'No Question' Digital Downloads will Surpass Retail, Says Microsoft VP

By Aaron Linde, Aug 06, 2008 8:00pm PDT Amid increasing revenues for digitally distributed games and downloadable content, a Microsoft executive affirmed his belief that digital sales will eventually overtake those of games sold in traditional retail channels in the near future.

"There's no question digital will overtake physical," said Xbox Europe marketing vice president David Gosen, as reported by MCV. "It happened in music and will happen to our industry."

Speaking at Microsoft's UK Gamefest development event, Gosen added that the success of Xbox Live Arcade and downloadable content for games such as Harmonix's Rock Band and Neversoft's Guitar Hero III illustrate a "convergence" in the industry, adding that "digital will be the dominant force in future."

Gosen's remarks follow Microsoft's earlier in which the company stated that paid content downloads had earned a total of $240 million, and boosted sales of those games supported with downloadable content by $21 million on average.

Microsoft isn't the only company banking heavily on digital distribution. This past June, Valve Software revealed that it expects online sales from its PC digital distribution platform Steam to dwarf its retail business as early as 2012.

Gosen reaffirmed Microsoft's commitment to heavy investment in Europe, noting that the Xbox 360's Xbox Live online service would see a renewed and reinvigorated focus with more games and entertainment content coming to the Xbox Live Marketplace in the territory.

"We have to think about how the consumer is changing and how the ways they are accessing media is changing," Gosen remarked.

Just what portion of music sales have gone digital remains an area of dispute; for example, data from the International Federation of the Phonographic Industry showed digital music purchases accounting for 30% of U.S. music sales in 2007, and 15% of music purchased worldwide.

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  • Well, thanks god.

    One thing a lot of people fail to realize, specially if they're on well developed markets like the US and most of Europe, is that it's much easier to reach secondary markets (like Latin America) with digital downloads. Today, as it is, we depend on the publisher's good intentions if we want to see a game released here - and even when they're released, it takes months to do so (and this with games that are not even localized, at most they get a translated manual; not that I would want localization anyway). It's no surprise people get used to pirating a game even if they have the money to buy it - they simply want it fast. In that regard, I'd say that Steam has singlehandedly cut the piracy market 'penetration' rate in Brazil by at least 90% of what it was. I'm pulling these numbers out of my ass, since we don't have access to any kind of official statistic, but there are many people who I know - me included - who used to expect the day a game was released so it'd hit the known iso distribution websites. Sometimes they'd buy the game once it was finally released locally, sometimes they wouldn't. Case is, nowadays they all expect the Steam release day. Piracy is easier as ever, but it's just not worth it - it's not easier than Steam. It was never about the price, it was about GETTING it. You may say "well, people should be patient and just wait!". Well, that's not how it works. Publishers and developers keep hyping their games. They say gamers should be excited about it. We have access to that online, you know - I'm Brazilian and I read the shack. I know what's getting released. I know what the developers want me to think, what they want me to buy. When something is released and everybody else around you is playing it and they say "but well... you can't play", I just doesn't sit well with people. They buy into the publisher's marketing, in a way that they're not willing to wait 3 month to try the brightest new toy available.

    With digital downloads the thing's a lot easier and there's no additional infrastructure needed (other than closer servers, and even there, not strictly necessary). It's much easier to do that, like Valve does, than try and find local partners in countries that are notoriously bureaucratic and with a market that's too spread out and then end up releasing a game at 2 times the US price. So while Microsoft and EA Brasil have made major strides in local retail distribution, I really expect digital download to take over not only because it'll be easier for people on these places to get their games, but because it'll show the publishers that there IS a market there and the only reason why they don't sell is because they've never tried hard enough and this has pushed people to the 'alternative' methods. Having a game available on release day changes this completely. I won't say Latin America is a powerhouse of a game buying market. But there are gamers here and we're constantly shat on, but as long as publishers don't restrict their games to certain locations, digital distribution changes everything and puts everybody on the same level.