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Publicado 14-sep-2009 a las 09:14 por Pepepipipopo (El Renacimiento y posible muerte subita del Blog de Pepepipipopo)
The Marvelous Adventures of an Essay Concerning Digital Distribution of Videogames to Pc All over the World through a Swedish Game Company’s Website
A little bit of Context
Gaming is an industry born in the early 1980s with simple games and even more simple graphics, starting of pretty humble with developers mainly focused in the US, Europe and Japan, over the last years it has developed into a worldwide phenomenon making it now one of the most powerful forces in the entertainment business, being compared and sometimes said to surpass the film industry and the music industry. So we can say that from pixels and giant plastic boxes to photorealistic graphics and prettier plastic boxes, gaming has evolved into more complex industry reaching for bigger audience, generating now revenues over the tenths of billions of dollars video games are now a force to be reckoned with.
Now, an issue that’s been of great importance since the beginning of the industry is the distribution channel. Ever since the first console was released the goal of the industry is to attract the target public into video games and keep them tangled in the cycle of videogames and consoles, while at the same time trying to draw the attention of more people expanding the target audience to a wider range of people. Going from a child oriented market to a now family entertainment experience.
But for such a new and innovative industry the channels of distribution had always been pretty common, mainly TV commercial, ads in magazines of the genre and other standard media, also the retailers have been almost the same, a physical store with many games in boxes displayed to the public. Which are still the dominant channel of sale and communication from the great companies to the consumers themselves. But since the growth of internet use in gaming such as online games and specialized web sites dedicated to video games new channels have appeared for the industry such as banners in specific websites, viral marketing through the web and many others.
And with this opening new media and the rising popularity of websites such as Amazon.com and ebay.com opened up the possibility of online video game stores, mainly online stores where an online versions of already existing retailers, such as EBgames, Best Buy, Wal-mart, GameStop among others which focused on selling games online and latter on delivering to the customers saving time for the, that was spent on going to a game shop and browse through the shelves until finding that one desired game. Also it gave the customer easier way to search for games thanks to the advantages of an online store which meant a larger library of available products to the customer, mainly because the lack of a physical location makes it easier to handle with inventory in one center of operations and distribution
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Digital Distribution: Origins
With this new method of selling games the industry seemed to have found a new and original way to sell games and handle the to the customers, but the advances in internet velocity and fast connection ushered in a new era of gaming, focusing every time more and more on the use of internet, mainly used in PCs, thanks to the simplicity of connecting a computer to internet unlike consoles at the time. Games starting being played on the web which required players to be connected to be able to play with each other simultaneously across the globe, games such as Ultima Online, Counter Strike and others rocketed online gaming. Weather it was and Online Role Playing Game or a First Person Shooter online gaming was meant to stay and expand in the market, up to being nowadays the largest demographic in gaming. And thanks to this sudden boom of popularity in gaming, a game developing company saw an opportunity to start an interesting business; this company was Valve Corporation, based in Bellevue, Washington. They started a service called Steam which consisted in selling games online but not delivering the discs to the customer but enabling the buyer to download the game directly from the server to their PC.
The Industry
This revolutionary method of selling games was a complete success with the birth of Steam many other game developers saw this market and decided to make partnerships with Valve so that their games would also be featured and available in Steam. But at the same time Steam was not a perfect system, its biggest flaws where affecting the community negatively, some games couldn’t be sold in some countries due to some company policies, price variation depending of the area of the buyer and the software needed to download games through this system had an error that blocked every computer in Europe that had a game downloaded by steam but didn’t have a internet connection. But still with these flaws other companies of digital distribution entered the market some of them where IGN.com’s Direct 2 Drive which featured a more strategy oriented catalogue of games, GoG.com a distributor of “classic” PC games to nostalgic gamers to name a few. But this market was mainly focused to North America leaving the rest of the world with great restriction to buy games or even not letting buyers from outside the United States, and Canada to be able to purchase games through their websites.
Sales Paradox
But not every company was releasing their games in the digital market; some where a bit doubtful of releasing their titles thanks to DRMs and piracy issues, and one of those companies was Paradox Interactive a Swedish video game developer and publishing company based in Stockholm, known for producing historical accurate strategy games. Not a worldly acclaimed company Paradox Interactive based most of its games on the feedback from its customers creating a strong connection between the company and its loyal fan base. Paradox always featured forums in their website where users could log in and comment about recent games released by Paradox or discuss issues regarding the games making recommendations or critics to the games which the developers and programmers take into consideration for their next release making it a company concerned for their customers, unlike most of the big gaming companies that ignore their customer’s opinion. So when a user from Argentina couldn’t find in the local market a new game made by Paradox, so he asked through the forums if he could buy the game directly from them and allow him to download it, this meant a cheaper way of buying for him and lower costs for the company. The response was an immediate yes allowing the customer to download the game from Paradox; this caught the attention of other users from other places in the world and also asked for this way of purchase, thanks to this positive feedback from the users Paradox-on-Demand was created a service that allowed gamers to directly download games from Paradox directly to their PCs. In less than a year the success of P.O.D was so large than other small and medium game developers approached Paradox interactive and asked if they could also release and sell their games through this platform, this looked like the start of something big for the company so they agreed and after a change in the name of the system Gamers Gate was released to the web.
The Digital Industry
But, how is the industry in which Gamers Gate is located in this market and which companies are its main competitors? The market of digital distribution in video games is a fairly young market with only a few years of existence, but it has turned into an active and competitive market with over 15 companies trying to succeed and become the dominant one. The big player in this market is Steam, Valve’s company with over 800 games in their library and 20 million user accounts, being over 40% of the market, Gamers gate has a library of over 1000 titles but with a smaller number of user accounts just being in 12% of the market. Steam has stopped its ravaging growth of over 60-percent while GG has been in a 100-percent growth for 3 years in a row and it doesn’t seem like its going to stop. With numbers like these it’s easy to tell that the competition between the companies to expand their market share is a wild fight for contracts with third party developers for the rights of different games. Also this industry it’s really hard for the entry of new companies thanks to the difficulty of distributing video games through this channel.
Real Time Strategy
The strategy used by GG is, through a user-friendly interface they give a service with freedom and flexibility to their users. The webpage is self explanatory with tutorials on how to download install and play the purchased game. This consists in a easy 4 step process first one must buy a game paying through credit card or PayPal, after the payment you download the game and immediately after that the game will automatically install itself on your computer and finally the last step is just star enjoying your purchased game. Now, unlike Steam and other companies of the market one can transfer purchased games from one account to the other, and to download multiple times purchased games, even though this might seem a big flaw on the system allowing unscrupulous gamers to take advantage of this situation, but the goal of Paradox is to create an open and consumer friendly concept which they have succeeded by trusting in their users giving them that freedom, so they can grow in that niche market of gaming. The success of gamers gate is shown not only in its strategies but also in its numbers, within the last 3 years of existence Gamers Gate has had a streak of 100-percent growth every single year making it the number one company regarding growth which clearly means that the formula of trusting users and giving them freedom works better than restricting them and forcing users to download software to exclusively download games when they could do it without that cumbersome “middle-man”
Competitive advantages:
“Deal of the Day”: This is a key concept when we talk about Gamers gate. This firm
as usual makes every weekend a good discount, this is very attractive to the demand and
unique among its pairs, this little gesture makes a huge difference in times of deciding
where to buy. The payments are made by credit card or PayPal. Technical Support: This service makes the difference between the competences. The technical supports in virtual-markets are essential because there always emerge problems or questions that are hard to solve. The service in Gamers gate can solve everything so quickly that really makes the purchase easier. Inside System: A key aspect of this company's success has been the ease with which players can purchase and access games through the service. Gamers Gate is fully browser-based, meaning players don't need to install any additional software onto their computers before they can begin buying and playing games. Unlike platforms like Steam, Gamers Gate allows players to transfer games between accounts at any point in time, ensuring that they always have access to the products they have purchased. "For us, it's all about anywhere, any time," Bergquist (CEO) explains. "We want gamers to access the games wherever they are, and we trust them."
Comparison with its main competitor as the benchmark:
The main competitor of Gamers gate is Steam.
Steam has the same businesses than Gamers gate it is the same video-game platform but with a tiny difference. Steam is bigger and it has been more time in the market. Steam also has more users (about 2 million of accounts) instead
Gamers gate over 400.000 users. One of the important reasons that explain the huge success for the last 3 years with more that 100% of growth of Gamers gate is the library of games, its over 1.000 while Steam only 840 approximately. Another reason is the way of purchasing the games, users complain that with Steam you have to download software and after a while your computer gets slow and filled of viruses
And useless folders. That’s one of the advantages of Gamers gate, that you don’t have to download anything, you pay you play. Besides the stagnation of Steam, its still selling like a beast and being the number one. It is good when Your benchmark is so high, because your goals are higher and also your growth,But is not easy to be in the shadows of a big firm, you really need to know how to manage the situation. Gamers gate besides its youth, is doing very well in the industry, and our analysis showed that in a couple years it will take over the marketshare.
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