Digital Distribution of Videogames

(Original image from: Gamasutra)

There is an article by videogame lawyer Thomas H. Buscaglia called: Game Law: The Good News About Digital Distribution. It touts the merits of this new delivery method of games to consumers. One of his main points is that digital distribution has an advantage over retail publishing b/c IP ownership issues are resolved in favor of the creators. The current trend is that digital distributors take no IP interest in the games they deliver.

He cites XBox Live Arcade as an example of the move towards digital distribution by the mainstream. XBox Live Arcade basically delivers very simple and small games to XBox Live subscribers (usually for a fee, but sometimes for free). It has been very popular as gamers wait for the bigger releases to hit stores. Another example of the move towards digital distribution is Game Tap. This is an online monthly pay service that allows users to access hundreds of classic and contemporary games from their PC. Likewise the current trend of developing games for cellphone download has created yet another digital distribution outlet and industry that Cingular wireless has tried to dominate.

So what does all of this mean for the owners of the IP of these digitally distributed games? According to Tom, the videogame lawyer, there are many incentives. For one thing, he says that the developer's royalties can be two to four times greater than the traditional publishing deal; "[t]his means you can sell fewer units and get by and if you get a hit, you get much more return, even at a significantly lower price point. Also, in most cases the developer retains the IP. This help builds long term value in the studio, something you cannot get otherwise unless you develop some sort of patentable technology or other licensable tools and technology while your making your game." Also he says that it opens the door to creative funding. A lot of games do not get made b/c of the strings that big publishers attach to the funding they provide for videogame development.

A parallel to this arrangement can be seen in print publishing. Often the royalty provided to an author ranges from 12 to 15% of net profits. As the publisher takes the financial risk, they get the biggest financial chunk. We currently see alternatives to traditional publishing popping up, via digitial distribution and even digital publishing arrangements. Sites like Lulu publishing allow creators to have their books published and via a fee arrangment. The distribution is more creator-generated, but the similarity in allow access to publishing shows that there is a trend towards widening the circle of published works and allowing more creator control in the process.

(Original image from: AnimeXplosion)

Finally, Tom says that the most important facet of digital distribution is that it "means more ways to get your games directly to the players with as little 'middle man' action as possible ... higher royalties, you get to keep your IP and direct access to your user base. " Time will tell whether this is a good thing that will spur creative and risky projects that might not otherwise get completed, or if we are just bombarded with lots of crappy titles.