Digital Distribution To Rescue Western Games Industry?

14 Aug 2009 at 16:01:44 by Andy Alderson

The financial services industry has issued a stark warning to Western game publishers.

Speaking at the Edinburgh Interactive Festival, BMO Capital Markets’ Edward Williams warned that the Western games industry had suffered "significant disruption" to its business plans, while Chinese publishers are still seeing increasing profits.

Williams attributed this to the fact that Western publishers are still primarily distributing games on DVD through retail, while the Chinese focus on digital distribution thanks to its PC-oriented market. The PC focus also means that Chinese publishers and developers pay less in royalties to console makers.

He went on to cite three reasons why operating costs for Western firms are rising:

• The increasing size of games – development takes longer and more money is spent on staff wages.
  
• The focus on multi-platform development
  
• The cost of licensing for titles such as FIFA and Tiger Woods PGA Tour
  

Williams blamed these reasons for the stagnation in profits, despite seeing increased game sales over the last four years. Of, course, with the global economic crisis sales have declined over the last year meaning the gap between profit and sales is becoming wider.

EA Sports’ Peter Moore acknowledged that digital distribution was becoming more important to the Western games industry.

"In China, PC and mobile platforms will continue to dominate," he told the BBC.

"There isn't the necessity to buy other pieces of hardware and it is our job to service that."

"In Europe we are going to see more content that's delivered electronically, be that through Steam, Xbox Live or whatever."

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