Ipsos MediaCT: Is the future of gaming downloadable?
In our latest Research Focus report, Ipsos MediaCT looks at the increasing popularity of downloadable games among next generation console owners.
2008 was a record year for the UK videogames industry. Despite the economic downturn, the software market grew by over 20% year-on-year to £1.905bn (ELSPA/GfK Chart-Track figures). The vast majority of this spend was on physical discs purchased in the high street or from online retailers.
Despite the growth in downloadable content (DLC) in other markets like music, for the games industry it was estimated to be just a fraction of the total combined packaged and downloaded games sold in 2008. Going forward, will the shift from physical to digital be inevitable or will it remain a niche market?
Publishers see DLC as offering multiple benefits. Distributing games via the internet not only boosts margins through efficiencies in manufacturing and cutting out physical retailing, but also helps stem the rise of the second-hand disc market which is stronger than ever with new entrants including HMV and Amazon.
Based on research conducted by Ipsos MediaCT, downloadable games make up a sizeable proportion of titles consumed amongst latest generation console owners. For PS3 gamers, DLC makes up 17% of current consumption, with Xbox 360 gamers at 16% and the Wii at 6%. Clearly the market has begun the shift to digital.
The research also shows that interest in paying to download new release games from official sources is extremely high. Most interested are Xbox 360 users at 76%, closely followed by PS3 users at 72%, with Wii users slightly lower at 69%. Getting the price right is critical. When downloads are priced at comparable levels to retail boxed games, around £36, interest in a downloadable version drops to below 5% for all game types. The optimum price, where total revenue is maximised, is around £12 – a considerable price drop from retail. This highlights the perceived value gap between physical and digital.
Interest amongst gamers in downloading catalogue titles is nearly as high as that of new release (Xbox 360 70%, PS3 64%, Wii 60%), with interest holding up at 26% at the more realistic price point of £4 – the point at which total revenue is maximised. So in the short term it is more likely that the boxed budget sector will be affected by digital, as the likes of Steam, Xbox LIVE, PSN and Nintendo’s Wii Shop Channel re-release software titles and capitalise on this market interest.
Furthermore, interest in downloadable expansion packs (game maps, song packs etc) is considerable, led by Xbox 360 gamers at 72%. More importantly, 1 in 3 console gamers remain interested when content is priced at £4. For publishers, pushing this market forward now will be key in accelerating the mass adoption of full game downloads, as consumers trial and become familiar with the download experience.
An immediate obstacle to overcome in developing the download market is the fact that a significant number of gamers don’t have their consoles linked up to the internet. Outside of connectivity issues, other reasons given by those not interested in downloading games are preferring to have the physical disc (38%), followed by 17% wanting the packaging/box. Since these are important to a lot of gamers, it seems unlikely that the digital format will completely replace the physical format in the foreseeable future.
To push digital further into the mainstream, a combination of things need to happen which are now starting to occur. It’s about online distribution, it’s about pushing out faster broadband speeds and it’s about pricing at the right levels.
We are probably still years away from a significant shift away from disc based games but the market has the opportunity to push forward. The consumer is willing to pay to download games and embrace DLC, the market now just needs to catch up with them with a realistic offering.
At Ipsos MediaCT, through our understanding of digital markets we are ideally placed to identify emerging trends and help shape future strategy for digital gaming.