Gaming has entered the online age. With the rapid rise in broadband usage, virtually every electronic gaming product released in the last three years now takes advantage of the Internet in some way. Through digital distribution, developers may no longer have to rely on publishers and retailers – and settle for tiny profit margins – to reach a massive audience.

Digitally-distributed games liberate developers to make the titles they want and enhance the chances of commercial success. Retail plagues such as piracy and resale of used games are reduced or even eliminated. And consumers are ready, eager, and equipped to embrace this more convenient distribution alternative. To take advantage of this opportunity, game developers need to understand – and address – the unique challenges associated with digital distribution. A key criterion for success is the ability to readily meet the needs of a global consumer base, yet few developers, large or small, are equipped to serve customers in America as readily as those in Germany . Game developers can either build out costly data centres (with little hope of overcoming Internet issues that cause poor performance), or they can outsource to a provider who can ensure high performance at an affordable price.

In recent years every major developer of mass-market entertainment has been forced to rethink traditional business models that have relied solely on retail outlets and physical copies of their products. In music, the iPod® has made digital music not only mainstream, but cool. In addition to online video retailers such as iTunes®, CinemaNow and Vongo, traditional retailers have opened online stores where people can download and enjoy films without having to buy the DVD. For the video game industry, the transition has been slower. The relative size and complexity of a game compared to music and movies has made it difficult for developers to attract customers online. But the following factors are combining to enable digitally distributed games (DDGs) to take off:
·         increased broadband usage
·         lower-priced, high-powered PCs
·         next-generation broadband-enabled devices such as Xbox 360™, PlayStation® 3, and Nintendo Wii™
·         consumer desire for convenience
·         stricter piracy protection
·         rising competition for shelf space

As an increasing number of gamers have broadband connections, and those broadband connections are becoming faster and more reliable, the user experience is getting better over time. Gamers are no longer continuously hampered by dropped connections or slow pipes as they try to download their favourite game. This shift also means that gamers have high expectations when it comes to the performance of online games.

Easy does it
Convenience is the number one reason cited by consumers for purchasing a game online. The successes of Apple and Microsoft digital offerings have shown that people favour ease of use over owning the CD. Historically, digital distribution too often meant storing a zipped game file on a secured server. While this kind of solution is quick and easy, it is not convenient for consumers and unnecessarily caps the product’s potential. With convenience top of mind for consumers, developers can ensure that their product is delivered quickly and efficiently using digital distribution.

Not so jolly, Roger
The future of gaming mirrors that of the history of the music and film industries. The threat of piracy and a desire for instant gratification make a move towards digital distribution of games inevitable. DDGs carry with them distinct advantages over their retail counterparts. Profit margins are higher – since game developers can bypass the publisher – and with a robust licensing system, piracy is much less of a problem.

DDGs can help curb the sale of used games and reduce piracy, two common concerns of developers in this market. High prices for games at retail, designed to compete with rising production costs, have actually encouraged the practice of reselling titles and cutting into revenues that would otherwise go to the developer.  Piracy of video games costs the North American market upwards of US$3bn each year and is estimated to be much costlier in other markets. Countries with high software piracy rates, such as China , have taken core games out of the retail space and are working to drive the market towards new business models such as digital distribution and virtual property.

Shelf-ish
While the shelf space for games – particularly PC games – at major retailers continues to shrink, the competition for those spaces is becoming more and more heated. As a result, both major AAA titles and independent games are now finding their way into the digital space. Players can buy anything from Sony Online Entertainment’s EverQuest II (a major massively multiplayer online role-playing game or MMORPG) to 80Soft’s President Forever (a text-based American election simulation) online. The beauty of online distribution of games is that – like film and movies before them – it levels the playing field and allows smaller companies such as 80Soft to compete directly with major publishers. This push towards retail-free distribution can lead to greater returns for developers, which already hover between 20% and 40%.

And the bandwidth plays on
Developers need a system that is equipped to deal with the large amounts of traffic and demand that games can create and ensure that the distribution of a major highly funded (AAA) title goes just as smoothly as a small content patch.

Developers could build their own infrastructure to handle digital distribution, but this can be a risky choice. Historically, games sales are higher in the first few weeks following initial release before levelling off. Most internal game delivery solutions can handle day-to-day traffic but suffer or buckle under the weight of an initial consumer rush, which can cause bandwidth usage to spike to 100Gbits/s and over. What is more, the file size and demand of the initial release are often difficult or impossible to predict, which means internal solutions often result in developer waste (over-estimation) or ineffectual early distribution (under-estimation).  A solution must be robust enough to scale at a second’s notice to provide optimal download performance.

If the Internet is congested or servers along the download path fail, downloads can be slow or fail to complete. Low download completion rates frustrate the customer and negatively impact the business. A Harris Interactive study revealed 7% of end users would abandon the purchase entirely after a failed download, and 32% would turn to a competitor for their needs. For game developers, this is a high risk to take when attempting to build a loyal global fan base.

Failed downloads also add to business costs. Gamers that stick around will often turn to support centres and elect for physical delivery of the game instead. Physical delivery costs often include everything that digital delivery solutions are able to provide, but with the additional expenses of packaging, shipping, warehousing and inventory management. These costs are magnified when games are sold globally. Game distribution is often headline driven. Developers of DDGs see large traffic and download spikes on launch and patch days that do not accurately represent their bandwidth needs for most of the year. While developers can build the necessary infrastructure to handle digital downloads – including mirroring downloads in multiple locations – this is often an expensive and resource-intensive proposition. Building out and maintaining infrastructure detracts from the main business focus. In addition, attempting to support unpredictable traffic spikes with excess capacity results in increased costs and wasted bandwidth that is often sitting idle.

Measure for measure
The key to successfully providing digital delivery of games requires an understanding of how well the end user is being served. Companies armed with critical information such as where users are downloading from and the success rate of downloads are better prepared to handle end-user needs and enhance their brand image. Many gaming publishers have trouble capturing this metric with reliability, and for those that do, it is not uncommon to see low completion rates – well below 50%.  Even a small improvement in download completion rates can make a significant difference in trial conversion rates.

A successful solution will not only improve the performance of downloads, it will also enable developers to measure the download and completion rates in a number of ways – such as by URL, by geography, and by end user IP address – in order to provide the best insight possible into the customer base. All this ultimately can lead to increased customer satisfaction – and revenues.

Many developers are discovering that outsourced DDG service providers can offer a lower up-front cost. Additionally, by outsourcing, developers can focus their resources on getting their product to market faster.

Endgame
In today’s gaming market, digital distribution is a core need, regardless of whether the game is retail, a hybrid, or online only. While digital delivery has already enjoyed significant success in the gaming market, industry observers agree the market is set to explode. The overall growth of the industry, along with widespread consumer adoption of broadband and increased consumer acceptance of digital content, makes the revolution inevitable.

While DDG offers an unprecedented opportunity to reach a global consumer base, successful initiatives must address the unique issues inherent to the Internet -- namely performance, availability, and scalability. A complete digital distribution solution enables developers to focus solely on making a rich game that works in a digital format – instead of worrying about the complex server and network architecture required to distribute it online.

The result? Developers can ensure that the maximum number of people worldwide have a chance to try their titles – all while realising higher profit margins than are possible via traditional distribution channels.