Digital Distribution

July 11, 2011

Digital Distribution… Competition Bad for Business?

A war is brewing on the internet for your money, support, and loyalty (no it’s not the PC vs Console war that you see flames on a daily basis) and the outcome could have dire consequences for the gaming industry.  That war is the supremacy over Digital Distribution.  Currently there are several key players in the industry, Steam (Valve Software), Impulse Driven (GameStop), Direct2Drive and GoG.  Steam is by far the most popular and largest of the group by several times however several companies are looking into providing their own services instead of selling them through a vendor and competitor like Steam.

We often hear the phrase “competition is better for consumers” and in many cases this is true but in the case of Digital Distribution is this truly the case?  Consider this, the majority of major title games can be had through Steam and Impulse at this point in time.  And they can generally be had below the standard retail costs of $50 – $60.  This provides the customer with a reliable source with a large and established customer base, prices below market standard, large selection of merchandise to choose from and many friends to socialize with.

Now enter EA and Activision that see the success of Steam and want to piece of those profits.  How do they bring customers over to their side that are perfectly happy with another, possibly superior product.  Simple, they create their own digital distribution service.  That alone, however, is not enough for customers to come crawling to them.  In the case of EA and Activision the chances of them pulling customers away from already established entities in the market is slim so what they do is withdraw all of their products from their competitors services.  More competition is good right?  Maybe?  Perhaps not…

In some cases in a free market there is an argument for a natural monopoly or perhaps a oligopoly.  Utilities are a prime example of this because it would be harmful to the customers to have more than one Utilities Company and it could even be dangerous.  This isn’t to say Steam, Origin or any other Digital Distribution service is as important as utilities services, because they most definitely are not.  However, it does create a interesting dilemma for customers who are now forced to choose between their favorite game and their platform of choice.  It’s in this way that large companies force customers to their product even if they don’t want to.  Crysis II was recently removed from steam because EA was violating Steam policies by dictating user content.  Shortly there after EA announced the reason for removing their games and announced that Crysis II, Mass Effect III, Battlefield 3 and The Old Republic would all be Origin exclusives and that they would not be available on other platforms.

Customers will now be forced to have not one but two or more of Digital Distribution software platforms adding more overhead to their systems.  They also have to split up their game collections across multiple platforms and this can be incredibly frustrating to consumers.  In addition to this these companies will now have exclusive monopolies of their product and now can dictate price as there is no longer and competition for their product.  This is almost NEVER good for consumers.

Customers should be wary as we star to see the market fragment as more developers try to develop their own Digital Distribution services.  What will consumers do as this happens?  That remains to be seen?  While I don’t think it will get to the point where there is legislation involved (not to say that it couldn’t) , I do expect there to be some major chances in the PC gaming industry as the market continues to move towards Digital Distribution.  What do you guys think?  Is more competition in the market when it comes to online games a good or bad thing? Do you think it will cause more harm than good?  Should companies be able to hold a monopoly over their games?  Let us know your thoughts!

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