Tobold's Blog
Thursday, June 20, 2013
The death of the physical disc

Buying a game on a physical disc has some advantages: You don't need a internet connection to install and play that game, you can resell the disc, or you can take it and play it elsewhere. A physical disc also has disadvantages: You need to leave your house to buy it, you can lose or damage it, it takes physical space to store it, and every time you want to switch games you need to change discs. Physical discs also have a big disadvantage for the game company making them: They cost money to make, and too many middle-men and used game resellers make money of it that doesn't go to the game company.

In 2010 something happened: Sales of PC games online for the first time were higher than sales of physical discs of PC games. If you include consoles, sales of physical discs are still ahead, but in 2012 they dropped by 21 percent, while online game sales were up 16 percent (and those numbers don't even include Steam).

This trend towards "digital distribution" (stupid term, as if a DVD wasn't digital) persists in spite of release prices online being objectively too high. Given the lower cost of distribution and less middle-men, game companies could sell online games cheaper. Currently they don't do it, because they fear reprisals from retail stores. But that isn't going to last forever: PC games are selling just fine in spite of not getting much shelf space in retail stores any more. And an Apple Store is doing just fine without selling software.

So today's news that Microsoft is giving up on online-based DRM for physical discs in some ways is a Pyrrhic victory: Everybody failed to notice that both on the XBone and the PS4 the much-touted advantages of being able to trade games only applies to physical discs. Games that you bought online on either system can't be resold, traded, or anything else. At some point in time Microsoft, Sony, and all the game companies they work with will notice that they make a lot more money from those online sales than from disc sales. And they might decide to not give subsidies to retail stores any more, and price downloadable games cheaper than physical discs. On the PC they already give discounts a lot faster on Steam than in retail.

The time between two console generations is about 7 years. Seeing how even today I barely ever use the disc drive of my PC any more, and my iPad doesn't even have one, I wouldn't be surprised if the next console generation of 2020 came without a disc drive either, at least not in the cheapest default version. Today might well be the last hurrah for physical discs.

Incidentally, the latest Steam beta has some hidden UI texts related to shared game libraries:

“SteamUI_JoinDialog_SharedLicense_Title” “Shared game library”

“SteamUI_JoinDialog_SharedLicenseLocked_OwnerText” “Just so you know, your games are currently in use by %borrower%. Playing now will send %borrower% a notice that it’s time to quit.”

“SteamUI_JoinDialog_SharedLicenseLocked_BorrowerText” “This shared game is currently unavailable. Please try again later or buy this game for your own library.”

Those texts seem to suggest that you can assign games to a shared library. Each shared game can only be played by one person at a time, though.
I disagree. It's not a Pyrrhic victory: they listened to the crowd (contrary to what many of us were writing here and over the web) and removed a horrible DRM. There are no losses, it's a clear "win" on the customers' side.

That's a first step. I am sure no-Kinect and a lower price will come sooner than later.

On a side note: Steam is moving towards the sharing solution, where you can share/lend a game in your library by just "unlocking it" to a friend (of course you can't play both at the same time). This is a first step too, and it's a great thing.
Sorry Mika, didn't read your post in time. I'm glad you pointed out about Steam, it's a great thing. It seems it's a sharing option that does not involve "selling" but you know... nobody blocks you to share it with a friend and ask for some PayPal cash outside Steam. He will keep the game and you're done.
Yes we PC gamers can nod smuggle knowing that those who protested loudly about Xbox drm will in all likelihood be willingly signing up for it in a few years. Nevertheless I remain convinced that the protests and subsequent climb down are important.

PC gamers moved to Steam and other digital distribution platforms willingly because it benefited them as customers to do so. Microsoft tried to force that change on unwilling customers before they were ready.

It is not just about timing either. Perhaps the most important point is that it demonstrated that customers do have power. The new digital distribution systems will need to appeal to customers to woo them then not force them to change.
I'm sorry Tobold, but I have to disagree somewhat. There were some problems with it.

First, a lot of early supporters were saying that it would help lower prices, with piracy and used games no longer a concern. You yourself said: ["A future in which media a virtual and can't be pirated or resold could thus result in lower prices."]

The problem was, Microsoft already announced that $60 was going to remain the price for their games, alongside Sony. Changing to a mostly-digital, locked-in strategy had no actual price benefit for a consumer, in this case.

The second problem is, they want to keep the discs, and can't easily go all-digital. It would hurt their placement in stores such as Wal-Mart, Gamestop, etc, and it would make it harder for non-gamers to buy games for gamers. Which do you think grandma is likelier to buy -- a disc for the PS4, or a code that can be redeemed for a game? One of those just doesn't feel 'real' to her.

The third problem is that their system did seem to push people towards other options. If sharing games with friends, used games, and being able to play without an internet connection is important to you, you were likely to buy a PS4 instead. If those key points weren't important to you, on the other hand, you have two options for them--an XBox One, or a gaming PC.

Lastly, the thing is, it's what the audience wanted. Even XBox fans were starting to desert to one degree or another (we'll never know the true numbers, sadly), while Sony got to play the hero by Doing The Exact Same Thing As Before.

In the end, the XBox One will still have digital games, just as a secondary option to physical games. This is exactly the same as the 360 had. The same will be true for the PS4. It's not revolutionary...but it's ultimately what people wanted.
You can package digital codes in a box so that grandma doesn't care or even know that the Call of Duty 15 she bought at Walmart just contains a code.

Will this change hurt Microsoft or just the publishers? I.e., more people stealing, sharing and reselling games affects publishers more than Microsoft?

I don't think the day-one download prices will be going down as much as retail going up. And digital allows more flexibility - easier to get both the $60 midnight launch crowd and the $5 steam sale crowd.

Instead of the simpler Microsoft DRM, publishers will have to go with their online accounts and DLC to reduce some of this.
> "digital distribution" (stupid term, as if a DVD wasn't digital)

No, it's not stupid and I don't understand why you keep saying this. The contents of a DVD or other media disk are digital, but if I go out and buy/rent one, the distribution method is in fact physical. If I download the movie/game/software instead, the distribution method is in fact digital. The different terms for the distribution methods are apt.
I for one look forward to the no-disc console days. Then my $400 console wouldn't become a media center because of a faulty disc drive (that i can't fix)
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