Do you own Grand Theft Auto 5 on disc? If so, you might be part of a dying breed, at least as far as Karl Slatoff is concerned.
The President of Take-Two Interactive, parent company of Rockstar Games, recently spoke about how the industry is moving closer to being completely digital at the Credit Suisse 21st Annual Technology, Media & Telecom Conference.
Video games, and even the whole entertainment industry, are only one among the many topics the conference concerns, which is why relevant news rarely arises from it. However, the industry forecasts of one of the most influential individuals in the biz could be worth hearing.
Karl Slatoff's comments aren't exactly revolutionary, though. The general idea that the gaming industry is speeding towards a status where retail is no longer a factor has been floating around since the conception of digital distribution. However, recent market trends have lent more than a bit of legitimacy to this concept.
Video games may not have been the first medium to embrace digital distribution, but they're certainly the medium best suited to it due to how on-going services tie into most of today's titles. Digital distribution is already a major element of the market, and considering its rate of growth over the past decade, it overtaking retail might arrive before we'd expect it.
Retail continues to have a massive impact on GTA 5's sales. PC is still the platform where digital distribution is most prominent, and only a small percentage of total GTA 5 sales happened on PC. The huge amount of copies sold on launch for Xbox 360 and PlayStation 3 were predominantly physical. In light of this, to hear the president of the game's publisher claim the industry will become 100% digital within the next 5-20 years can sound a bit extreme.
I think over the long-term, it will be 100% [digital]. I just can't predict whether that's five years, 10 years, or 20 years. It's probably less than 20 and maybe more than five, but I think it ultimately gets there. That's the zeitgeist. Things are moving in that direction.
It's easy to dismiss this based on how things stand today, but you need to remember that what we're talking about is projecting growth rates forward 5 years. Digital distribution exploded since its conception — just look at Steam — and has been shooting upwards at an exponential rate. This year, Black Friday was considerably mild in retail stores (well, comparatively) due to the proliferation of online shopping.
Every other industry has jumped on pseudo-digital distribution, even if the products themselves are physical, unlike in the case of games. You can buy absolutely everything online, from groceries through furniture, toys and books all the way to weapons-grade uranium. Literally.
Games, which are a digital medium to begin with and for which physical media was only ever used because the tech for digital distribution didn't exist twenty years ago, lead the charge when it comes to digital distribution. But with streaming services all of TV, film and music have fallen in line as well. As the whole world moves closer to digitization, it makes sense that gaming should be the first to max it out.
Something that gives games an edge over other products in converting users to digital distribution is that so many other aspects beyond the distribution are inherently digital. Even if you do buy a game in retail you'll still have to register online, you'll still have achievements tied to your account and there still will be DLC you cannot buy through retail.
Services like Xbox Live and PlayStation Network, as well as their respective online storefronts, are doing much to convert the mainstream casual users. This layer of the consumer base is both the majority and also the one more prone to sticking to retail, while the hardcore crowd sooner embrace digital. Slatoff sees the impact of these services.
Why I think it's a little quicker than people imagined is honestly, Sony and Microsoft have done a really nice job with their services. You've got more people on Xbox Live, more people on PSN, and it helps. The friction is going away at a quicker rate because these platforms have been really well developed, and the consumers love it.
These aren't the days of walking into a store, perusing the shelves, picking a game based on the blurb and screenshots on the case, then popping it into your console at home and playing. These are the days of having AAA marketing campaigns hammer the premise of the game into you, which you then pre-order and pick up at your local game store... And after you went home and inserted the disc you still need to download 50% of the game after logging into at least two different accounts. Even retail isn't retail anymore.
While physical stores are still the major players when it comes to AAA, the indie market has almost achieved 100% digitalization already, and it won't be long until AAA catches up. Once the consumers adopt digital to the point where the cost of packaging and shipping outstrip the income, that shift will come.
While huge faceless corporations rarely actually care about the environment, a shift to a full digital industry would have numerous environmental benefits as well. Every single disc case, every manual and every shrinkwrap around the case becomes waste sooner or later, and it's not like our planet needs any more of that.
Retail isn't going away tomorrow, though.
It's still a major force, and unfortunately not exactly a beneficial one. As various retailers keep getting exclusive pre-order bonus deals, chopping up games so that players have no way of getting the full experience in a desperate attempt to stay afloat, more and more consumers will start to see that these stores are hardly pro-customer. Until that happens, however? Retail still reigns.
The truth is physical retail is still the majority of our business, and very important partners of ours. And we want to do everything we can to support that environment. And we do. They're very strong marketing and distribution partners for us. But again, it's out of our control. Whether we want it or not, it looks like it's going to happen eventually.
When speaking about digital distribution, one cannot neglect the topic of DLC and the new forms of digital monetization. Buzz phrases like "games as a service" and others fly around and all are rooted in constant content support while providing "recurrent consumer spending opportunities" — corporate doublespeak for microtransactions.
Microtransactions, specifically lootboxes, are kind of a hot topic these days and the Battlefront 2 debacle has kicked up quite the storm. Slatoff also addressed this topic at the conference.
The whole gambling regulator thing, we don't view that sort of thing as gambling. Our view of it is the same as the ESA statement for the most part. That's going to play its course, but in terms of the consumer and the noise you hear in the market right now, it's all about content. It's about overdelivering on content and making sure you're focused on engagement. That has been our strategy and where we're focused, and as long as you keep your eye on that ball, you're going to be OK. The consumer's going to be really happy with what they get.
Considering the speed at which Rockstar puts out games — GTA 5 was launched in 2013 and Red Dead Redemption 2 is coming in 2018 — whatever comes next falls into Slatoff's 5-year minimum, so the possibility of a digital-only GTA 6, Bully 2 or Red Dead Redemption 3, without any physical releases, is very real.
The benefits of digital distribution for the games themselves aren't lost on Rockstar Games either.
While you can't buy GTA 4 or older GTA titles online, Red Dead Redemption is available both online and in brick and mortar stores today. The developer has released almost it's entire library (of note) digitally across most platforms. This allows titles that should otherwise be way beyond their shelf life to still bring in revenue, still get new fans and not get forgotten.
Digital distribution is one of those aspects of the future, much like how phones and the internet became central and essential parts of modern like, that you cannot avoid whether you like it or not.
Digital-only GTA, here we come.
