Tuesday, September 09, 2008

GameStop: Digital Distribution Won't Overtake Retail Until 2020 at Earliest

Digital downloads may be on the rise, but GameStop CEO Dan DeMatteo isn't worried about the impact of digital for at least another dozen years.

by James Brightman on Monday, September 08, 2008

GameStop: Digital Distribution Won't Overtake Retail Until 2020 at Earliest

Between the PC and the prevalence of connected consoles such as the Xbox 360, PS3 and Wii, digital distribution in the video game industry is becoming an increasingly popular way for publishers to deliver their games to consumers. In addition to smaller titles on Xbox Live or PlayStation Network, we're beginning to see more full-scale games available for download as well. Given the file sizes of some of these several gigabyte behemoths, however, downloading a full game can take a very long time.

That said, there are some who believe digital distribution will overtake or even replace retail game sales in less than 10 years. GameStop isn't concerned one bit, though. CEO Dan DeMatteo told us in a new interview that it'll be at least a dozen years or more until we see the real impact of these digital downloads.

"The first digital distribution was Napster and it was illegal. Let's just start there. The software publishers are afraid to death of piracy. Once a full game is lying on a hard drive, there's the potential for piracy. Aside from the games, the bandwidth, etc., our studies have concluded that the network won't be in place to do digital distribution of full games until 2020 to 2025," he commented. "And that's using today's size, but as consoles get more powerful, games get bigger. Right now, a 30GB game with your best T1 line is about 72 hours to do it."

He also argues, contrary to the popular notion that by sidestepping retail publishers are saving money, that digital distribution ends up yielding less money from a final sale.

"Microsoft and Sony are the gatekeepers for their consoles. And if you're a third party that should scare the hell out of you because that's the only way to get to your customer. They'll take 10 to 15 percent. Video game publishers sell me games today for $48 wholesale. If they go direct to the customer they'll probably get about $30 for them. They'll get less for the game if they bypass retail," he said.

Check out the full interview for more insight into GameStop's booming business
via GameDaily

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