Game: How Not to Survive a Digital Transition

It has been an eventful week for the UK Games industry with leading national retailer Game first suspending trading in its shares and then calling in the administrators.  Yet this morning the Electronic Retailers Association announced that Games have just become the largest UK entertainment sales category.  So how can these apparently contradictory dynamics co-exist?  The answer lies in the success of Games as a digital product, or rather series of digital products.

It is Gaming Channel Strategy that Is Undergoing the Digital Transition

The modern day games industry has always effectively been a digital, or at least electronic, business, selling software than exists only in digital contexts.  What has changed since the first Magnavox Odyssey video game console in 1972 is that the channel strategy has become ‘digitized’.  In the console arena, online marketplaces allow gamers to download directly to their consoles, in the PC space retailers such as Steam enable games to download directly to their computers and in the mobile and tablet space, well they’ve been digital from the start.  Thus we have the global Games market with the largest digital transition of any entertainments sector: 39% compared to 29% for music and 4% for newspapers according to PWC.

The more digital the UK Games market became, the more exposed Game became.  With 300 stores across the UK, Game is to UK Games sales what HMV is to UK music sales, in more ways than one:

  • It has a dominant high street footprint
  • Its core market of physical buyers is shrinking
  • It faces fierce digital competition on multiple fronts
  • It lacks the device ecosystem of many of those new competitors
  • It hasn’t translated its physical dominance digitally

The Games Industry is a Digital Transition Best Practice

There are also some telling differences between games and music:

  • Unlike music, the game industry’s physical customers are not analaogue hold outs. A large portion of physical music buyers, the Digital Refusniks are often older and do not tend to be very technology minded or web-literate.  Physical games buyers however are quite the opposite.  Gaming is a technology centred activity and many of those gamers who still buy physically are younger, pre-credit card age Gamers.  Thus while the music industry frets about how to persuade the Digital Refusniks to embrace something alien to them, the physical games buyers will naturally transition to digital.
  • Digital opens up new gaming audiences in a manner music companies would dream of. Whereas digital has largely transitioned the music industry’s most valuable existing customers, digital is opening up new markets and customers for games.  The average profile of an online social gamer is an early 40’s woman.  Not exactly your core xBoxer.  Similarly mobile app stores are bringing whole new swathes of consumers into the gaming market.

Digital is a success story for the Games Industry.  The struggles of Game are a reflection of the company’s inability to construct a long term and effective digital strategy, not of the state of the games industry.  The future is bright, the future is digital, for the industry if not the high street retailers.