Until recently, the most common method to get a video game you wanted to play was to buy a physical copy of it. However, things have been changing- digital sales of games have overtaken retail games sales. Now, as well as in the future, the digitisation of video games is both the meta as well as the future of gaming. Analysts have estimated that video game revenue will come from almost entirely digital sources as early as 2022.

This can be mainly attributed to digital distribution platforms such as Steam for PC games, or online stores for consoles. Let’s take Steam for instance. It hosts thousands of games from publishers ranging from giants like Bethesda and BioWare, to small indie developers. Not only does it have a variety of digital games though, it also offers regular sales and special events where any game publisher can be sure of selling a large number of copies of a game.

Any good e-retail stores do the below things excellently:

It provides customers with a great deal of choice, and lets them buy and play these games almost instantly.

It personalizes the product recommendations to its users based on their preferences and prior purchases.

It incentivizes them with amazing discounts as well as in-platform rewards.

It promotes engagement with features like game badges and achievements, friend lists, chat, and more.

Apart from benefits for customers, retailers also see the advantages of going digital. They save a significant amount on overhead costs, as well as worrying about unsold or damaged merchandise. Games reaching their target audience has improved significantly as a result of digitisation. The increased access people have to fast internet speeds has widened audiences across new demographics around the globe.

Finally, in the last year and half as a result of the pandemic, gaming as an industry has surged to unprecedented heights. For example, Sony’s fiscal quarter for 2020 began in April as the lockdowns were being implemented globally. Their customers, suddenly house-bound, caused digital sales to make up an astounding 74% of total sales for that quarter, a huge rise from the 59 percent of the previous year. 

Apart from benefits for customers, retailers also see the advantages of going digital. They save a significant amount on overhead costs, as well as worrying about unsold or damaged merchandise. Games reaching their target audience has improved significantly as a result of digitisation. The increased access people have to fast internet speeds has widened audiences across new demographics around the globe.

Finally, in the last year and half as a result of the pandemic, gaming as an industry has surged to unprecedented heights. For example, Sony’s fiscal quarter for 2020 began in April as the lockdowns were being implemented globally. Their customers, suddenly house-bound, caused digital sales to make up an astounding 74% of total sales for that quarter, a huge rise from the 59 percent of the previous year. 

Advantages of Digitisation

Digitisation comes with a lot of advantages, which we go into below:

Convenience and ease of access: If you wanted a game ten to fifteen years ago, you would have to visit a physical store, find a copy of the game, and buy it. There were several possible problems, ranging from damaged discs to the game simply being out of stock, as well as the time taken to track down and buy the game. It is also less convenient to store and transport these discs- this is an added cost to the retailer. In today’s digital era, digital games can be bought online by customers with just a few clicks. These platforms also hold a huge variety of games, far more than most physical stores can stock. Further, customers can download and install these games across multiple setups and devices, since they’re tied to an account.

Personalization: Keeping track of what your customers are buying and playing from your online store is made considerably easier by digitisation. By understanding their preferences and interests, e-retailers can recommend games which are personalized to their customers’ interests.

A continuously improving game experience: Developers and publishers can gain analytical data about how players engage and interact with their games and also use data tools like sentiment analysis. This helps them to continuously improve and fine-tune their products, ensuring their customers keep getting a better experience going forward.

Lower costs for customers and retailers alike: E-retailers save a great deal of money by not having to invest in physical stores, cutting out the middlemen, and not having to worry about damaged merchandise, and these cost savings are transferred to the end user. As a result, customers often get great discounts and offers on platforms like Steam during holiday sales and promotions, and even free games on platforms like GoG and Epic Games.

Disadvantages of Digitisation:

It isn’t all positive however- like any industrial transition, digitisation has its costs. Let’s take a look at them:

Games disappearing forever: If a game is very old, it might not have a digital version of it available. Once taken down from stores, it might disappear forever. An example of this is SimsRefinery- it was lost for decades until someone ran across a floppy disk of the game and made a digital copy of it. Only the existence of a physical copy made its rediscovery possible. This risk also applies to indie games- most of them exist only digitally and if these are removed from e-retail stores, it can lead to them disappearing.

Data security and protection: As a result of digitisation, a customers’ personal and financial details are often if not always linked with their store accounts, which leaves them vulnerable to data breaches. Whether it is a company accidentally publishing customer details or malicious attacks by hackers, one’s details stored online are always vulnerable to theft or exposure. Companies need to continuously update and upgrade their data security measures to ensure their customer data is safe.

Closed Platform monopolies: Something to be wary about is the rise of e-shop monopolies on closed platforms. Less competition results in increased prices and stagnant online shopping experiences. Digitisation increases the likelihood of consumers shopping at a platform’s exclusive online store, resulting in higher costs for consumers and publishers alike.

Licensing concerns, accessibility, and ownership: Traditionally, when an individual buys a physical game, they assume they own that copy and have access to it forever. This works well if you go and purchase a physical disc for example, and gives you a sense of control and ownership. However, when you grab a digital version, you’re really only buying the licence to play it, and this could lead to you losing access to it if the game is removed from the store for some reason. In fact, several major publishers state in their terms of service that if a game isn’t available on their digital platform anymore, you won’t be able to download it again, even if you’d already paid for it.

The demise of the preowned games market: Games can be expensive, whether they are physical or digital. Buying new copies of them can be hard for quite a few gamers. A way they circumvent this entry barrier to gaming is by buying used physical copies. Several industries such as cars, furniture, electronics, and the like have a thriving pre-owned market and video games are no different. Stores like GameStop have made an industry of reselling used games. However, as a result of digitisation, the preowned games market is heading for its demise as most digital distribution platforms prevent reselling. GameStop closed more than a thousand stores by the end of their fiscal year of 2020, thanks to reduced business and debt. Video games are harder to buy now for a large demographic, which creates a barrier to accessibility.

Trends that Push the Digitisation of Games:

Despite the disadvantages, the gaming industry has been steadily moving towards digitisation for several years now, across multiple gaming platforms. This is a result of certain factors of which we go into detail below:

Shifting game revenue business models: While in the past, the key focus for game retailers and publishers was the number of copies sold, revenue models are evolving across gaming platforms. The free-to-play model lets players play games for no initial charge, introducing monetization at later stages in a variety of ways. These include paying for an ad-free version, buying in-game upgrades and cosmetics, unlocking new areas and characters, and several more. Another model gaining popularity is gaming as a service (GaaS). Similar to how companies provide software as a service (SaaS), GaaS is a subscription-based on-demand service which enables gamers to play titles on hosting servers of video game publishers. Combined with monetizing options like the aforementioned ones, GaaS can help extend the longevity of a video game’s popularity. GaaS also pushes digitisation greatly because the games using it as a revenue model are predominantly digital.

Digital-only console variants: Sony has two variants of their flagship console line, the PlayStation 5. One of these comes with an Ultra HD Blu-ray disc drive and the second runs purely digital games. Their major competitor, the Xbox consoles from Microsoft, also released an All-Digital Edition for the Xbox One S and is expected to launch a similar model for their new Xbox Series X. These variants are a way to ease their customers into a digital future and also improve sales for their game subscription services (PlayStation Now and Xbox Game Pass.)

Cloud gaming: Gamers can now directly stream games from the cloud, saving them from having to invest in high end hardware or download huge files. People who don’t have a console or a decent gaming PC can find it difficult to game for entertainment. However, with a rise in access to fast internet, streaming games from the cloud can become a reality in the next few years and already is a major area of focus for several tech giants like Facebook’s Facebook Gaming, Google’s Stadia, and Microsoft’s Xbox Cloud Gaming.

The rise of esports: Esports is estimated to have an annual growth rate of about 10.4% by 2023. Several hundreds of millions of people watch it both casually and hardcore. It had a YoY growth rate of 11.7 percent by February 2020. As a result of the Covid 19 lockdowns, 889 billion minutes of gaming tournaments have been viewed on Twitch, a massive 35% increase from 2019’s 660 billion minutes. Similar popularity which sports leagues and franchises like the NBA and EPL enjoy is seen amidst esports enthusiasts now. Good examples of this are fans buying their favorite team’s merchandise, as well as huge companies sponsoring and collaborating with esport teams and game studios during tournaments. On older platforms like television, as a result of the pandemic, the time slots reserved for cancelled sports events were filled with esports tournaments instead. The games these tournaments are hosted for are predominantly digital releases and have led to the e-sports industry being valued as a multi-billion dollar industry, further promoting digitisation.

Communities plus streaming and creation tools: On YouTube, after music, game videos account for the most videos as well as views on the platform. 

The time spent by people watching game video content has increased exponentially, especially with streaming services like YouTube Gaming and Twitch. A lot of these games are primarily digital releases. The popularity of this content causes digitisation to shoot up. Reaching people is also easier as a result of tools enabling single-click live streaming, social platforms integrating live video content, and features like Instagram reels which let creators interact with their audiences anytime, anywhere. 

Conclusion

There is no doubt that the future of video games is entering a digital era. The convenience, cost savings, and reach of digital games far outweighs the cons for game makers and consumers alike, plus there are several things publishers can do to improve digital game ownership such as timed refunds, trading, and publishing retro releases on their e-stores, to name a few. With the two major consoles- Xbox and Playstation- both releasing digital-only variants of their consoles which are cheaper, console gamers will be able to push digitisation even further. Developers and publishers are looking to cut down on middlemen and overheads to increase their profits by not depending on retailers to sell their products. For example, Capcom reported how digital sales significantly improved their company’s profits by removing retailers from the sales journey.

It appears to be only a matter of time until CDs and cartridges join the obsolescence of floppy disks and the like. As the gaming industry enters a new age, game companies must face questions regarding preserving past games, digital exclusives, and more, as well as come up with a long-term plan to deal with the shift to digital sales. Promoting cross-platform play and saves will also be essential as it enables users to jump between different devices. CD Projekt Red’s The Witcher 3: Wild Hunt is a great example of this. They offered the game for free on PC if it was owned on a console and made cloud save transfers possible between platforms. 

At this juncture, it isn’t a question of whether digitisation of video games is happening, it’s how it impacts the gaming industry as a whole. To be able to stand out amidst the rising competition, e-retailers must ensure their product pages are accurate and well-optimised, both of which require high quality game metadata. They need to be able to boost their discoverability and keep their customers loyal. Reach out to us for data covering over 180,000 games, spanning 200 platforms across four continents.