The long tail of digital distribution

I so do like glimpses into the future. NCSoft announced that you can now buy City of Heroes and Lineage II via IGN's digital distribution service Direct2Drive. So I had a look there, and I liked what I saw. One good thing was that I didn't even need to register or install their download manager, they are using the same system as their sister-site Fileplanet. The choice of games on offer isn't huge, but there are some decent games, several MMOs (including Everquest), and some games that would be hard to find in a video games store.

Internet retailers call that the "long tail", and it is part of the business model of successful outfits like Amazon.com. A brick and mortar shop selling books or video games can only offer a limited number of items, due to limits of shelf space. So such shops only sell the most popular books or games. An internet retailer can at very low cost store a much wider range of products. And customers soon learn that their chance to find any non-bestseller is much greater at the internet outfit.

The advantages of the long tail become even more pronounced in digital distribution. As you are buying copies of data, the store is never out of stock. Storing a copy of some old game on a hard drive has a very low marginal cost, and it takes just one customer to buy it to make it profitable. So I expect digital distribution of PC games to grow, especially since PC games are slowly but surely losing the shelf space wars against console games in the brick and mortar stores.

The remaining problems are related to marketing. Game producers might be bound to "exclusive" contracts with game distributors, which forbid digital distribution at least when the game is new. There might also be contracts in place which prevent IGN to sell certain games digitally outside the United States. But the more people get broadband access, and the less shelf space the brick and mortar stores are willing to dedicate to PC games, the more attractive digital distribution becomes. One day we might be able to buy the majority of games digitally, on the day they are released.
- posted by Tobold @ 7:59 AM Permanent Link