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Experts: Gaming Industry Already Embracing Digital

2 Feb, 2011 By: Chris Tribbey

Panelists at the Feb. 2 GameSupply conference discuss the changing world of digital distribution.

BURBANK, Calif. — Somehow, and only in the past year or so, the video game industry became a lot like the fast food industry.

Like trying to up-sell fries or a larger soda with a burger, the video game industry is up-selling virtual weapons, virtual clothing and extra levels with that $60 disc you just bought.

And if EA Sports is any indication, the industry is doing a hell of job. On top of the billion-plus Electronic Arts reported it made this fiscal year, the company will reach its stated goal of $750 million in pure digital sales as well, a 39% jump year over year. From 2009 to 2010 the entire gaming industry saw the digital pie go from just under $7 billion in revenue to more than $9 billion, EA reported.

“We’re going from transactional to service,” said Peter Moore, president of EA Sports, Feb. 2 at the GameSupply conference. “Once we get that disc into their system, it’s up to us to tie in $1, $2, $3 [microtransactions]. Let’s keep that disc fresh in the tray. It’s my job to keep it out of the used bin.”

Beyond keeping physical games fresh with add-ons and updates, Moore also cautioned that developers embrace online gaming, even the free offerings. Pointing to the music industry — a common whipping boy when it comes to discussing disc versus digital — Moore said the gaming industry needs to be prepared to go along with the behavior of consumers. If they demand full games for download instead of disc, so be it.

“If we don’t change out ways, we’re done,” he said. “The fragmentation of time and platform and tastes has changed. The democratization of the experience, the ease of play, allows hundreds of millions, many who pay nothing, to call themselves gamers.”

Shawn Freeman, SVP and GM of digital business for GameStop, said he sees “a hybrid” of gaming offerings for now. The challenge for the gaming industry is how to give consumers what they want.

“How do we bundle the physical content in a way that’s meaningful and attractive to the consumer?” he asked.

Broadband speeds are part of the issue for the digital delivery of games, Freeman and other panelists agreed, but Freeman said: “The test is going to come much sooner for the digital movie business than it is for the digital gaming business.”

When gaming does become more digital than physical, it’s got to be easy too, panelists said.

“Twitter would not work if it had any friction or any pain,” said David Perry, CEO and co-founder of Gaikai, which offers streaming, cloud-based gaming technology. “Everything we do as an industry is treat the consumer first. Fit into their time.”

He also pointed out that consumers’ attitude toward purchases have changed as well. They want to try before they buy, he said, and the gaming industry needs to facilitate that desire.

“Games, we’re like ‘No, no, no,’” he said. “’If you don’t have $60 in your pocket, you’re not playing that game.’”

After the event, the Entertainment Merchants Association, which produced the event along with the Media and Entertainment Services Alliance, handed out its Video Game Supply Chain Awards.

Activision Blizzard was honored for Supply Chain Innovation, Sony DADC took home Supply Chain Efficiency honors and Pacific Color Graphics was honored for Green Supply Chain Leadership.

"Each of these companies is modeling excellence in their video game supply chain practices,” said EMA president and CEO Bo Andersen.

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