Latest Figures On Digital Distribution

Reality is a bus... a damn cool one.

NPD has just released a report saying that in the first half of 2010, digital downloads outpaced sales of physical discs for PC games. There were 11.2 million full-game digital downloads purchased online compared to 8.2 million physical units purchased at retail. This shouldn't really be a surprise, given how the retail space available for PC games has been shrinking for years. Walk into a GameStop and check out how much space is devoted to PC games, compared to console games... or used games.

Who were the top digital retailers? Steamgames.com, Direct2drive.com, EA.com, Worldofwarcraft.com, and Blizzard.com, based on units sold. For casual games, Bigfishgames.com, Gamehouse.com, iWin.com, Pogo.com and Wildtangent.com.  All the usual suspects. It's interesting to note how highly EA and Blizzard placed, showing that the big dogs in publishing have clued in to the importance of digital distribution... though they still have a ways to go to dominate that segment, if they ever do.
It is important to note that the dollar revenue from retail was still greater than the digital sales; 57% of the dollars came from retail stores, obviously because downloads were discounted more easily. All of this news was tempered by the fact that sales were down 21% over last year (for the combined dollar volume of digital and retail), while unit sales were down 14%. Ouch. Obviously, once people were looking around online for titles, they found numerous free-to-play and free options.

Meanwhile, even with this data some analysts are attempting to calm the wild-eyed doomsayers. "We're all fine here, just a small reactor leak, we've got it locked down." Essentially, they think the growth rate is slowing, and it'll be a long time before digital distribution outpaces retail.

This report sounds more like wishful thinking than sound analysis. It overlooks the many advantages of digital distribution for both the publisher and the consumer. For everybody, that is, except the retailer. Publishers should be happy at the thought of reducing vast capital expenditures on retail packaging, shipping, and storage. Consumers should be looking forward to reduced prices on a regular basis once physical costs are stripped out of the supply chain.

If you wait for digital distribution to be larger than retail distribution before creating a strategy to deal with it, you have already lost. See music publishing... and now book publishing. Reality is a bus driving forward; you can be on it, or under it. Time to choose.