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Digital on track to comprise 34 percent of console market by 2017
Digital on track to comprise 34 percent of console market by 2017
November 8, 2013 | By Kris Ligman

November 8, 2013 | By Kris Ligman
More: Console/PC, Business/Marketing

With the increased accessibility of high-speed internet and consequential rise of digital distribution within the last console cycle, odds are good that this an upward trend we will see continuing through the release of Sony's and Microsoft's next-gen hardware.

Analytics firm IHS projects that digital will account for up to 34 percent of games spend on PlayStation 4 and Xbox One by 2017. It sees this as a natural continuation of digital's growth through the lifespan of the PS3 and Xbox 360, shooting from 7 percent in 2008 to its current, considerable share of the market.

"it's clear that next-gen consoles will be more aggressively aligned to digital distribution and services than previous cycles," says IHS games director Piers Harding-Rolls. With the growing popularity of 'day and date' digital releases coinciding with packaged retail launches, Harding-Rolls says, "By 2017 new releases could be enjoying up to 18 percent digital sales depending on geography."

There are five key factors behind the growing adoption of digital distribution, according to the report.

Content and services: The increased availability of day-one digital releases for console games, as well as the prevalence of DLC, in-game purchases and free client software through which to deliver these, will continue to drive adoption of digital. "While digital distribution of full games will drive the transition as it has in the PC sector, experimentation with new content and service models... will help accelerate the switch to digital consumption," says the IHS report.

Pricing: "The nature of the 'closed' console platforms means that competition on pricing is inevitably less developed, but this is slowly changing," says Harding-Rolls. With digital marketplaces now beginning to price games aggressively against packaged retail, it seems natural this will be an ongoing and growing trend, leading to lower list prices for consumers.

Accessibility: "Especially relevant for high-end games, the ability to access content rapidly or even instantly would accelerate digital adoption significantly," says the report, citing in particular the PlayStation 4's ability to stream PlayStation 3 titles. "How these are built and rolled out will impact digital distribution adoption."

Discoverability: With more populous digital marketplaces, the inevitable issue of discoverability will crop up, as it has done on popular mobile platforms such as Apple's app store. On this vector, Sony and Microsoft's ability to build "effective discovery tools and recommendation engines" will deeply affect adoption rates by both customers and developers.

Monetization: While the outgoing console generation has seen DLC become a normalized fixture of games' business model, IHS foresees the adoption of mobile-styled microtransactions and hybrid retail/digital models to propel spending on next-gen consoles.

"There is no doubt that this is by far the most competitive consumer electronics climate that Sony and Microsoft have launched consoles into," concludes the IHS report. "However... the shift to digital consumption coupled with lower up-front investment in console hardware design and custom components will lay the foundation for stronger profitability for the platform holders [Sony and Microsoft] across the next generation."

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Dane MacMahon
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With games like Killzone Shadowfall weighing in at 50GB I find it hard to believe a ton of people are going to choose downloading and storing that versus a disc version, but I could easily be wrong. The PC digital sales market for "big games" took off way quicker than I expected.

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I agree- it's tricky without seeing the original report, but it sounds like the analysts don't realize that a side effect of the DVD on the Xbox 360 was to hold back game size- I hear that many of the next-gen titles are going to be 30 GB+
That's going to be day-plus downloads for most consumers.
It's also much bigger than the standard network caps for many (IIRC Turkey is 5 GB and the UK's standard BT packages are 20 GB).
I suppose the counter argument is that consumers are more and more conditioned to expect a download, so that may shift the balance.

Dane MacMahon
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Yeah, I have some of the best home internet you can have in the US and a 50GB download is still massive in my opinion. Throw in the fact standard HDDs for these systems would allow only 8 or 10 games that size to be installed at a time and you're looking at multiple re-downloads when wanting to replay games. Just seems insane.

Even on PC games like Max Payne 3 really made me regret going all digital, and that game was only 20 or so GB.

Merc Hoffner
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I'm not sure how it's going to play out, but you can compound these memory issues with what is more or less the lowest ROM to RAM ratio in history. With this much memory and a stagnation in the progress of optical storage as well as the limits of network infrastructure, filling it up with unique assets will be ever more problematic, and might drive further contraction of game length. You could only uniquely fill the RAM 6 times over from the large blu-ray discs! Let alone what you could do from a reasonably sized download. My connection's decent, and it would take me more than an hour to fill up enough RAM to start playing the first level of anything.

Theoretically procedural generation could help fill these gaps as compression did previously. But that was said last generation as well, and not much of it happened. Games mostly just got shorter.

Salim Muhammad
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I think, much like last generation, we'll see iterations of the consoles with larger HDD's. In the meantime, I think most people (like my self) will only download smaller indie games. Also, I only play a few games at once, so it's no big deal for me to just delete the games i'm not playing. Although, that day one download will be really tempting.

Harry Fields
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For consoles, Media will reign supreme. Most users aren't going to replace their PS4 HDD, nor are most going to add an external HDD to their XBone. Digital is very much a core market. And with the digital resale canned for now, I see most players sticking with Media so they can trade it in at gamestop. Digital will be the norm for indie/arcade style titles and HD remakes that don't have the sales projections to get shelf space at Wal-Mart, Target, etc. Everyone is also seeing the max capacity of 50GB Dual Layer BD-ROM. 3 and 4 layer discs are supported by the players in both consoles. It'll probably be a couple years before those are targeted, but whew... 100GB download would be .... ugh.

And for the life of me, I don't see why Sony/MS didn't spend the extra 10$ to put a 1TB drive in the systems. yeah, profitability and all that, but MS especially wants you to use this machine for everything and gives us a paltry 500GB :\. Being a geek and having more external HDDs around the house/office than I can keep track of, it won't be a problem for me, but most consumers won't go there. At least I don't think they will. Tinkerer types tend to favor PC anyway.