Digital outsells retail; ‘boxes’ still earn more revenue
Consumers typically prefer physical goods over digital ones and, despite conveniences and frequent sales offered by digital distribution platforms like Valve’s Steam, many gamers prefer having a physical disc in hand. This is especially true for consoles: we want to insert a disc and play, not wait for a massive download. Even on the PC, however, where this time differential is less, retail boxed games sold more units than digital downloads.
Until this month, that is. The NPD Group’s estimates for January-June 2010 list an impressive split: 11.2 million digital games versus 8.2 million box copies. By contrast, physical copies edged out digital downloads last year, 23.5 million to 21.3 million.
Outselling on a per-unit basis is an important milestone that has now passed—and it’s unlikely that the trend will ever reverse itself. Where digital downloads are still lagging behind, however, is in the actual revenue totals. Both sides of PC sales are down significantly year-over-year, but the split is still heavily in favor of boxed games: 57% to 43%.
There are two likely reasons for this: digital games are often smaller, more ‘arcade’-like titles developed by independent companies. Also, part of what makes digital distribution platforms like Steam so popular are their frequent sales and other promotions. Lower dollars means more units sold—but also less total revenue.
All reports by the NPD group on PC sales data, however, must be taken with a grain of salt. This is primarily because very little reliable data—even for a data gathering company like NPD—exists to track revenue generated by subscriptions and microtransactions for online games. A sale of World of Warcraft registers the initial box as a unit sold and the revenue gained, but the NPD’s numbers do not track the revenue gained by subscriptions. Also, numerous online games use a so-called ‘free to play’ model, where initial access to the game is free but extra content and better in-game items require being paid for.
It’s unknown whether, if this data were included, that digital revenue would also eclipse revenue at retail. Given the sheer number and popularity of many online PC games, however, it’s entirely reasonable to assume that digital revenue already exceeds retail by a considerable margin.