The 1C executive who predicted that PC games will be sold "completely by digital" by the first quarter of 2011 has clarified his remarks and, as expected, that's not quite what he meant.
It struck me as a bit iffy last week when word got out that Darryl Still, the international publishing director of Russian heavyweight 1C Company, had said that the PC gaming market would be almost entirely digital by the beginning of 2011. "Q1 2011 is my estimate as to when PC games will be sold completely via digital," he said. "I have seen the predictions that by 2013 more than 50 per cent of our revenues will be earned digitally. But if the PC games market has to wait until 2013 then we are all in trouble."
A single year seems like an awfully tight window for such a dramatic overhaul of the entire PC game industry and unsurprisingly, that's not exactly what Still meant. "The quote has dropped slightly out of context, as they often do," he explained. "The discussion was about the tipping point. The point in time where more than 50 percent of a publisher's PC revenue would be gained digitally, and in this respect I think Q1 2011 is not a far-fetched estimate at all."
The 1C Company may not be as familiar to North American gamers as Activision, EA or Ubisoft but it's a major player in Russia and Europe and puts out a serious pile of games. It localizes North American releases for overseas markets but also develops and publishes numerous original games, some of which are quite good but tricky to get on this side of the pond without going digital. In that context, his prediction sounds a lot more reasonable.
"Frankly, 1C are at that point now outside of Russia and Germany (where PC retail holds stong). In the UK and North America we've certainly gained more than 50 percent of our PC revenue over this Christmas by way of downloads," he said.
"Another mitigating factor to consider is that I am talking about revenue here, not units. A PC game going direct from 1C to a digital distribution outlet and retailing at $19.99 gains us $14 per sale revenue, with no inventory or return cost. For the same game, selling out of a box in a retail store, 1C would see about $4 per sale," he continued. "So even if retail is outselling digital by 3 to 1, we still make more on the digital model."
Bottom line: Digital distribution allows publishers to make a whole lot of money from foreign markets that were previously inaccessible and that's leading to some big, big changes in the industry - but for the foreseeable future, the keyboard-and-mouse crowd will still be able to pop in and browse the shelves at GameStop, just like everybody else.