Brick-and-mortar video game stores have at least another two to three years left in South Africa, according to the director of one of South Africa’s most well-known video game retailers.
With global broadband connectivity on the rise, gamers are increasingly using digital storefronts to purchase video games.
This may lead many to believe that video game discs will soon be a thing of the past, similar to how music streaming services killed the CD album.
Adding fuel to this speculation is the fact that both Sony and Microsoft are offering versions of their next-generation consoles without any optical drives at all.
Additionally, multiple publishers – including EA, Xbox, and Ubisoft – are now offering gaming subscriptions which provide access to titles without the user ever owning the game at all.
To top all of this off, companies like Microsoft, Google, and Nvidia have launched cloud game services which stream entire game content from servers, eliminating the need to have any local files installed.
By all indications, it appears as though digital gaming copies are the future.
In South Africa, however, mobile data remains relatively expensive for the average citizen, and cheaper fixed-line access is still limited.
With many game sizes now measuring 100GB and beyond, it could be challenging to convince South African gamers that digital is the way to go.
MyBroadband spoke to BT Games Director Launa Bagnall about the state of the physical game retail industry in the country.
A few years to go
Bagnall said she believed physical retail of video games in its current form has at least another two to three years left, with download sizes and storage capacity being major reasons for this.
“Game downloads are going to be getting even bigger in size and storage capacity on the new consoles doesn’t allow the option to store a lot of games,” Bagnall said.
It also appears as though the manufacturers are aware that there is still a market for physical game copies, and not only in South Africa.
Bagnall previously told MyBroadband that only 8% of BT Games’s PlayStation 5 pre-order allocations were digital editions, which appeared indicative of allocations elsewhere as well.
“One of our former employees who now works for Gamestop in the US, said that their store was only allocated three digital consoles versus 18 with disc,” Bagnall explained.
Multiple other retailers have reported similar low allocations for the digital-only console, with between 75%-80% of stock being for the standard PS5 console.
Bagnall said BT Games’s current and next-generation console titles are and will continue to be complete physical copies with all of the installation files, while PC games are largely offered in digital download keys.
“PC games have been negatively affected particularly by Steam and Battlenet and we have seen a progressive decline in sales on this platform over the last four years. However, this decline has been driven by the majority of publishers no longer releasing retail copies of PC games and this affected the decline far faster.”
This makes sense given that these consoles feature Blu-Ray drives which allow for large capacity disks, whereas PCs are primarily equipped with DVD drives.
Fitting current AAA titles on DVDs would require numerous disks in the package. In the case of Flight Simulator 2020, for example, a special physical edition is available with 10 DVDs.
Across the other platforms, Bagnall said day one numbers on physical products have been affected by digital sales but they then taper off to single-digit percentages, in contrast to retail.
“Back catalogue game sales continue to thrive and this generally speaks to an audience who cannot afford broadband,” she added.
Additionally, some publishers offer exclusive editions, preorder incentives, and content to drive the retail sales of games.
The pricing problem
Bagnall explained that digital platforms often had an advantage over physical game stores when it came to pricing, but not because they were willingly offering them at lower prices.
“Once a publisher has listed a title on a digital platform, they are not permitted to alter the price,” Bagnall noted.
However, when the Rand’s value declines, some of the local retailer suppliers are unable to negotiate pricing on new releases that is in line with digital downloads.
“Thus when our rand devalues like this year, retail can end up being more expensive than digital.”
BT Games offers a trade-in program which allows gamers to exchange pre-played games for credit to acquire new titles for cheaper.
Bagnall said BT Games attempted to go into the digital PC market in 2013, but the investment did not warrant the return.
“Digital downloads are largely driven by new releases and specials. We did very well when EA and Ubisoft gave us promotions on games, but the rest of the time it was dismal,” she explained.
With regards to its future sustainability, Bagnall noted digital currency purchases would likely play a major role, as many consumers are still afraid to or unable to use credit cards online.
“We have for the last five years been very active in selling digital currencies for Steam, PSN and Xbox Stores and this share of our business has grown exceptionally,” she said.
These sales see huge growth when the PSN or Xbox stores run promotions, and when Fortnite releases a new season pass.
She added that during lockdown, sales in digital currencies increased significantly.
“I don’t believe we will venture into selling game downloads as the sale of digital currency already caters for this,” Bagnall said.