Activision's CEO needs a surfboard

"The idea of full downloadable games is so far in the future that it's almost incomprehensible as an opportunity," said Bobby Kotick, chief executive of Activision. -- The New York Times

Short discussion: Wrong!

Longer discussion:  Kotick apparently does not know of newer streaming technologies that allow for large games to be played well before fully transferred to the user's platform.  This is the single technology breakthrough that makes large game downloads a viable option for gamers.

And once players, press and CEOs like Kotick experience this technology, they will all wake up to the fact that digital delivery is on the verge of an explosive acceleration of acceptance, much as CD-ROMs exploded in popularity a dozen years ago.

Valve's Steam, as an example, is NOT representative of the next generation of digital distribution that will change the way software is sold and delivered.  A much better example is Triton, the digital deliver service that Prey will use.  When player's buy Prey from Triton, they need to only download around 20 percent of the game before they can begin playing the game.  This takes about 20-25 minutes or so, a very reasonable period to wait before playing a content heavy, triple-A title.

Digital delivery simply has too many advantages for publishers to ignore:

o Immediate revenue stream.  No more waiting to be paid by the retailers, who make money on the float, the period of time they have the publisher's money sitting in their accounts earning interest, at the publisher's expense.

o Higher wholesale.  This means that the publisher makes more money per game sold, because digital delivery is inherently less expensive because there are no cost-of-goods (no game box and manual).

o No chance of rentals (until the publisher decides it's okay, like after a three month window).

o No chance of resells, an after-market that is killing publishers and developers alike.

o Less chance of piracy.

There are other advantages, too, but I'll save those for discussion after Prey is released via Triton, that way I can point them out specifically using a real world example.

The bottom-line, though, is that publisher CEOs like Kotick, who are likely unaware of the advanced state of coming next-generation digital delivery services like Triton, are about to be blind-sided by a wave that will either sweep them aside--or more likely they will whip out their surfboards and join our industry's Next Big Thing.

Comments

[Patrick Grote]

Scott ... You said:

"No chance of resells, an after-market that is killing publishers and developers alike."

Resell in this case means a person who bought the game, plays it then resells it? Or do you mean another type of resell?

If it's the former ... how is that killing publishers and developers?

[yossa]

The publishers and developers get no revenue from the reselled copies.

[Tom Schaffer]

Well, we solved the "problem" of to long downloading times by developing technology that allows extremely small data size. Digital distribution sure is an opportunity if you really WANT to use it.

[Scott Miller]

Patrick, the resell market is one of the most profitable revenue sources now for chains like Gamestop, and it doesn't generate any revenue for developers or publishers. Resells, for us, has largely the same effect as pirated copies, because the gamer plays the game, but we see no revenue benefit.

Legally, there's no problem with resells, but the end effect is that it does hurt pubs and devs. It's not a legal issue, but it's a reality issue that digital distribution can go a long way to fixing. (Not that gamers will see this as something that needs to be "corrected," of course! And as a gamer, I would think the same way -- cheap games is cheap games!)

[Kristian Joensen]

Scott, some people have complained of beeing forced to update HL2 via steam and therby forced to install a update that breaks the game for them. Will that be an issue with Prey and Triton ?

[Ernest Adams]

Right on, Scott. When you think about it, keeping a bitstream frozen in a piece of plastic and sitting around in a shopping mall is a pretty damn stupid way to get it from your computer to mine.

The day will come when bricks-and-mortar software stores will be as scarce as professional phrenologists.

[Colm Mac]

Right the reason the resale market exists is because games are too expensive. If I play 60 euro (forty/fifty dollars) for a game I need to be pretty sure its bloody great. Now if digital distribution is so cost saving will the cost to gamers come down?

The Boxed Copy of Half-Life 2 Episode 1 costs $19.99 (List Price, Amazon charges $16.95) and the Steam version costs $19.95. I know you said Steam isn't the future but something is wrong there.

The cost of goods for the boxed copy has to cost more than Steams one. The boxed copy gives revenue to Retailer, a Wholesaler/Distributer, publisher EA and Value. The Steam copy one all the revenue goes to Value (minus taxes and credit card charges). So since all those middle men have been cut out why can't some of that saving go to the gamers?

[Freakhead]

A couple comments.

I think Steam is a good example of the future actually. And I really don't see much stopping a service like Steam from distributing full games a part at a time. I think their episodic take on gaming is quite indicative of the future as is pre-downloading. The bigger issue amongst these types of services is will they dedicate enough bandwidth/server power to initial demand on the day of release.

Second, publishers do see money from resells albeit indirectly. Of course I don't know the numbers, but I think everyone can agree that a ton of folks trade in old games to finance new games. And as such publishers do see money from used game sales. And I think if this 'safety-net' wasn't there then many folks then would think twice about buying a game.

I suppose a way around this for digital delivery would be to trade account names/passwords between friends. I mean I can tell my bro on the other side of the country my Steam login/password so he can play too. I guess they could limit this type of action fairly easily tho.

Still the point is Joe Schmoe is going to think twice about taking a chance on a game if they are stuck with the $50+ pricetag no matter what. And that's leads back to STeam's Episodic content. It's alot easier to take a chance on $20 than $50.

[Val Vanderschaegen]

Valve did offer a ~$2 discount for preorders I believe, even at full price I'd rather give more money to the developer.

I have a feeling it'll be a long time before we see publishers going for digital distribution, they really don't want anger walmart by offering another channel.

One reason we haven't seen lower prices with Steam is because I believe there are certain agreements between publisher and retailer that the publisher can't undercut the retail outlets. And until publishers are in the position to ignore retai loutlets they can't offer lower prices via digital download. Of course folks will be less likely to go the digital distribution route if they can't save money especially when with retail you can trade in the game when you're done and you get a physical disc, case and manual. It's a bit of a catch-22.

[gman]

Though I agree with the idea, I tried Triton. Doesn't work through a proxy. So much for anyone in the game industry or any reviewer ever seeing a game. WTF are they thinking?

I also agree with the comment above about price. If normal wholesale price is 50% of retail then if you are cutting out the wholesale -> retail markup, pass that savings on to the consumer and you'll stand a chance of helping accelerate the switch to online distro.

[gekido]

what i'm waiting for is a download system that truly acknowledges that i have bought a game and have lost or otherwise destroyed the cd's that came with the original legit game purchase.

steam is the closest thing to this that i've seen so far that actually protects (values) the developer, but it does so in such a way as to be such an invasive hastle to the customer that the value outweighs the benefits.

for example: i purchased bf2 AND the special forces add-on...the original cd's (all 3 of them) don't function properly anymore for me to reload the game...so i'm basically screwed with that game.

same thing with far cry...say i want to reinstall the game...so i am forced to go through the original 5 cd installation PLUS tracking down and finding the 3 patches (which all must be installed in order due to the lack of a cumulative patch) before i have a functional game...

and they think that the gaming customer isn't excited about digital distribution? nonsense...

steam at least remembers that i bought the game if i choose to go back and play again. totalgaming.net's download system is also a step in the right direction, but i think it might be too big of a step in the right direction - i just bought galciv2 and the serial number was an optional part of the installation and the game never did ask me for a serial number before i played it...as a developer this is a BIT much - i at least want the annoyance factor in place for serial numbers before people pirate my games / products, but some developers may not i guess.

haven't tried the other offerings, but I feel that steam is close, but not quite what the industry needs and the gaming population wants...

[gekido]

>>If normal wholesale price is 50% of retail then if you are cutting out the wholesale -> retail markup,
>>pass that savings on to the consumer and you'll stand a chance of helping accelerate the switch to
>>online distro.

depending on how they are doing their online billing, even with online sales, you have a significant markup just from the ecommerce charges. particularly as a smaller indie developer, the markup for a $20 title can equal almost 40% or so of the overall cost of sale.

For a full price game, the overhead is very similar to printing an actual CD / box when it comes down to it, even though it is theoretically a 'zero cost' sale...the banks always take their cut and the credit card companies aren't any better...

let alone the risk that the developer takes in handling fraud / charge backs etc - the risk for doing online digital distribution is pretty high, but even so I feel it's more than worth it in the long run for the opportunity to avoid the traditional publisher / retail market...

[Hexx]

I think you're and most peoples ideas of getting rid of the resale market is completely absurd. There are many games that you either 1) have to buy on ebay or gamestop (I'm about to get a DS lite and want to play Castlevania DS, Trauma Center, and Phoenix Wright all of which are in the top 5 ds games for most people and all of which are no longer sold via retail channels) and 2) resale on the internet (not gamestop/electronics boutique) allows you to try at a cheaper price a game that you probably wouldn't have bought otherwise (an example of this is Chronicles of Riddick for the Xbox good game but I wouldn't have played it had it not been for the resale market due to the fact that it was a licensed game).

Sadly, I think the best role model of how the resale market should go is something that the RIAA has started. On some resale websites like the one where you trade CDs with others on the internet (I forgot it's name) actually pay royalties to the RIAA. I think the game industry should unite and do something along these lines. If you look at a place like gamestop or eb they make ~$30 off of most of the used games that they sell. If developers try to cut into this they could in my opinion generate revenue that they would have otherwise not had.

[Scott Miller]

Hexx, you're right, a revenue sharing program on resells would be terrific, and satisfy pubs and devs. However, the retail stores currently have no inventive to share these juicy profits, and until they do, they likely won't.

[Hexx]

Maybe digital downloading services are the key to having enough leverage to get retail outlets to go about and do this.

[nico]

Is it possible to buy and download Prey on the Xbox 360 ?

Short discussion: No

[Scott Miller]

Nico, I would love to make Prey a buy and download game on the Xbox 360. Our publisher will not allow this, though. Everyone is scared to upset the retailers right now, but that will eventually change.

[nico]

... but you're publisher is ok to release the PC game via Triton. I'd like to know why.

And do you really think that it's possible to release AAA games like Prey on a console which have a 20Gb HD ? Quake 4 take 3Gb on my PC. How many games is it possible to download before a 20Gb HD is full : five, six ? Is it acceptable for an average player ? I don't think so.

[Mike Edwards]

nico,

If your XBOX Live account is flagged as having paid for Prey, I assume you'd always be able to download it again in the future if you had to delete it to make room for something else. Combined with the delivery method Scott mentioned (20% download before you can start playing) this is a pretty slick solution. If they made you re-purchase it, well, that's entirely different.

No game is ever perfect, and patches are a reality when it comes to software in general. You'd always have the latest and greatest version of the game. Unfortunately, it would likely lead to a rise in publishers rushing console games out the door without the requirement of needing to get it right the first time. I wonder if console gamers would have as much patience with this practice as PC gamers who are accustomed to it?

[Jose]

While I'm a big supporter of the online distribution channel, I don't think Triton is the answer. While the technology sounds interesting, the main benefit (no development cost to the game studio) does not really translate into something the player would appreciate or understand. Actually, a game specifically developed with content streaming on mind would greatly outperform Triton in many areas, including user interface and waiting time.

I downloaded the Wolfenstein demo with Triton (a old game, not that big in resource size) and tried to play as soon as it was available. The net result was a hanged computer in a loading screen while Triton was streaming in the background, without any indication on screen of the remaining time (and that was many minutes). It also forces me to connect me to their server each time I want to play any game, so I don't see here a big improvement over Steam's much-maligned intrusiveness. Add to this a very amateurish and unpolished user interface in their web page and their client application (flickering, bad design, lack of features), and I really can't even begin to understand how this can become a success of any kind.

Steam used a similar technique at some point (game levels streaming from the Net) altough probably it required specific development resources for each game. However, they are now using the preloading scheme instead, requiring you to download the whole game (altough you can have most of the data downloaded before the release date). While in technology terms it may look like an inferior solution, it is the difference between confusing the user with insane loading times and simply having to wait more, with the additional benefit of giving hardcore players the game they want at the minute of release.

While Steam does some things very wrong (insanely high prices, making it uncompetitive, as the worst of them in my opinion), there is also a lot to learn about it.

[Scott Miller]

Jose, any previous experience with Triton will likely not compare with the new version of the service, which has undergone dramatic recent improvement, and will continue to do so.

Also, with an older game like Wolf, it's likely related to the game itself having problems rather than Triton. We've extensively tested Triton and it has been almost 100% problem free, a remarkable achievement.

[Michael Dragojlovic]

I'm gonna miss the retail shops where you can go in and browse at all the boxes, and sometimes buy something on instinct. And then when you do buy something you have that anticipation of going home and installing it on your machine. But with digital distribution there won't be that magic. People are probably less likely to buy something on gut instinct. They are most likely to check out the developer's site (which is a good thing though, if the developer has good marketing knowledge that is) and then check out reviews, which can make or break the sale. And if they do buy it they can start playing immediately. There is none of the anticipation of getting something out of the box, which can make the experience so much more exciting. So, like everything, there a pros and cons, and one of the cons of digital distribution taking over is that old codgers like us are gonna miss our days of walking to the computer shop on a nice sunny day and having a browse amongst real people, instead of just sitting on our ass giving a sum of digits to a server.

[Art Sharma]

Hello Scott,

Is Triton going to go through another major UI haul because quite frankly I think it is awful right now. It is better than it was when I first tried it out but it still looks very rough and unprofessional. It can have all the greatest streaming technology ever but if the interface sucks I don't want to use it. I hope Triton really takes off because I think it has a lot of potential. I have been a huge fan of digital distribution and I think Steam is pretty damn good and hope they improve on that too.

[Patrick Grote]

Scott ... thanks for the answer.

As for resales, if the publisher were involved and received a cut would that work for digital distribution? For instance, I am finished with HL2 and HL2 Ep1. I should be able to sell that due to the first sale doctrine, but I cannot. Will I be able to do that with your service?

Thanks again!