We're All Fine Here...

Just a small reactor leak, we've got it locked down.

Or at least, that's the word from the Entertainment Merchants Association, the industry organization for retailers who sell DVDs and videogames. They're saying that all this talk about digital distribution is just air, because 80% to 90% of videogames sold were on physical media. See, retail stores are doing great. That big cold thing in the water we're heading towards must be the ice I ordered for our cocktails. Isn't this a great cruise?

Where to begin? First I'll note that the "80% to 90%" figure seems awfully vague, and there's no mention of how that figure was arrived at. Could it have been pulled out of, let's say, thin air? Second, even if you grant that range, what would it have been a couple of years ago? Next to nothing... and now it's somewhere between 10% and 20%. Seems like a pretty swift growth rate. It wouldn't take long at that rate to turn physical distribution into a rounding error.

Digital distribution offers many advantages to publishers and consumers alike. Publishers can save huge amounts of money on the cost of production, and even more money by not giving up any margin to retailers or distributors. Customers get their product without ever having to leave home. Digital distributors (like Steam) have found that they can get huge sales increases by lowering prices, which they can do because the margins are so huge. This also benefits consumers, who can score new games for far less than the usual retail price.

Digital distribution is devastating for retailers, which is why they're trying so hard to believe it's not happening. (Though GameStop is making acquisitions like Kongregate to prepare for this future.) Don't be fooled; it's happening, it's happening fast, and it's going to change everything about the game industry and the book industry. The music business tried to disbelieve, and they even tried to use lawsuits to kill the process. They succeeded in delaying and mutating the transition for a while, but in the end the big music publishers have ended up losing out in many ways.

Don't be like them. Revise your strategies and business models so you can take advantage of this change. This is a tremendous opportunity; whenever a market is shaken up it's a chance for smaller players to become big.