning Walmart sells the most CDs, but #2 (and closing VERY fast) is the proprietary Apple CD-less format. 48% of teenagers last year didn't buy a single CD, all year. Not one CD, wow!

 

So then Walmart should be worried and pissed about this right? Apple is pulling bread right off everyone's table and shrinking Walmart's business (really the entire CD market's business.) Have you ever been a Walmart that didn't have iPods lined up floor to ceiling in the music dept? Walmart is a paper tiger, ultimately they are a glorified retail outlet. They will sell whatever makes them money. Or they die. Period.

 

As far as EB games and those stores go, they are on their last legs anyway. I might pick up a game or two there, but between Amazon, Best Buy, and Costco there is almost always a better deal out there.

 

Video killed the radio star guys. The only difference between sound (iTunes) and video/gaming is the size of the download. ANd that gets to be a smaller and smaller hurdle every day.

 

Here's something interesting to ponder: what if Bluray is the last (viable) physical disc format we ever have? Is it a must have in the next gen, or longer term does it become "must ditch"?

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Sorry Keith, your arguement about Walmart and retailers just doesn't hold water.

 

First of all, it is neither my point nor my argument. I was just offering up what the 1up Podcast guys and others have been saying on the subject. The context was "Warhawk" and Sony's handling of its distribution and what that could mean for game distribution in the future. So I will relay to them your message about Bruce's Mom's water breaking or whatever you said.

 

Oh, and I think several people are missing the point and instead arguing that digital distribution is viable, pointing to Steam and Itunes and saying, "SEE! Told you!"

 

But the point isn't whether digital distribution is viable or not. The point being made, and imo not being rebuked properly, is that a hardware maker has to maintain a healthy distribution relationship with stores like Walmart and Bestbuy to feed their electronics into consumer hands...

 

... In the videogame industry specifically, where manufacture's sell their hardware with really low profit margin's with the promise of high software and accessory profit margins, will the elimination of software strain that relationship with retailers? Will manufacture's like Microsoft and Sony have to make concessions? Could it be a problem? Could it cost them money trying to deal with that relationship problem?

 

I don't work in that department of Sony or Microsoft but I bet it is a challenge. I have no idea. I could just as easily be arguing the other side. Just thought it was interesting.

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As far as EB games and those stores go, they are on their last legs anyway. I might pick up a game or two there, but between Amazon, Best Buy, and Costco there is almost always a better deal out there.

 

I agree with most of what you said Zot, but this bit about the Amazons, Costcos and such taking out GameStop and EB games, I don't see that happening for a few reasons.

 

1. Gamestop, for example, has grown consistently over the last 5 years, with little to no slowdown (see: http://finance.yahoo.com/echarts?s=GME#symbol=GME;range=5y;compare=), despite these other retailers being around the entire time.

2. Gamestop (I know this isn't true of all the outlets) offers gamers (and their gift buying parents) a level of cutomer service that gives them some sense that they are making an educated purchase. Kind of like buying a stereo from Tweeter instead of Wall-Mart, provided you're buying the same quality product.

3. USED GAMES: This is what has drivin GameStop's financial success, since they can pretty much dictate their margins on used games, they have provided themselves a predictable, and viable revenue stream for years to come (at least until DD demolishes them).

4. Customer Loyalty: While many people hate gamestop, far more people love them, because they know that they can trade in a game and with the trade in value, buy another one at a substatially reduced price. Also, they have attracted many with the bonus of getting an additional 20% savings over the reduced price of buying a used game (10% on the trade in and 10% on the new purchase), provided they become members to the gamestop club for $20/yr (which includes a decent magazine subscription).

5. Least I forget we're americans, we want INSTANT gratification, so given that, depending on where you live, a trip to your local gamestop can be just around the block, which is much faster than waiting for amazon to ship your game, which is actually more expensive than the $25-30 out of pocket you're about to spend on Assasin's Creed used with your Eternal Sonata trade-in.

 

So when you say last legs, I raise an eyebrow in suspicion.

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I think one of the key components people miss in these digital distribution is the lack of gaurentee that comes with games being available as a digital property. I mentioned it earlier but data redundancy and available are HUGE issues for me in accepting full games (specifically) as downloadable property.

 

Wipeout HD is a perfect example of the topic I'm talking about. As of right now, there will be no disc version of Wipeout HD released. Let's presume for a moment that we won't see a disc release at all from Sony. Now, I have no issues spending the $29.99-$39.99 price tag on the game because I very much want to play it. I'll get 4-6 years (or maybe even the full 10 years Sony envisions for the PS3) of enjoyment out of it. However, years from now when the Playstation 3 is a memory and the Playstation 4 sits on store shelves a downloadable only machine - what happens when Sony decides to turn off the servers for PS3 downloadable games? What happens if my WipeoutHD installation corrupts and I need to redownload and that's not there?

 

Mind you, we are seeing a great revolution of nostalgiac game releases across all of these services but do I really want to wait for Sony/Microsoft/Nintendo to work out a proper timetable for when to make Wipeout HD available again before I can play it? You see, I can throw in my hard copy of original PSX titles whenever I want to and the biggest concern I have it whether my original PSX/PS2/PS3 hardware is going to play that title (hardware that's fairly easily replaced).

 

Keep in mind that I'm not saying that's going to happen with every title out there. I simply don't have enough faith in any of these console manufacturers (who can barely agree on backwards compatibility being a standard feature for example) to get thier act together in maintaining a huge library of current and older titles for download.

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I can't speak for everyone or everywhere but at least in a city like Detroit Gamestop/EB's aren't going anywhere and are doing pretty well. Most people here don't have credit cards and can't deal hunt online, they need to go to a brick and mortar store to get their games. Best Buy's and Circuit Citys will not put a retail store in the city meaning you need to go out to the burbs to shop there, why do that when there's 3 Gamestop/EB's almost within walking distance? Sure you're going to pay full price but when you factor in time and gas you're probably pretty much even. Toss in the ability to swap your old games in for credit on new ones (disregarding the fact you're getting ass-raped in that deal) and you can see why those stores will probably be around for awhile to come.

 

Personally I'll deal hunt online occasionally if the shipping isn't bad, but I usually want my game ASAP. I'll also occasionally go to Best Buy for games as well, but most times I just pay full price for the convenience of being able to take a 5 minute trip from my house to pick up my games.

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First of all, it is neither my point nor my argument. I was just offering up what the 1up Podcast guys and others have been saying on the subject. The context was "Warhawk" and Sony's handling of its distribution and what that could mean for game distribution in the future. So I will relay to them your message about Bruce's Mom's water breaking or whatever you said.

 

Please, leave your girlfriends out of this. I want nothing to do with that level of depravity. I have to insist that your sex life is off the table right now.

 

Oh, and I think several people are missing the point and instead arguing that digital distribution is viable, pointing to Steam and Itunes and saying, "SEE! Told you!"

 

But the point isn't whether digital distribution is viable or not. The point being made, and imo not being rebuked properly, is that a hardware maker has to maintain a healthy distribution relationship with stores like Walmart and Bestbuy to feed their electronics into consumer hands...

 

And I'm holding up an iPod and saying, "See, told you!" Apple's relationship with Walmart is perfectly healthy. Walmart can sell iPods, or they can go jump off a cliff. Even though every iPod sold results in reduced CD sales (which Walmart is #1 in.) Amazingly, Walmart continues to sell iPods. They are a retail chain and must act as such if they are to survive.

 

You could be right, but what I'm saying is it actually isn't that hard to do, espeically if it is done intelligently (let's suspend that we're discussing MS for a moment.) I just got a Mac Book Pro. Do you know you can upload your entire drive to an online Apple server with a .Mac account for $99/yr? Not only is it a backup in case of loss, but you can log in to ANY Mac and access both your programs and files online remotely. So if your Mac Book falls into a river, spontaneously combusts, or you just flat out forget it on a business trip, you go into a cyber cafe somewhere, find a mac, and you're back in business 100% from your last save point. Or give your critical powerpoint presentation to a big customer with a borrowed mac.

 

Imagine having a console that could do something like that. So if I went to Keith or Romier's house, not only could we play my games, we could play off of my saved games if we wanted (or Keith's DLC or whatever.) It just spins out over the net. Or if we all wanted to attend a gamer LAN event, there would be zero need to bring anything. You show up, login, and bingo - exactly set up like your console at home. So your console, saves, and settings are actually attached to your login, the box itself is just a conduit to reach that system (with offline capabilities of course.) Something like that sounds pretty crazy hot to me.

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And I'm holding up an iPod and saying, "See, told you!" Apple's relationship with Walmart is perfectly healthy. Walmart can sell iPods, or they can go jump off a cliff. Even though every iPod sold results in reduced CD sales (which Walmart is #1 in.) Amazingly, Walmart continues to sell iPods. They are a retail chain and must act as such if they are to survive.

 

What's the profit margin on a iPod for Walmart? I suspect the reason they sell them is hoping to sell peripherals & iTunes cards along with any sales of iPods themselves.

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