Gaming in the Digital Era: How the Transition from Physical to Digital Affects Console Gamers and Developers

With the next generation of console gaming among us, we are entering the first gaming generation where many console owners will have no other option but to purchase games digitally. Both the Xbox Series S and Playstation 5 Digital Edition are cheaper, disc drive-less counterparts to the standard editions of those consoles. In an economy rocked by the COVID-19 pandemic, and with digital distribution becoming the norm for console gaming over the course of this current generation, it's tough to imagine many consumers will be opting to spend more money for the novelty of a disc drive.

So what, then, does a digital-only world mean for the industry in general?

Console Gamers as Digital Consumers

It's no secret, especially in post-lockdown America, why digital has become the standard for console gaming so quickly. When the country largely shut down in March, gaming became a major escape for casual and hardcore gamers. With plenty of time suddenly on their hands, some sought relief in Animal Crossing: New Horizons and others got lost in Call of Duty: Warzone — both games conveniently launching in March.

The digital purchasing trend gained steam long before the pandemic. It wasn't just the lockdown that amplified digital purchases; the physical-to-digital shift has been developing since even before this current console generation. In-console digital stores are certainly standard now, but they only became featured on all console offerings less than 15 years ago.

While PC gamers have had this luxury for quite some time, digital distribution only truly became a viable option for console gamers with the launches of Xbox 360 (2005), PS3 and Wii (both 2006). These consoles all featured online stores where you could download games of various sizes. Still, hard drives were smaller and internet speeds were slower back then. Downloading games, especially full-size AAA titles, was more of a luxury than a standard means of purchasing.

Since 2006, though, hard drive sizes and internet speeds have increased, resulting in console gamers increasingly purchasing digitally instead of physically over the past decade. According to a report from Statista, digital purchases accounted for a whopping 83% of all game sales in 2018, and one can only imagine what 2020's percentage will look like. Hard drive space and download speeds aren't the only contributing factors to digital distribution overtaking physical, though — there are a number of other benefits to purchasing games digitally.

Of course, the primary benefit of digital distribution is the immediacy it provides. If a consumer wants a game, it can be purchased and, with download speeds today, ready to play within minutes. Deals also happen more frequently, are easier to scour through, and games drop in price much quicker than before.

Digital marketplaces have also eliminated the necessity of pre-orders. It used to be that pre-ordering was a necessary step in ensuring you procured a copy of a game on launch day. If you didn't, you ran the risk of searching multiple stores for a copy and potentially missing out entirely. Nowadays, there's no risk of digital copies running out. Pre-ordering is a nice way of financially committing to a developer you love, while maybe securing some digital bonuses as an incentive, but is no longer necessary as infinite digital copies of games are available 24/7.

The lack of a physical product, though, does raise some questions regarding what consumers are actually paying for. A consumer knows exactly what they've purchased when they leave a store with a tangible case with a game inside. A digital purchase, however, is a bit more mysterious. Sure, we can see the new game icon on our home screen and the space it takes up on our hard drive, but what exactly are we purchasing?

Temporary Licenses

When you purchase a game digitally, by downloading and playing it, certainly feels like you purchased the game — but that's not exactly the case. What you've actually purchased is a license, tied to that account, that allows you to download the game. Therefore, if you lose access to that account for whatever reason, those purchases could very well be gone forever. In turn, if the store the game was purchased from shuts down, you could lose the opportunity to re-download it. This has already happened with the Wii Shop Channel, which shut down in 2019.

Sure, when the entire service eventually goes down in the future, consumers will be out of luck if they ever wish to re-download their purchased titles. But what if just a single game gets pulled from the store? This has happened in the past with iOS titles like Flappy Bird and, most recently, Fortnite. The games were pulled from the App Store, resulting in phones that still had the apps installed selling for exorbitant prices on auction sites. A similar thing happened with the P.T. Demo, Marvel Ultimate Alliance 1 and 2, and other titles on PS4.

With digital purchasing, there's no getting your money back when you're finished with the product and wishing to resell. This is different from physical distribution of not just games and movies, but any product. Any physical product you buy can, theoretically, eventually be resold on auction sites or even yard sales — but there's no reselling of a digital license. Once you make the purchase, you're stuck with that game.

In terms of media in general, this is the route in which society is headed. Digital consumers are paying for temporary licenses of books, audiobooks, movies and games that can only be re-downloaded so long as those distributors exist. Digital streamers are paying subscription services for monthly access to libraries of streaming titles - be it Spotify, Netflix, Audible, etc.

Two big console players, Sony and Microsoft, have already adopted subscription models of their own — Playstation Now and Game Pass being their respective services. These subscription services provide subscribers access to a multitude of titles at a certain time, ala Netflix. Nintendo also has a subscription-locked library of classic NES and SNES titles exclusive to Nintendo Switch Online subscribers.

Genesis of the Indie Gaming Genre

Microsoft's Game Pass is widely acclaimed. The service gives subscribers access to a plethora of titles that they can play on PC, Xbox, and even Android. Game Pass' library features more than 100 titles and will occasionally feature a title on the day it launches. Such was the case with Spiritfarer — the latest title from indie studio Thunder Lotus Games.

Spiritfarer is an adventure game that tasks players with commandeering a boat delivering spirits to the afterlife while building relationships with them along the way. Spiritfarer launched Aug. 18 free for Game Pass members while retailing for $30 on PS4, Nintendo Switch, and PC. Considering Thunder Lotus have both developed and published their three digital-first titles so far, we sat down with Rodrigue Duperron, their marketing and communication specialist, to discuss how the digitalization of gaming has affected the studio.

"The simplest thing to say," Duperron said, "is that we're digital first ... it's all we've ever known. We're part of the generation of devs made possible by the digital revolution."

Digital is indeed intertwined with the genesis of Thunder Lotus Games. In 2014, founder Will Dubé quit his "job as a designer of free-to-play mobile titles to pursue [his] dream: to make an indie title." Dubé took to Kickstarter to find funding for his quest.

"Instead of making games for everyone," he says, "I wanted to work on a project with a real audience. Not ‘everyone’, not ‘gamers’, but PC indie gamers, gamers like me." In 2015, Thunder Lotus Games launched its first title, Jotun, on Steam for Windows, Mac, and Linux. Their well-received debut came to consoles in 2016 — limited physical editions of Jotun would come later.

"Devs of our size," Duperron said, "can't really aspire to go forward with physical editions at launch."

In fact, Duperron added that physical wasn't even part of the initial thought process throughout developing Jotun. "Digital first," he said, "then we'll see what's possible with physical."

Thunder Lotus's story, especially their dependence on digital marketplaces, is similar to that of many indie developers. When Duperron spoke about the generation of devs made possible by the digital revolution, he was more or less talking about an entire genre of indie games that only became possible on consoles when technology allowed for it.

Take another indie studio for example — Supergiant Games. Supergiant Games has been one of the most consistently-acclaimed indie studios over the past decade — with digital hits like Bastion, Transistor, and Pyre. With the recent launch of Supergiant Games' fourth title, Hades, their creative director, Greg Kasavin, credited digital distribution for the company's successes.

"Our studio only exists because digital distribution of games became viable over the last 10 or 15 years," Kasavin said in a statement. "It used to be that most developers had to ship their game on disc for $59. But with the advent of platforms like Steam and Xbox LIVE Arcade, smaller developers like Supergiant were able to find their own niche. Our team has about 20 people so we are much smaller than AAA studios, though still able to make games that we think can leave a lasting positive impression."

Kasavin brought up Xbox Live Arcade, which also comes up in my discussion with Duperron. Many console gamers will likely think back to XBLA as their first experience with indie digital downloads.

Gamers have been treated to so many classic direct-to-digital indie titles since — Castle Crashers, Braid, Journey, Super Meat Boy, The Binding of Isaac, Celeste, Spiritfarer, and so many more.

Potential Causes for Concern

Digital distribution has inarguably given gamers access to a wealth of inspired, artistic, and downright genre-defining indie titles — but it isn't all roses when it comes to the development side. Thanks to the digital space, there are a number of nefarious, disappointing, or cheap tactics that developers can utilize to make more money off consumers and lighten their own workloads.

The Rise of Microtransactions

If thinking about Xbox Live Arcade has you nostalgically brought you back to the days of late 2000's console gaming, you might also dig a little deeper and recall many console gamers' first experience with DLC: Oblivion's infamous Horse Armor.

DLC, or downloadable content, refers to any extraneous piece of content that owners of a game can purchase to supplement the title. DLC can be anything from a free character skin to a full-priced expansion. The original Xbox had minor DLC support, but gamers didn't really begin seeing an abundance of paid DLC until the next generation. One of the earliest Xbox 360 DLC's was the $2.50 horse armor Bethesda released for The Elder Scrolls IV: Oblivion.

In the 14 years that have passed since the Horse Armor's release, paid cosmetic DLC has become a common practice in games of all sorts. At the time, though, this was a relatively new expense for console gamers — and the Horse Armor maintains a notorious reputation as opening the floodgates of paid console DLC.

DLC is all the more common now. often falling under the ugly umbrella of microtransactions — an all-too-familiar modern annoyance brought about by the digitalization of gaming. Microtransactions are smaller -- though they quickly add up -- transactions within a game. These could be $2 purchases of an in-game currency that helps improve your player or stamina-type purchases on mobile games that allow you to play for longer.

Microtransactions often force a consumer to make a choice between spending their time or money. The time within the game often offers the same rewards, but money could get them faster. Microtransactions have led to incredible profits for Rockstar in GTA Online, and plenty of other developers that implement them. The video below argues that Bethesda's horse armor not only sparked the era of paid cosmetic DLC, but pay-to-win practices as well.

Systems like these, and many others made possible by the digitization of console gaming, have forever changed the potential revenue streams of console games. Whereas just a couple of generations ago companies could only make money from a console games' retail distribution, nowadays developers can continually generate revenue from a single game post-release. In fact, many free games have generated the most revenue — look at Fortnite.

For a quick illustration of how a single developer's strategy can change over the course of two generations, let's take a look at Rockstar— developer of the Grand Theft Auto series. Last generation, before microtransactions, pay to win, and GAAS had become so common, Rockstar released Grand Theft Auto IV for PS3 and Xbox 360. Grand Theft Auto IV was the first in the series to feature multiplayer online play. As a means of making more money post-release, however, Rockstar released two single-player expansions. Seeing as GTA has always been a single-player-first series, gamers were happy to spend some money on extra content; the expansions were well-reviewed by critics as well. Red Dead Redemption, Rockstar's other release on PS3/360, took the same exact approach. A single player franchise that featured its first online mode. Still, Rockstar focused on single-player expansions — releasing the widely-acclaimed Undead Nightmare zombie DLC.

This current generation, however, Rockstar has taken a totally different approach. Whereas last gen they released GTA IV, V, and Red Dead Redemption, this generation's only Rockstar game was Red Dead Redemption II. Grand Theft Auto V was a last-gen release that was ported to Xbox One/PS4. Grand Theft Auto and Red Dead Redemption fans have been clamoring for more single-player content, but Rockstar has instead focused on milking their online entities.

Post Release Content and Major Post-Launch Alterations to Games

A multitude of new financial practices is not the only digital dilemma for console gamers. Another double-edged sword made possible by the digitization of gaming is the ability for developers to make alterations to games at any moment through patches and updates.

By definition, of course, post-release patches are a good thing. No consumer wants to purchase a game that has any glaring issue that can never be fixed. Nowadays, gamers can notice issues or bugs in the favorite games, directly contact the dev, and usually see those problems fixed in a matter of days. There have even been cases where a game was initially a disappointment, but the developer works so hard addressing the fanbase's concerns post-release that they eventually rectify the situation.

This works inversely, too, though. Developers now essentially have a "get out of jail free" card knowing that they can fix any problems at a later date. This means that developers can avoid delaying games that are in need of a delay. A bug-ridden game can be rushed to release by the developer, knowing they can patch any issues in the following weeks.

The Future

In summation, the digitalization of gaming has changed the format in which games are distributed, allowed for the genesis of a new wave of indie devs, and made possible new financial revenue streams and post-release updates. But what happens next? What new issues might arise when digital distribution is no longer a method, but the method for distributing games?

It's easy to foresee a future where the physical gaming marketplace has completed evaporated, but Duperron was adamant that physical will never entirely disappear in the gaming industry.

Not only should physical always be an option for gamers, Duperron also suggests that physical distribution has no bearing on game discounting — deals are here to stay, and may only get better. One frequent fear you might encounter on gaming forums is the idea that a diminished, or nonexistent, physical marketplace could affect the great deals digital consumers have been able to take advantage of throughout this generation. Duperron contends that game discount has much more to do with competition and maintaining sales than it does with competing with the physical market.