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Analysis: GameStop's OnLive Box-Out Hints At Greater Digital War
Analysis: GameStop's OnLive Box-Out Hints At Greater Digital War Exclusive
August 24, 2011 | By Kris Graft

[Gamasutra editor-in-chief Kris Graft examines how GameStop's decision to remove streaming game vouchers from packaged games indicates how the old guard fears "fast-movers who have the technology, business savvy and agility to flip the boat."]

Game 'Stop' indeed.

Publisher Square Enix and streaming online game company OnLive tried an interesting new strategy this week, bundling the physical retail PC version of the critical hit Deus Ex: Human Revolution with a voucher for full access to the OnLive version of the game.

It seems like a win-win strategy: Square Enix adds value to its high-profile release at virtually no cost, and OnLive gets to sneak into gamers' homes to introduce this newfangled streaming technology that works across multiple online-enabled platforms.

But GameStop quickly put the kibosh on that idea, starting a voucher removal program: an internal initiative ("Operation: Voucher Freedom" is less offensive, so we'll use that) to have GameStop associates rip open those copies of DEHR, snatch out the OnLive offers along with the new game smell, and sell them, streaming-free.

[Since first publishing this piece, GameStop has reportedly decided to pull the PC version of the game from shelves completely. -- Ed.]

The move, now made public by a leaked memo, sends a clear message to not only OnLive, but also GameStop's publishing partners: Tread on our fledgling digital business, and we will leverage our brick-and-mortar muscle to marginalize any competitive digital aspirations.

The conflict of interest, of course, is that GameStop is doing everything it can to break into the digital business itself. A popular myth is that GameStop fears digital business models, but the fact is that it loves them. What GameStop really fears is that it's not going to get its cut. For instance, GameStop is OK with DLC these days, because it found a clever way to get in on the action through in-store DLC purchases and sales of points cards used to buy digital content. The giant is appeased.

Let's face it, GameStop is and always has been looking out for number one, whether you consider the fact that nearly 50 percent of its gross profit come from used product sales (reminder: publishers see no direct profits from these sales), or the fact that it wants to use its size and influence to sideline digital competitors.

GameStop's acquisition of Stardock's Impulse digital distribution platform means that it is competing head-to-head with services including Valve's 30 million-strong Steam, and its PC and console game streaming strategy (via the Spawn Labs acquisition), is competing -- or rather, will be competing -- with OnLive, and is currently under testing.

This week's Operation: Voucher Freedom will affect GameStop negatively, albeit just for the short term, creating resentment among people who keep up on gaming news (and who already pretty much hate GameStop). It'll blow over rather quickly.

It's probably not much more than an annoyance to Square Enix, which will ride the wave of high Metacritic scores for DEHR as much as it can.

As GameStop intended, OnLive is getting the worst of it here, as OnLive is no longer getting into GameStop's 4,000 North American retail locations. OnLive had to have seen this coming, the way that it announced the voucher the day of DEHR's launch, and the fact that GameStop told Gamasutra, "Unfortunately, the coupon was packed without our prior knowledge."

While the negative psychological implication for consumers appears to be along the lines of "I was going to receive something of value, then big corporate monster ripped it away," the reality is, as GameStop correctly notes, OnLive is a competitor now. It's not the classiest thing that GameStop could do, and I don't agree how it all went down (opening a product and selling it as new is annoying -- but GameStop's been doing this for years). But just think how hilarious it would've seemed to entrepreneur and OnLive CEO Steve Perlman to have injected his service into the bloodstream of what is destined to become one of his company's biggest opponents in the streaming game space. GameStop would've looked like chumps.

It's only going to get stickier from here. Electronic Arts is ramping up its digital distribution business with Origin, and has a streaming demo partnership with Gaikai that could blossom into a full-fledged streaming game partnership. Activision's has a rather narrow scope currently, serving as a platform for Blizzard games, but that platform, or at least its tech, will inevitably be leveraged into digitally-distributed Activision Blizzard games.

GameStop told Gamasutra, "We pulled the coupons because, like all retailers, we prefer not to promote our competitors and their competing offerings and services in our stores." GameStop is absolutely right -- but the issue is that its publishing partners who are essential to its largely physical business are slowly but surely becoming its digital competitors. And it's not just GameStop that will closely guard its digital business -- everyone that's making the transition is on unsure footing, and wary of fast-movers who have the technology, business savvy and agility to flip the boat.

The transition is going to be a rocky one: publishers, retailers, and their respective online businesses will be butting heads. As much furor that was raised this week over Operation: Voucher Freedom, it's only a hint at the the upcoming battle between online and physical retail, so time to suit up.

And as a final thought, what are those associates doing with all of those OnLive vouchers? Maybe they'll just recycle them into more Game Informer magazines.

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Eric Kwan
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I am so not looking forward to the day where I'll have to visit a different virtual storefront for each game I buy (and then have to sign in and authenticate on myriad DRM servers to play, to boot).

Dave Long
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That day's getting closer and closer. Some publishers (like Paradox - who also have their own very effective digital download service in GamersGate) are taking the "get your game everywhere" approach, and I applaud them for it, but there are many others who make getting their game online a chore, or almost impossible (legally - and I don't condone gaming piracy in any form). It's a right shame, and yet another reason why I prefer my games on PS3 where I can get 'em (and that could equally be XBL - I just happen to be on PS3), because the one service gives me access to an ever-widening range of games with no risk of me needing separate accounts for stuff (other than Konami's mess with MGO early in the piece).

One of the reasons I'm a big fan of Steam is the way they've designed their client software to support launching of non-steam games, and that many of these non-steam games will still support Steam's community features (ie, I can launch play Gal Civ II and still Shift-tab to chat on Steam) - this is the way I'd like to see things go, where people can choose their platform of choice, but play non-platform games 'through' it.

Alex Leighton
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Me too. Hopefully as long as people keep buying retail this future will be held off, but it's a sad future where consumers will be getting screwed.

Alex Beckers
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Last week's The Economist had a short piece about the way the cable television industry is transforming, there are a lot of parallels here. In the past, cable channels worked through the cable service provider to get content into the home. With the advent of streaming and the decline in TV ownership, cable channels may need to start marketing directly to consumers, bypassing the cable service provider entirely.

Replace "cable channel" with "publisher" and "cable service provider" with "retailer". It's not QUITE that simple -- you're still going to want a retail presence for Grandma who just wants something for little Johnny's birthday -- but the parallels are there. We're going to see more and more channel conflict going forward.

Nathaniel Smith
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I've got to admit, I'm confused here.

the boxed pc version of the game was shipped with an online voucher to get the streaming copy of the exact same game?? why do this?

k, then gamestop removes the vouchers from the boxed game copies- again why do this?

i think i got the what and how but not why. someone plz explain in lamen terms : )

Glenn Sturgeon
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Easy victory in court for square & onlive..

Gil Salvado
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"Only because everyone's doing it, doesn't make it right."

GameStop could have surely used this for their own marketing strategy - like: look we even support our competitors - which would have polished their reputation a little, but given the fact that they didn't even knew of the vouchers until shipment gave the an impossible time frame to react smart on this.

For the digital distribution shift it's going to be the survival of the fittest, or like DEHR likes to put it: the ones most adaptable.

Miguel Castarde
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The most sad thing is see Square having to apologise for Gamestop:

"GameStop was not made aware of this inclusion and Square Enix respects the right of GameStop to have final say over the contents of products it sells and to adjust them where they see fit in accordance with their policies."

Jindo Fox
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GameStop's petty victory seems very short-sighted to me. This is likely to be the last time they will get a chance to pull paper vouchers out of retail boxes. As a result of this heavy-handed approach, you can bet that next time, OnLive's code will be offered to the player at the time of installation or registration, and GameStop won't be able to do anything about it. Can't stop the signal.

Eric Feliu
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Wow just one more reason to despise Gamestop. Just when I think they can't stoop any lower they do something like this. It's irrelevant that they compete for digital rights. If they did not agree with the software package then they should have pulled it from their shelves and returned the product to the publisher. To alter the packing is just wrong.

A publisher should be able to package their product as they see fit and it seems reasonable to me that they have no burden to inform Gamestop or any store what special deals are included.

I guess Square is afraid that Gamestop may decide to not carry any of Square's software in the future, which displays the power that Gamestop holds over the game industry to me.

Jerry Hall
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HAHA, that's like Best Buy taking all the USB cables out of all the electronics they sell, because Best Buy sells USB cables too.

Marc-Andre Caron
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Joel Braun
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Better analogy is Gamestop removing retail games from their shelves, because it competes with their used game business..

Silly when it gets down to it..