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The Decline of Physical Games and The Rise of Digital Distribution

When Valve made the much-anticipated Half-Life 2 available on Steam in 2004, a deluge of users rushed to download the game or authenticate their physical copy, and Steam simply keeled over and crashed

Valve had made Steam authentication mandatory for even physical copies of the game, so everyone who had bought the title, either through Steam or at a retailer, had to go through Valve’s client, and the company’s servers simply could not handle the load. Gamers who had expected the further adventures of Gordon Freeman ended up with pop-ups from the Steam client apologising for the lengthy delays. 

Steam has come a long way since then and is a fixture of millions of PCs now, and many major publishers, including Sony, currently release games on the platform. Steam is also home to thousands of indie games and is arguably the most prominent digital delivery service for PCs. 

The digital distribution of games – whether on PC, console or mobile – has grown prevalent thanks to growing internet speeds, higher broadband penetration, and many other factors. Consoles have long featured digital storefronts from which gamers can buy and download games, smartphone games are available via Google Play or the iOS App Store, and for the PC, digital games have practically become the norm as modern computers tend to lack optical drives. In turn, sales of physical game copies, or ‘retail’ editions, are on the decline, though they are yet to be fully supplanted by digital delivery. 

In this blog, we will delve into the history of game storage media, from cartridges to Blu-ray discs and chart the rise to prominence of digital distribution services for games. Game storage formats have played a significant role in the history of gaming, and even today’s major consoles provide support for physical copies. However, the industry is transitioning towards digital delivery as the principal mode for selling games – we will look into why this is the case.

What is a Digital Game?

A digital game refers to any title downloaded from a digital delivery service such as Steam, a console manufacturer’s online store, or smartphone app stores. Digital game data can be installed on devices like internal hard disks, solid-state drives and even removable storage. Note that such games do not have to be paid for a la carte – subscription services such as the Xbox Game Pass or PlayStation Plus allow users to download many games and play them so long as they remain subscribed.  

What is a Physical Game?

A physical game copy refers to any game whose data is stored in physical media like cartridges, floppy discs, CDs, DVDs or Blu-ray discs. Today, such physical copies may not contain all the files required to play the game and you may still have to download either a significant portion of game data or the latest patch from a digital delivery service.

In the past (especially during the time of cartridges), buying a game was a one-and-done deal, and you inserted the game cartridge into a slot to play and even save progress – cartridges featured a chip specially designed for game saves. Effectively, this meant that all game data – whether it was the game itself, or your progress, was saved in the cartridge, and not on a storage device in the console. 

Physical game copies (especially of console games) can be shared among friends, sold second-hand to others or traded in at a retailer. They can even allow access to a full game without necessitating an internet connection, though most contemporary games need downloadable patches and updates to work properly. People still buy physical games because of discounts at local retailers or e-commerce sites, and the advantages that physical copies offer. 

A Retail Display of Video Games at a Store in Geneva (Courtesy Wikimedia Commons)
A Retail Display of Video Games at a Store in Geneva (Courtesy Wikimedia Commons)

In the next section, we will outline the evolution of physical game storage formats, from the cartridge to the Blu-ray disc. Like any form of media, gaming depended on physical storage before high-quality internet speeds made digital downloads a viable alternative. The capacity and efficiency of physical formats steadily increased and the transition from one storage format to another often marked a major inflection point for the gaming industry, as we will see below. 

A History of Physical Game Media

Physical copies of games have played an integral role in making gaming a popular and affordable past-time, especially since they were geared from the first to make home gaming viable. 

The following sections will discuss the role of cartridges and floppy disks in gaming from the 70’s to the 90’s, followed by CDs and DVDs (both of which Sony used to great effect in PlayStation consoles), and then to Blu-Ray, which was first used by Sony for the PlayStation 3, and then integrated with Xbox consoles as well from the eighth console generation onwards. 

Storage Size Growth

Cartridges and Floppy Disks

The advent of cartridges marked a major shift for home gaming – no longer did consumers have to buy dedicated consoles for their favourite games, but could buy a single console and play multiple games on it simply by slotting a compatible game cartridge into the system. 

Fairchild Semiconductor pioneered the design of the first console with interchangeable game cartridges – the Fairchild Channel F (1976). Although overshadowed by the Atari 2600 (1977), Fairchild was the first to create a console with a microprocessor that loaded games from programmable cartridges.

The Fairchild Channel F (Courtesy Wikimedia Commons)
The Fairchild Channel F (Courtesy Wikimedia Commons)

Designers at Fairchild knew that their sensitive cartridge circuit boards had to be capable of withstanding considerable abuse, like being left out in the sun, or being stepped upon. They encased their technology in hard, durable plastic, but also created an easy-to-use slotting mechanism, which would enable both the cartridges and the console to withstand multiple insertions and ejections. 

Cartridge design evolved considerably after Fairchild’s pioneering efforts. They loaded graphics and other game data faster and faster, and new iterations were made to use less system memory. By the time Nintendo released the N64 (1996), cartridges could store upto 64 MB of data – the first cartridges made by Atari and Fairchild could store just 32 KB at best. From the late 70s to the early 90s, the cartridge was the default storage medium for console games, especially because they were hard to reverse engineer

Game Cartridges for the Atari 2600 (Courtesy Flickr)
Game Cartridges for the Atari 2600 (Courtesy Flickr)

During roughly the same period, floppy disks – especially the 3.5 inch versions introduced by Sony in 1980 – were used to store and exchange games and other programs for the PC. The 3.5 inch disk was designed to be durable and resilient, with a hard plastic casing and a sliding metal shutter that protected the magnetic storage tape inside. They were an ‘almost viral’ way for transmitting shareware – especially portions of games like Doom (1993) and the Commander Keen games. 

Doom was also one of the most prominent games to be released on floppy disks, as were many other games of that period, such as Prince of Persia (1989). Such games could be shared even with friends who didn’t have the same type of PC, since the floppy disk drive had become an industry standard by the late 70s. 

The Floppy Disk Set for the Full Release of Doom (Courtesy Internet Archive)
The Floppy Disk Set for the Full Release of Doom (Courtesy Internet Archive)

Both the floppy disk and the game cartridge would eventually be supplanted by the CD-ROM (Compact Disc Read Only Memory). We discuss the advent and rise of optical media in the following sections.

Optical Media

The use of optical media greatly expanded the possibilities of gaming by allowing games to be much larger in size. In a cartridge, game data is stored on a single chip on a circuit board, limiting storage capacity, and save games are stored on another chip. But almost all the surface area of an optical disc can be crammed with data in the form of microscopic indents etched by a laser – such discs are known as ‘optical’ because light is used to both read and write onto them. A Blu-ray disc’s capacity is more than 50 times that of a CD because of its much smaller, densely-packed indents.

Comparison of Storage Density in Optical Media (Courtesy Wikimedia Commons)
Comparison of Storage Density in Optical Media (Courtesy Wikimedia Commons)

Games such as Final Fantasy VII (1997), Halo 2 (2004), the Last of Us (2013), and many others made full use of the storage space available to them to deliver quality content at the highest-fidelity graphics that were possible at the time they were released. Support for optical media also helped consoles double as home entertainment systems, and the success of many consoles, across generations, was partly because they could play movies and music as well. 

The CD-ROM Supersedes the Game Cartridge

The PlayStation (1994) is the first home gaming console to sell more than 100 million units, and this is at least partly due to its use of compact disks (CDs) as the storage format for its games. In 1985, Sony and Philips had together developed a technical standard by which CDs could hold any form of data, which led to the creation of CD-ROMs. With about 700 MB of storage space, they dwarfed the capacity of cartridges (which could store up to 64 MB) and allowed games to offer much more content than was possible earlier. CDs also featured various other advantages – they were cheaper to manufacture and also reduced production times for games, leading to lower retail prices. 

Sony’s PlayStation Popularised the CD-ROM as a Game Storage Medium (Courtesy Wikimedia Commons)
Sony’s PlayStation Popularised the CD-ROM as a Game Storage Medium (Courtesy Wikimedia Commons)

According to a PC World article, Sony won the first console war it ever participated in largely because it used CDs. Due to the inherent advantages of this storage format, Sony was able to bring many third-party publishers into the fold, including Square Enix, whose hugely successful Final Fantasy games had traditionally been Nintendo exclusives and had served as system sellers for Nintendo consoles

Square decided that Nintendo’s cartridge-based N64 would not suffice for Final Fantasy VII. It turned to Sony, and the end result was a gorgeous game with high-quality cinematics and pre-rendered backgrounds, all made possible because of the CD’s higher storage capacity and the PlayStation’s support for 3D graphics. Final Fantasy VII was hailed as the ‘game that sold the PlayStation’ – FF VII did for Sony what previous instalments of the franchise had done for Nintendo.

Final Fantasy VII (Courtesy Sony)
Final Fantasy VII (Courtesy Sony)

The PlayStation could also play audio and video CDs, making it one of the most versatile home entertainment systems of the time. The resounding success of the PlayStation led to the marginalisation of the cartridge, and home gaming consoles would use optical storage as the primary medium by selling games.

Final Fantasy VII’s Cinematics Were a Key Selling Point for the Game (Courtesy Sony)
Final Fantasy VII’s Cinematics Were a Key Selling Point for the Game (Courtesy Sony)

DVDs Turn Consoles into Home Entertainment Systems

Much like the CD-ROM, the DVD (Digital Versatile Disc) would allow games to be much larger in size and feature more content. Halo: Combat Evolved (2001) spawned a huge franchise that became a major system seller for Xbox consoles, and required the higher storage capacity of a DVD. Halo 2, considered one of the greatest games of all time, is nearly seven times as large as the first Halo game.

Halo 2 (Courtesy Microsoft)
Halo 2 (Courtesy Microsoft)

The larger-sized 3D games made for the PS 2 and the Xbox are recognisably modern – Gran Turismo 3 (2001) for the PS 2 features stunning graphics, as do the Halo games released for the Xbox, which used Microsoft’s DirectX technology and a graphics card made in collaboration with Nvidia for hardware acceleration. Higher graphical fidelity depends on high-resolution textures and game assets, which in turn require greater storage space – the shift to DVD enabled more content, and contributed to higher-quality graphics as well.

The PlayStation 2 (2000) and the first Xbox (2001) supported game DVDs and CDs and both could interface with home theatre systems, essentially serving as DVD players. The PS 2 could play movies and music out of the box, with the gamepad allowing you to control playback. You could also buy a remote for image adjustments and more playback features. Unlike the PS 2, the Xbox did not come with built-in DVD playback support: it needed a DVD kit containing a remote control and infrared sensor

The Xbox Required a Special Kit for DVD Video Playback (Courtesy Wikimedia Commons)
The Xbox Required a Special Kit for DVD Video Playback (Courtesy Wikimedia Commons)

Costing a mere $299 at launch, the PS 2 was actually cheaper than some of the standalone DVD players of that time. The console’s support for DVD video was welcomed at a time when the DVD was one of the best ways to experience movies at home, as it came with bonus features and extra materials like deleted scenes and interviews with cast and crew. Films like the lengthy Lord of the Rings trilogy made it to the DVD as extended editions. The PS 2 not only boasted a great library of game exclusives but also served as an affordable home entertainment system, allowing users to enjoy high-quality DVD editions of their favourite movies. 

The PS 2 is the best-selling home-gaming console of all time, and one of the factors that is said to have contributed to this was its capacity to double as a DVD player – it even allowed you to play burned CDs and DVDs, i.e, pirated movies, music and games.

Blu-ray Powers Massive Games

The Blu-ray disc format allowed even larger game sizes thanks to its storage capacity of upto 50 GB. The PS 3 edition of Last of Us (2013) – one of the finest games ever made – was around 26 GB in size, Uncharted 3: Drake’s Deception (2011) takes up 43.5 GB of storage space, and the PS 4 box-set for the Last of Us Part II contained two Blu-ray discs, to accommodate more than 70 GB of game data.

The Last of Us Part II (Courtesy Sony)
The Last of Us Part II (Courtesy Sony)

Game sizes actually increased from one console generation to another – Call of Duty: Ghosts (2013) for the PS 3 was 10.9 GB in size – this mushroomed to more than 30 GB for the PS 4, mainly because the next-gen versions came with higher-resolutions texture sets, higher-polygon game assets, and higher-definition cutscenes and cinematics.

In fact, the Blu-ray disc format’s prevalence is at least partly due to gaming and the PlayStation 3. Sony created the prototype of the Blu-ray disc in 2000, but when it was officially released in 2006, a format war ensued between Blu-ray and the HD-DVD format. By 2008, however, both the software and entertainment industries had settled on the Blu-ray format – a BBC article published the same year argues that the format won because it was integrated with the PlayStation 3, which had sold more than 10 million units by early 2008 and could play Blu-ray video at a time when the first standalone Blu-ray players were nearly double the PS3’s price. Microsoft had gone with the HD-DVD format for the Xbox 360 (2005), and though rumours sometimes surfaced about a Blu-ray add-on for the console, the Xbox 360 does not support Blu-ray playback

Eventually, Microsoft also chose the Blu-ray, which is supported by the PS 4 (2013), the PS 5 disc edition (2020), the Xbox One (2013) and its variants, and the Xbox Series X (2020). These consoles support DVD and Blu-ray video playback as well.

It must be noted that a built-in Blu-ray player did not propel the PS 3 to the success that PS 2 enjoyed with its DVD playback capability. Nintendo’s Wii (2006), which used a proprietary DVD-based disc format for physical copies and lacked any movie or music playback, won the console war of this generation, mainly due to its far wider appeal. 

In fact, by the late 2000s, observers were predicting that physical formats would decline thanks to a new ‘download era’ ushered in by high-speed, high-bandwidth internet connections and increased broadband penetration – in effect, supporting a physical format would not confer a significant advantage. In the next sections, we will discuss the rise to prominence of digital distribution for games, and the factors that have driven this transition.

The Prominence of Digital Delivery in Gaming

Digital delivery for games has grown more and more popular over the course of the last decade and the pandemic-period lockdowns accelerated this trend – in 2020, digital game sales surpassed physical sales for the first time, and 91% of the game industry’s revenue was digital (this includes full game downloads along with in-app purchases, downloadable content and mobile game sales). By 2021, the number of unique console titles sold on digital platforms in the US had far surpassed games sold as physical copies. According to an NPD report, nearly 2200 unique console titles were released on digital storefronts in the US, as compared to 226 titles sold as physical copies. A year later, Sony reported that digital purchases constituted 80% of game sales in 2022’s first quarter

Unique Digital Console Titles Far Surpassed Physical Copies in 2021 (Courtesy Ars Technica)
Unique Digital Console Titles Far Surpassed Physical Copies in 2021 (Courtesy Ars Technica)

All this data suggests that digital delivery has become the primary, if not the sole, method for distributing games, and analysts believe that digital games will totally dominate the industry in less than a decade. Digital delivery is already the default for smartphones, which have never offered support for physical games, and we have covered mobile gaming and its main platforms in detail elsewhere. However, digital games did not rise to primacy overnight for other platforms such as PC and consoles, which had to transition from selling large-sized titles on high-capacity optical media to digital delivery. We will discuss the emergence and growth of digital distribution in such platforms below.

The Rise of Steam

Steam is by far the most successful digital distribution platform for PC games, though it was not the first – the now-defunct Stardock Central (2001) was the first such service for PC games. Steam was released in 2003 as a client that could easily update certain Valve games, especially the popular multiplayer shooter, Counter-Strike (2004).  

A 2002 survey conducted by Valve revealed that 75% of its users had broadband connections, and convinced the company that digital delivery of games was a viable proposition. Their first attempt to deliver a game digitally (Half-Life 2) was not a resounding success, as is recounted above, but Valve continued to improve the Steam client and its support infrastructure, and within a few years, major publishers such as id Software, Take Two Interactive, Eidos, EA and many others decided to make their PC games available on Steam.

The Steam User Interface circa 2010 (Courtesy Valve and Reddit User 2muchrubik)
The Steam User Interface circa 2010 (Courtesy Valve and Reddit User 2muchrubik)

As the service grew more and more popular, some developers baulked at its restrictive terms of service, with EA deciding to launch Mass Effect 3 on its own Origin platform in 2012. Nevertheless, Steam remains the pre-eminent digital distribution platform for PC games – by 2021, it had 132 million monthly active users who could browse a library of over 50000 unique titles. Revenue from games sold on Steam reached $6.6 bn in the same year. 

Other digital delivery sites include GOG.com (2008) – which enforces a strict non-digital rights management policy – and the Epic Games Store (2018), which is attempting to challenge Steam’s primacy. To incentivise publishers, Epic takes a 12% cut from game sales, whereas Steam takes 30% initially, though its share decreases to 20% if game revenue exceeds $50 million. Epic also does not enforce a digital rights management (DRM) policy for all games, allowing each publisher to decide DRM policy. 

In 2020, Epic Games spent more than $400 million to secure games that would be exclusive to Epic, and unavailable on Steam, for at least a year. Subsequently, in December 2021, monthly active users peaked at 62 million, which is less than half of Steam’s 132 million monthly active users, and as of 2021, Epic has a total of 917 games, a fraction of Steam’s game catalogue. However, Steam took more than a decade to build its library and following, and the Epic Store has been around for less than five years. Epic is also known for freely giving away an estimated $17.5 billion worth of games, and even though its store went down for eight hours when it made Grand Theft Auto V free for a week in May 2020, Epic got seven million new users as a result of the giveaway. Steam might have a huge head-start, but Epic arguably has the momentum.

Epic Games Got 7 Million New Users After its GTA V Giveaway (Courtesy Rockstar Games)
Epic Games Got 7 Million New Users After its GTA V Giveaway (Courtesy Rockstar Games)

The prominence of Steam, the rise of Epic and the death of the computer optical drive, have made digital distribution the principal method for selling games for PCs.

Digital Stores for Consoles Evolve

Console makers, especially Microsoft, were quick to realise the potential of digital delivery – the original Xbox shipped with the Xbox Live (2002) service, whose principal function was to enable multiplayer gaming and the digital delivery of game content. In its early years, the platform offered premium downloadable content and add-ons for games, but could not offer full game downloads. In 2004, Microsoft created the Xbox Live Arcade platform, which offered small, quickly downloadable games from a range of developers – most of these games were either console classics or arcade-style titles. The platform served as an easy entry point for independent developers who could develop games and quickly release them as download-only titles. 

Paperboy, a 1985 Atari Game, on Xbox Live Arcade (Courtesy Flickr)
Paperboy, a 1985 Atari Game, on Xbox Live Arcade (Courtesy Flickr)

Sony launched the PlayStation Store in 2006, and as with the Xbox, it initially offered downloadable content rather than full game downloads. The Store platform was first launched with the PlayStation 3 and six years later, it started to offer a variety of full game downloads. 

The Wii Shop Channel (2006 – 2019), a digital distribution platform for the Nintendo Wii, supported the download of various applications, content, and even a web browser. Wii Ware (2008), one of the services in the Wii Shop Channel, was Nintendo’s first foray into digital delivery of full (small-sized) games, and as Microsoft did with the Xbox Live Arcade, Nintendo promoted Wii Ware as an avenue for small developers to publish innovative content that would be delivered digitally, thereby avoiding the risks and commitments of retail distribution. The Wii Ware service shut down when the Wii Shop Channel was discontinued, and players can no longer purchase titles anymore, though they can continue to download owned games to compatible devices.

By 2009, both Microsoft and Sony started offering full game downloads – after its E3 press conference, Microsoft announced that games such as Bioshock (2007), Assassin’s Creed (2007), and The Elder Scrolls IV: Oblivion (2006) would be offered as full game downloads on its Store platform for the Xbox 360. Meanwhile, Sony announced that full games could be downloaded over WiFi to its handheld gaming device, the PSP Go (2009), which had 16 GB of storage and lacked a slot for physical games. By 2011, the PS 3 had also enabled full game downloads – at a time when game sizes were ballooning, and broadband speeds were not quite capable of downloading large-sized games. In 2013, Ars Technica reported that a major Steam game took about 4 hours to download, while a PS 3 game took more than 5 hours to download – and this was in the US, where broadband speeds have generally been high. Download times have however tended to decrease as internet speeds and broadband access have steadily improved.

Oblivion was One of the First AAA Games to be Delivered Digitally on the Xbox (Courtesy Bethesda Softworks)
Oblivion was One of the First AAA Games to be Delivered Digitally on the Xbox (Courtesy Bethesda Softworks)

The Nintendo eShop launched in 2011 for the 3DS and was made available on the Wii U at the console’s launch (2012), and keeping up with Sony and Microsoft, Nintendo’s eShop featured full game downloads, along with DLC, video content, updates and more. The first game to be released both on the eShop and as a retail copy was New Super Mario Bros. 2 (2012). 

New Super Mario Bros 2 (Courtesy Nintendo)
New Super Mario Bros 2 (Courtesy Nintendo)

The majority of Nintendo’s retail releases are now available as digital downloads, and developers can also choose to publish digital-only titles on the eShop. This platform is the primary digital storefront for the Nintendo Switch, the hybrid hand-held and home-gaming console that has sold more than 100 million units

By 2013, digital game sales had started to edge past physical sales in the US, and by 2018, physical sales accounted for only 17% of all game sales in the country. In the next section, we will discuss the factors that have contributed to the rise of digital distribution. 

Physical Game Sales Have Steadily Declined Since 2013
Physical Game Sales Have Steadily Declined Since 2013

Why Have Physical Game Sales Declined?

There are many interconnected factors that have led to the decline of physical game sales. Higher internet speeds and broadband penetration have made video streaming services possible – they have also contributed to making large game downloads viable. The COVID pandemic also made digital downloads popular during the shutdowns, and revenue from digital downloads have surpassed physical sales in part because mobile games, which are delivered digitally, have become the biggest segment of the gaming market. We discuss these and other factors below. 

  • Increasing penetration of high-bandwidth, high-speed, low-cost internet: Based on Ookla reports, nearly 50 countries have median download speeds greater than 100 megabits/second (Mbps). As of September 2021, the global average download speed on broadband was 113.2 Mbps, up nearly 30 megabits from 2020 speeds. 83% of US households have access to broadband connections, and a majority of those homes have connection speeds of 15 Mbps or higher. With the advent of 4k texture packs, 4k video, high-quality audio and more, the size of some contemporary games exceeds 100 GB, with Call of Duty: Modern Warfare (2019) at a staggering 183 GB. The game would take at least four Blu-ray discs for the retail edition, and a high-speed internet connection is a more viable option for delivering such games than cumbersome disc editions. 
  • Digital storefronts control game prices and cut out the resale market: Game sales are significant sources of revenue for console makers and publishers. Cutting out the middleman – retailers who stock physical copies of games and trade-ins – and drawing people to digital storefronts would result in higher overall profits for console manufacturers and publishers. This has led console makers to offer more incentives for digital purchases – the Xbox Play Anywhere program, launched in 2016, allowed users to buy a digital Xbox game and play it on both the console and the PC. Both Sony and Microsoft now offer cheaper all-digital editions of consoles: the Xbox Series S and the PlayStation 5 Digital Edition. Microsoft is even working on a patent that will allow Series S owners to authenticate a physical game copy using an external disc drive and download it via the digital storefront. The PS 5 uses an advanced compression technique to decrease the size of game data and reduce the wait time to access a digitally downloaded game.
  • The Pandemic made digital downloads more popular: Many observers have pointed out that lockdown restrictions spurred the purchase of digital copies, especially as gaming itself became of vital importance as a means of connecting with people, and physical stores could not be visited due to widespread shutdowns. In fact, the pandemic is considered a tipping point for digital game sales. By 2020, when the current generation of consoles were released, digital purchases accounted for nearly half of console game sales
  • Cloud gaming and gaming subscriptions: Currently, both Microsoft and Sony feature a robust digital delivery platform, and both offer game subscription services with libraries that boast multiple exclusives, which can be downloaded and played for free so long as you pay a monthly subscription fee. Such services also offer discounted prices at the digital storefront for many games, including those that are not part of the subscription. The highest tiers of these services also feature cloud gaming. With 25 million users, the Xbox Game Pass accounts for a significant portion of Microsoft’s gaming revenue. In fact, the rise of subscription services, made possible by higher internet speeds, could even lead to a new war based on the ‘subscription exclusives’ between console makers.
  • Live-service games depend on downloads: The industry has seen a major shift towards live-service games, which seek to keep their audiences engaged for years by regularly adding new game content, updates, game-balancing patches and in-app purchases – and all such content is delivered digitally. In a world where many of the industry’s most prominent titles follow the games-as-a-service model, physical copies may simply not be a viable mode of distribution. Live-service games are also quite large in size – the free-to-play game Destiny 2, including all expansions and updates, currently requires 97 GB of storage space on a PS 5, and more than 100 GB of space on an Xbox Series X|S, and though a physical copy exists, a significant portion of the game content needs to be downloaded. Some of the most prominent games today depend on digital delivery.
  • The biggest sector in gaming uses digital delivery: Mobile games are delivered as apps through stores such as Google Play and the iOS App Store, and they are some of the most lucrative titles on the market. As of 2022, more than 60 mobile games have made more than $1 billion in lifetime sales, and mobile titles constitute the largest share (45%) of global games revenue. The mobile gaming market is expected to be worth nearly $140 billion by 2026, and as mobile games grow ever more popular and lucrative, revenue from digital sales (including full-game downloads, DLC, in-app purchases and more) will continue to surpass physical sales revenue. 
  • Considering that so many factors are contributing toward the transition to digital delivery, one might believe that physical games are on the way to extinction. This is, however, not quite the case. In 2018, gamesindustry.biz argued that the sale of physical games might be declining, but it still remained an industry worth billions of dollars worldwide, with 75% of AAA games being sold as physical copies. A year later, it reported that physical console games accounted for 60% of sales value during the last quarter of 2019. These reports may reflect a pre-COVID reality, but even during the pandemic, in April 2020, more than a million physical games were sold in the UK, the highest figure since 2015. Physical games, while on the decline, are not yet finished.

Conclusion

The inherent advantages of physical games – shareability, resale value and access to game data without the need for a connection – still hold value to gamers. The outrage over Microsoft’s attempt to implement an always-online DRM policy for even physical Xbox One games shows that full ownership – another perk of physical games – is valued by users.

However, the Nintendo Switch’s cartridges underscore the problems with physical copies. While Sony and Microsoft support Blu-ray disc editions for their consoles, the Switch uses a proprietary cartridge based on the SD card format for retail games – such cards can currently hold upto 32 GB of data, though 64-GB cartridges have been in the works for at least three years. The small storage capacity of such cartridges requires users to download a significant part of the game, and they are also costlier to manufacture than Blu-ray discs, resulting in some games costing more on the Switch than on PC or console. These disadvantages may lead the portable Switch’s successors to eschew support for physical copies.

In fact, both retail distribution and digital delivery may be superseded by cloud gaming, which is expected to become a $20.9-billion industry by 2030. Amazon’s Luna and the cloud gaming solutions of Microsoft and Sony require only a fast connection to play a game, and if game streaming becomes prevalent, it can make retail copies, digital downloads and even game installation a thing of the past. Cloud gaming is considered the ‘killer use-case’ for burgeoning 5G networks, and the growth of 5G infrastructure can make game streaming a highly popular and easy way to play games. 

Some sources on the web continue to argue that physical games are still relevant, and others that they should remain relevant, given that access to a digital copy of a game can potentially end when the provider goes bust – this is one of many arguments used to justify breaking DRM on media. Some have even argued that the death of the Blu-ray format (as a medium for movies and games) does not bode well for gamers, especially those on a budget, who need to resell their games to afford new ones.

Opinions aside, the industry itself is moving away from physical copies in a quite decisive manner, propelled by steadily increasing internet speeds and a changing industry landscape in which highly-lucrative live-service titles and mobile games dominate. Physical copies may not completely die out, but they will likely be relegated to a (very) niche market in the years to come. 

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The Decline of Platform Exclusivity

The year was 1991 and Sony had just suffered a public humiliation at the hands of Nintendo. On May 28, Sony had announced that it was working with the gaming company to build a new console with a CD drive. Nervous about Sony’s intentions regarding the gaming market, Nintendo publicly rebuffed the company a day later, declaring that it would be partnering with Phillips instead. 

 

Nintendo had inadvertently helped create a juggernaut that would crush its competitors until Microsoft joined the fray. In the ’90s, the console wars had all been about Sega and Nintendo, but with its first PlayStation console (1994), Sony outsold the Nintendo 64 by a huge margin, and with the PS2, it finished off Sega as a console player. Microsoft realised that a new entrant could disrupt the market, and released its Xbox to compete with the PS2 – and this is why we talk about Sony vs Microsoft today, rather than Nintendo vs Sega. Nintendo still thrives in the console market, largely by not competing directly with Microsoft or Sony, and appealing to a wider, casual demographic. 

In this article we will discuss how platform exclusives – games released solely for one platform – have been the deciding factor in every iteration of the console war until the ninth generation of consoles. We will also delve into the reasons why companies are now moving away from platform exclusivity toward an inclusive approach that involves PC ports, multi-platform game subscription libraries and cloud gaming solutions.

What are Exclusive Games and non-Exclusive Games?

An exclusive is simply a game that can be played on only one platform – no exceptions. Such games are locked down to a single platform, such as the Xbox or the PlayStation, or even the PC. Halo 5: Guardians (2015) – the best selling first-party Xbox One game, can only be played on that console or the Xbox Series X|S, Shadow of The Colossus (2005) can be played on the PS2, the 2011 remaster can be played on the PS3, and the 2018 remake can be played on both the PS4 and PS5 – in effect, the title is restricted to the PlayStation console platform. Dota 2 (2013) and League of Legends (2009) – both major esports – are exclusive to PC. 

A timed exclusive is an exclusive that can be released for different console platforms and/or PC after a specific timeframe lapses. Timed exclusives such as GTA III (2001) and GTA: Vice City (2002) are among the best selling PS2 games of all time. Mass Effect (2007) was a timed exclusive for the Xbox 360, before being ported to PC in 2008, and to the PS3 in 2012, and Mass Effect 2 (2010) was a timed exclusive for the Xbox 360 that was ported to the PS3 in early 2011. Both the first and second part of Mass Effect are among the best-selling Xbox 360 games

Both exclusives and timed exclusives can be called ‘platform exclusives’ – they are released for only a specific video game console or to one company’s console platform, and not available on any other platform, either permanently, or for a set duration. 

A console exclusive is available and playable on one console platform, but not on the other, while being available on PC or another non-console platform. Halo Infinite (2021) can be played on both the Xbox Series X|S and Xbox One, but it can’t be played on any PlayStation console, and Horizon Zero Dawn (2017) can be played both on the PS4 and PS5, but it can’t be played on any Xbox console. While both Halo Infinite and Horizon Zero Dawn are available on PC, a gaming desktop would be required for the best experience. Like platform exclusives, ‘console exclusives’ are meant to sway potential buyers toward their respective platforms – Halo fans will opt for the latest Xbox consoles while fans of Sony exclusives would choose the latest PlayStation console.

Many prominent games such as The Elder Scrolls: Skyrim (2011), The Witcher 3 (2015), GTA V (2013) and Elden Ring (2022) are non-exclusive – they offer vast worlds, great stories, engaging quests and more, and none of them are locked behind a single platform. All these games are available on PC, Xbox and Playstation and thus maximise the potential audience they can garner. 

In the next section, we will deal with how platform exclusives determined the victor in several iterations of the console wars, until Microsoft adopted a multi-platform ecosystem policy mid-way into the eighth generation of consoles, signalling a shift away from platform exclusivity. 

The Prominence and Decline of Exclusives in the Console Wars

Most video game consoles are sold at a loss for the first few years – the strategy being to gain consumers for the console’s library of games – eventually, console sales, along with sales of games available on it, may more than make up for the cost incurred in developing the console.

For multiple generations, the success of a console was largely dependent on its exclusive library – it was the deciding factor for someone looking to buy a console. Sega pulled in gamers with exclusives like Sonic, Nintendo did the same with Mario and Zelda, and Sony and Microsoft would continue this trend with a plethora of exclusives Hence, any history of platform exclusives is inextricably linked with the console wars – in the sections below, we discuss such exclusives in the larger context of competing console makers.

Gen 1-3: Atari, Sega and Nintendo Come to the Fore

The first generation home consoles often supported only one game, usually a variation of Pong, such as Pong Doubles, Quadrapong, and Breakout. The success of consoles like Magnavox Odyssey and Atari’s Home Pong series resulted in hundreds of inferior console clones hitting the market, eventually precipitating a market crash in 1977. In the same year, Nintendo would release several dedicated home consoles – the Color TV-Game series – that would support multiple games. The first console had six ball-and-paddle games. A later console would feature a racing game and the last would contain a port of Nintendo’s arcade game Computer Othello. With a bigger library, Nintendo’s Color TV-game series outsold all others, at 1,500,000 units

Home consoles of the second generation used game cartridges, which spurred the development of multiple games for each console. Space Invaders (1980) became the killer app for the Atari 2600 (1977), quadrupling sales of the console. The ColecoVision (1982) also boasted the successful Donkey Kong, which it licensed from Nintendo. The Atari had an extensive game library and dominated sales with 30 million units sold, while Mattel’s Intellivision sold 3,000,000 units and ColecoVision, 2,000,000 units. The second generation would also end in a market crash in North America, due to market saturation and poor game quality (apart from a few exceptions) 

Nintendo’s revolutionary NES (Nintendo Entertainment System, 1983) would dominate third-gen consoles and revitalise the industry, selling more than 60 million units on the back of a top-notch gaming library that used the computational power of 8-bit processors. Titles like Super Mario Bros (1985), Mega Man 2 (1988), and The Legend of Zelda (1986) set the standard for the third generation and Zelda was a runaway bestseller, selling over 6 million copies – both Zelda and Mario were system sellers as well. Phantasy Star and Alex Kidd in Miracle World were landmark titles for the Sega Master System, though neither Sega nor Atari could compete with the NES – The Atari 7800 sold less than 4 million units, (helped in part by licensed conversions of Nintendo games) and the Sega Master System sold 13 million units

Fourth Gen: Sonic vs Mario

By the fourth generation, Atari had exited the market due to the 1983 crash and the prominence of Nintendo and Sega, who would become the primary combatants in the ensuing console war. For the Genesis (1988), Sega came up with the infamous marketing slogan, Sega does what Nintendon’t, indicating it would compete directly with Nintendo, especially with Sonic the Hedgehog (1991), a title that would give Mario a run for his money. Other Sega Genesis games include Streets of Rage 2 (1993), Phantasy Star IV (1994) and Castlevania: Bloodlines (1994)

Nintendo responded with the Super NES (1990), releasing more industry-standard games such as Chrono Trigger (1995), Super Metroid (1994), Street Fighter II (1992) and The Legend Of Zelda: A Link To The Past (1991), which is considered one of the greatest games of all time.

However, Sega held its own: Sonic the Hedgehog became the best-selling game of 1991, selling 2 million copies worldwide. Sega did not win the war – it sold over 30 million Genesis units while the SNES sold over 49 million units, but it had proved that it could go up against the industry giant. 

Fifth Gen: Sony Rises to the Top with Game-Changing Exclusives

Until the fifth generation, the major players in the console wars had been Atari (until the fourth generation), and Sega and Nintendo. That would change with the advent of Sony’s Playstation. 

The original PlayStation home console changed the game, quite literally, with Final Fantasy VII (1997). FF publisher Square Enix had developed games exclusively for Nintendo until Sony convinced the company that its ambitions for FF VII would only be realised with the PlayStation, which used CDs rather than cartridges, and supported the latest 3D graphics. Square took full advantage of the PlayStation’s capabilities – introducing full-motion video cinematic cutscenes that would become a major selling point for the game. 

Like FF VII, other Sony exclusives such as the original Tekken (1994), Resident Evil (1996), Crash Bandicoot (1996) and Metal Gear Solid (1998), capitalised on the new console’s technological capabilities. Sony became the platform of choice for third-party studios such as Capcom, Konami, Electronic Arts and Namco, which it had eagerly courted from the outset. From 1996 to 2000, the Crash Bandicoot games were exclusive to the PlayStation consoles, Titles in the Metal Gear Solid series also began life as PS exclusives before being ported, and they rank as some of the best games of all time.

Both Sega’s Saturn and the Nintendo 64 failed against a better-designed console with a host of third-party exclusives that set a new standard for gaming. Sony sold 102 million PlayStation units, Sega sold a mere 9.24 million Saturn units, and Nintendo sold 32.93 million N64 units. With its first gaming console, Sony had become the market leader.

Sixth Gen: Sony Exclusives Redefine Gaming, Halo powers the Xbox

Sony’s PlayStation 2 (2000) also boasted a strong library of games. With titles such as Shadow of the Colossus, Ico (2001), Okami (2006), Gran Turismo 3: A-Spec (2001), Final Fantasy X (2001), God of War (2005), God of War 2 (2007), GTA III and GTA: Vice City, Sony continued to redefine what people could expect from a gaming experience. 

While both GTA III and GTA: Vice City have since been ported to other platforms, Sony entered into timed exclusivity agreements with the publisher, allowing it to gain a ‘stranglehold on the competition’. Sony’s exclusives helped make the PS2 the best-selling home gaming console of all time.

Microsoft’s first console – the Xbox (released 2001-02) , was going up against an industry titan with few competitors. But the Xbox had a killer app – Halo. The original XBox could not match the PS2’s success – Microsoft sold 24 million units as opposed to 158 million PS2 units – but Halo: Combat Evolved (2001) was the beginning of one of the biggest franchises in gaming, and proved that Microsoft could be a contender in the console market. Microsoft has sold 6.43 million copies of Halo: Combat Evolved, and the Halo franchise has sold 81 million copies worldwide – it is still one of the biggest reasons to buy an Xbox console. 

The Dreamcast (1998) preceded both the PS2 and the Xbox, but failed against the PS2 because of a lack of third-party content and Sega ended production before it even had a chance to compete with Microsoft’s console. Sega ceased to be a player in the market – the Dreamcast was its last console. 

Seventh Gen: Wii Wins by Appealing to a Wider Audience

Microsoft closed the console sales gap in the next generation – the Xbox 360 eventually sold 84 million units while the PS 3 sold 87.4 million units. The Xbox 360 (2005) had a strong exclusive line up, including Halo 3 (2007), which doubled sales of the console, and other hits such as Gears of War 2 (2008) and 3 (2011), Forza Motorsport 4 (2011) and Forza Horizon (2012).

The release of Metal Gear Solid 4 in 2008 boosted sales of the PS3, but as the final tally indicates, the seventh generation was a closely fought race for Microsoft and Sony – many developers found it hard to develop for the unique architecture of the PS3, leading to an underwhelming exclusive line up that gave the Xbox 360 an advantage.

The PS3 eventually caught up with ambitious exclusives such as the Last of Us (2013), God of War: Ascension (2013), Heavy Rain (2010) and Gran Turismo 5 (2010), but the generation was characterised by franchises such as Grand Theft Auto, Bioshock, Assassin’s Creed, Elder Scrolls, Tomb Raider and Final Fantasy, whose third-party publishers released their biggest games on both consoles to reach a wider audience. 

The real winner of the seventh generation console war, however, was the Nintendo Wii (2006), whose Wii Remote could be used for both traditional input and motion sensing. Wii Sports (2006), a game bundle that recreated popular sports at home using the Wii’s motion detection, became the best-selling Nintendo game ever, and helped the Wii become the best-selling console of the seventh generation, at 102 million units. With its lineup of family-friendly exclusives such as Mario Kart Wii (2008), New Super Mario Bros Wii (2009) and Wii Play (2006), the Wii won by attracting a much wider, casual audience, which neither the PS3 nor the Xbox 360 targeted. 

Since the Wii, Nintendo isn’t participating in a war so much as playing its own game: the Switch (2017) is yet another innovative console – a hybrid hand-held and home gaming platform. It has sold 103 million units as of February 2022, and its exclusives appeal to both core gamers and casual players. Many of its game franchises, such as Mario, Zelda and Pokemon, are huge system sellers  and The Legend of Zelda: Breath of the Wild (2017) has powered Switch sales.

Eighth Gen: Sony Wins by Sticking to an Exclusive Strategy

The scales swung back toward Sony in the next generation of consoles – both the Xbox One and the PS4 were launched in late 2013, and Sony’s console would outsell the Xbox One by a huge margin, primarily by adding steadily to its library of top-notch AAA titles. Despite an underwhelming exclusive lineup at launch, the PS4 would go on to become the second-best selling home console of all time after the PS2.

After a shaky start, Sony released a string of hit exclusives  – Bloodborne (2015), Uncharted 4: A Thief’s End (2016), Horizon Zero Dawn (2017), God of War (2018), Marvel’s Spider-Man (2018), and Ghost of Tsushima (2020) – all of which were integral to PS4 sales. 

Microsoft, on the other hand, was impaired by an identity crisis, as a ScreenRant article puts it. The tech giant pushed extras like the Kinect, which few cared for, and announced a controversial digital rights management (DRM) policy that required gamers to connect to the internet to play offline games, and also limited sharing physical copies with others. Widespread backlash forced them to abandon their DRM measures. 

Sony, meanwhile, offered a cheaper system that was more powerful, and also came with a solid library. Having only a few heavy hitters like Forza Horizon 2 (2014) and Halo 5: Guardians (not yet ported to PC), the Xbox One only managed 51 million units, less than half of PS4’s 117 million units. The Xbox One lost to the PS4 not only because it lacked a good roster of exclusives, but also because it tried to build an ecosystem hostile to gamers. 

Microsoft Begins the Move Away from Platform Exclusives

When Microsoft launched its Xbox Play Anywhere program in 2016, it got DRM just right – it allowed users to buy a game once and play it ‘anywhere’ (meaning on both PCs and Xbox consoles, but not PS consoles). It also enabled gamers to carry over their saved games, addons and expansions with them when they resumed playing on a different platform.

The Play Anywhere service was enabled for a slew of games, including Gears of War 4 (2016), Forza Horizon 3 (2016) and ReCore (2016), and the program signalled a major shift from exclusivity to an ecosystem for both Xbox and PC players, even in the face of repeated criticism regarding the Xbox One’s lack of exclusives. The roster of Play Anywhere games has since grown steadily.

After the Play Anywhere Program, Microsoft launched the successful Game Pass game subscription service for Xbox in 2017 and PC in 2019, and added Xbox Cloud Gaming to the Game Pass later that year. Microsoft’s cloud gaming solution would lead to speculation that consoles would soon become unnecessary

Sony, on the other hand, would take a few years to realise that its time-honoured exclusive-first strategy for its consoles restricted it from reaching the wider audience that Microsoft had attracted with its content services. 

Why are More Games Non-Exclusive Today?

In this section we will look at the various factors that have contributed to the decline of platform exclusives – changing industry attitudes, the release of prominent platform exclusives on PC, and the advent of cloud gaming.

Changing Industry Attitudes

In a June 2020 interview with BBC Click, Xbox head Phil Spencer said: ‘Our strategy does not revolve around how many Xboxes I sell this year.’ He added that Microsoft was focused on delivering services through the Xbox Game Pass. 

Months before the launch of the Xbox Series X|S consoles, Xbox head Phil Spencer also insisted that the Xbox brand was not built around exclusives. In a July 2020 interview with gamesindustry.biz, the game industry veteran said that the idea of locking people away from being able to experience games was completely counter to what gaming meant to him. 

He also characterised the Series X|S consoles as an upgrade rather than a complete departure from previous consoles, and promised backwards compatibility for thousands of games. Later that year, he announced that Microsoft would release all next gen titles for both Xbox and PC, with first-party titles arriving on the Game Pass subscription. 

Spencer – and Microsoft – could make such claims on the strength of the Xbox Game Pass. By 2020, many outlets were calling it a success, and even the Guardian took note when the service hit 10 million subscribers during the lockdown. With 25 million subscribers as of 2022, the Game Pass subscription service has helped Microsoft reach a far wider audience – especially as the Xbox cloud gaming solution is available on multiple platforms, including PC, console and mobile devices. The subscription service also accounts for a significant portion of Microsoft’s gaming revenue. A PC gamer article provides an apt summary of Microsoft’s core business strategy: selling game content through subscriptions or direct purchases. The device on which you play does not matter – in fact, Microsoft can shun the platform exclusive, and disregard console sales, simply because it can afford to. 

The PS5 and the Xbox Series X|S were released at roughly the same time in late 2020. Sony stuck with its policy of lining up a compelling set of exclusives, which led analysts to predict that the next-gen Xbox consoles would suffer poor sales because of Sony’s superior library. 

Despite the PS5 boasting a strong library at launch, the Xbox Series S actually outsold the Sony console in the 2021 November holiday season – the pandemic-period chip shortage and other factors had led to low PS5 stock, which led in turn to poor sales.

November is a critical month for the game industry: sales spike as Americans buy up game consoles and games to give as gifts. The Xbox Series S was readily available and also benefited from its low cost and the release of the much-anticipated Halo Infinite and Forza Horizon 5 (2021). Forza Horizon 5 broke Xbox records, passing 10 million players within its first week

An exclusive strategy built around a console requires the console to be readily available, and the PS5 shortage may have impelled Sony toward a dramatic change in policy. In May 2022, SIE president Jim Ryan stated that the company’s focus on building a strong portfolio of narrative-rich, graphically beautiful single-player games, had restricted it to a ‘rather narrow portion of the gaming market’. 

A chart from a 2022 Sony presentation showing the rise in PC/Mobile Releases (Courtesy Sony)

By expanding to PC and mobile and offering live services, Sony could move from a single part of the market to ‘being present pretty much everywhere’. In a mid-term strategy meeting, Sony released a presentation detailing its move away from a ‘walled garden’ approach to releasing content on more platforms and mediums. Sony now wants around half of its games to be available on PC and mobile by 2025. 

For Microsoft, platform exclusives are no longer part of its business strategy, which now involves multi-platform subscriptions and streaming services. For Sony, moving into multiple platforms gives it the chance to be present in all gaming segments. In the next section, we will discuss how both industry giants have approached the PC ecosystem.

Microsoft and Sony Double Down on PC gaming

Microsoft has led the charge in making all its games available on PC – the tech giant’s next-gen games will be available not only on the Microsoft Store, but Steam as well. Microsoft has also added to its game library by acquiring companies such as Activision Blizzard and Bethesda, both of which have released prominent games on PC and other platforms. With the Game Pass’ cloud solution, such games are available to stream as well, on multiple devices (except PlayStation consoles). 

Microsoft is also enticing publishers into the Windows Store ecosystem – in 2021, the tech giant reduced its revenue cut from Store games to 12% from 30%, encouraging more developers to create games for the digital storefront, which is of course, available on Xbox consoles as well. 

Sony is also catching up, releasing some of its exclusives on PC. In fact, releasing PC ports is seen as one of Sony’s strategies to reach a wider audience and give gamers a taste of the quality they can expect from a PS5 console. In August 2020, Sony released a PC port of the much-lauded Horizon Zero Dawn and ported Days Gone (2019) in 2021. It then made a stunning announcement later that year: 2018’s God of War, one of Sony’s greatest exclusives, would be available on PC by 2022. 

Sony now plans to release four more games on PC this year –  Uncharted 4: A Thief’s End and Uncharted: The Lost Legacy will be bundled as the Legacy of Thieves Collection, though no release date has been confirmed yet, while Marvel’s Spider Man Remastered (2020) will be available on August 12, and Marvel’s Spider-Man: Miles Morales (2020) during fall 2022. Sony’s announcements have led multiple media outlets to declare that exclusivity and the console wars are over for good. 

A slide from a 2022 Sony presentation growth in revenue via PC Ports (Courtesy Sony)

Sony is committed to its PC gambit – in 2021, it launched the Playstation PC label on Steam and a year later, it acquired the porting specialist Nixxes Software, and later confirmed that it would collaborate with Nixxes to bring more PS4 and PS5 titles to PC. In April 2022, Sony put out a job listing for ‘senior director of PC planning and strategy at PlayStation Global’, and a month later, the company forecast that its PC game sales would jump a whopping 275% to $300 million by the end of the next fiscal year. 

It is apparent, however, that Sony is making PC ports of its platform exclusives a while after their release on PlayStation consoles, enabling the company to walk a fine line between drawing people toward its consoles, and reaching a wider audience with ports.

The Advent of Cloud Gaming

Cloud gaming services could actually bring exclusives back into play, if they follow a model similar to media streaming services such as Netflix, Prime Video and Disney+. ‘Exclusive’ media franchises such as Stranger Things on Netflix, and the Star Wars and Marvel franchises on Disney+ impel consumers to pay monthly subscriptions for multiple streaming services. 

Enabling gamers to play on any device with a strong network connection is a key value proposition for any cloud gaming service. Xbox’s cloud gaming solution (part of the highest Game Pass tier) is available on Android, Windows, iOS, iPadOS, Xbox One, Xbox Series X|S, and Steam Deck.

With its robust library, Sony’s PlayStation Plus service is characterised as “the Game Pass alternative that many people believed Sony would never offer”, and as the highest tiers of both the Game Pass and PS Plus feature cloud gaming, gamesindustry.biz argues that a new war, now between competing streaming services, is about to begin. The Playstation Plus Cloud Streaming Service is available on PC – as such, no streaming exclusive can be considered a platform exclusive. 

However, cloud gaming services are still in the nascent stage and 5G networks – integral to the game streaming experience on mobile platforms – are far from ubiquitous and the ‘deprioritization’ of Google Stadia has raised concerns about the viability of cloud gaming

Conclusion: Is Platform Exclusivity Dying?

During the console wars, platform exclusives, timed or otherwise, played a big role in determining the success of a console. Current trends suggest that the once-mighty platform exclusive may be past its heyday. 

Microsoft appears to have decisively moved away from platform exclusives, especially with the Game Pass, its multi-platform Store, and its cloud gaming solution. But even Microsoft wants to keep some high-profile titles as console exclusives – Xbox chief Phil Spencer has all but announced that The Elder Scrolls VI will be playable only on Xbox or PC and Starfield, Bethesda’s first new IP in 25 years, is exclusive to PC and Xbox. Responding to the ensuing backlash, Todd Howard, chief of Bethesda, insisted that exclusivity would lead to a better product

Sony seems unwilling to fully relinquish platform exclusives. It has many platform exclusives scheduled for the PS5, and revealed in 2021 that the company had spent $329 mn on third-party exclusives for the console. But a year later, Sony announced that it would spend $300 mn to help first-party studios develop games and release them on multiple platforms, suggesting a shift toward inclusivity. Sony is committed to its PC strategy, but it wants to make a compelling case for the PS5 as well – by lining up third-party exclusives, and releasing first-party exclusives on PC a year or so after they are released on the PS5 – attracting buyers to their consoles and reaching a wider audience with their games.

The platform exclusive might be dying – only for the service exclusive to take its place. Both the Xbox Game Pass and the PlayStation Plus service feature exclusive content that cannot be accessed anywhere else. Such exclusives may not be locked to a single platform – Game Pass exclusives can be downloaded to both PC and Xbox, and its streaming solution brings these exclusives to just about any device except a PlayStation console. The PS Plus’ streaming solution works on the PC as well. 

If subscriptions and game streaming solutions become prevalent, and turn into major sources of revenue, Microsoft and Sony may be at war yet again, on a new front, and may even face challengers offering innovative game content services. The decline of the platform exclusive may well usher in a new era of multi-platform gaming, but gamers would then have to decide between subscription services rather than consoles. Gameopedia’s data curation team amasses information about all sorts of gaming hardware, gaming services and games. Reach out to us to learn about our game data solutions and more.

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8 Major Gaming Trends to Look Out for in 2022

Things have never looked better for the video game industry. It has grown exponentially over the last few years and the rate of growth doesn’t seem to be slowing down any time soon. It is estimated that over 2.5 billion people around the world play video games, and they contributed to the video game industry’s record-breaking 2021 revenue of $180 billion. The global gaming market is set to reach $256.97 billion by 2025. 

Global video game market value from 2020-2025, courtesy Statista.

There are several trends that have driven this explosive growth in revenue and audience: let’s look at those likely to be relevant in 2022.

Gaming Trends to Look Out For in 2022

1. The Massive Growth of Mobile Gaming

When it comes to gaming, a massive trend over the past decade that is only increasing in prominence is the rise of mobile gaming. The market for mobile games is expected to register a CAGR of 14% between 2020 and 2025. This is a result of improving technology when it comes to smartphone hardware and the growing penetration of these devices as a direct result of cheap internet data packs. Mobile games also often prefer the free-to-play (F2P) revenue model as it increases the number of downloads by users. This is because players can try out a game before deciding if it’s something they like and want to invest their time and money in. One of the things to note is the play-to-earn (P2E) business model which is slowly gaining popularity. Developed with blockchain technology (we’ll look at this in detail later), P2E games let players generate real income held in a crypto wallet, which means that even if they leave the game or it shuts down, they’ll be able to take these assets with them.

Mobile gaming has surged in the last decade with improvements to both mobile hardware and internet.

The sheer volume of gamers who play on smartphones and tablets makes it the biggest gaming platform. A survey in 2021 found that 68.1 percent of respondents stated that they played games via smartphone, making it the most popular gaming device worldwide. According to AppAnnie, consumers spent 50% more on mobile games than all other gaming platforms combined in 2021. Experts believe this trend will continue in 2022 as more games will support cross-play gaming. Asia-Pacific is emerging as the major contributor to the growth of the global mobile gaming industry. 

AAA mobile game releases are also likely to increase. The recent success of miHoYo’s Genshin Impact as well as that of prior releases like Fortnite, PUBG Mobile, and Call of Duty Mobile have proven that AAA mobile gaming experiences are not only popular but also highly profitable. A month into Genshin Impact’s release, it was downloaded 15 million times and earned more than $150 million in revenue. The key to successful AAA mobile game releases are high-quality graphics and a game experience similar to what you’d get on a PC or console.

Finally, gamers are increasingly looking for mobile games that come with social features. In fact, according to App Annie, roughly two-thirds of the top 50 mobile games have at least one social feature. These include in-game chat, guilds and clans, co-op and PvP modes, social media connections, and more. 

2. Cloud Gaming Becoming Viable

For many years, gamers have been waiting for innovations that would make cloud gaming go mainstream. It has the potential to revolutionise the gaming and entertainment industries by eliminating the need for expensive hardware and enabling remote access to game content. The prominent cloud gaming services in the current gaming ecosystem include PlayStation Now, Xbox Cloud Gaming, Amazon Luna, and Nvidia’s GeForce Now. Google has also committed to bringing at least 100 new games to their cloud service Stadia by the end of 2022. The future only seems brighter as cloud gaming is expected to expand at a compound annual growth rate (CAGR) of 48.2% from 2021 to 2027. 

Some of the notable cloud gaming platforms: at their price, definitely an attractive bet to people who don't want to invest in expensive hardware.

We’ve already looked at the advantages and the future of cloud gaming in detail in one of our previous articles. With cloud gaming, you don’t need to upgrade your PC or console. Instead of buying expensive gaming hardware, a basic laptop or even a mobile phone would do. You can play games on any OS or Device. Gaming on the cloud would allow games to become more platform-independent, allowing PCs and tablets running Mac, Linux, Android, and other operating systems to support games that might otherwise only run on Windows.

Other benefits include being able to start playing games instantly, as the server already has the game installed and can load the game immediately. This helps avoid waiting for patch updates. Cloud services would allow for very easy spectating of games, such as professional gaming matches. With the significant improvements in internet infrastructure, speeds, and bandwidth, streaming games might become prominent in 2022. The lack of a need to download periodic updates and possibilities of large-scale multiplayer gaming also improve its appeal.

3. Blockchain Gaming and NFTs

A blockchain is essentially a chain of data blocks on a computer network that is transparent to all of its users as well as anybody else. It cannot be altered or relocated. This way, a complete record of everything that has transpired on the network in relation to the data is preserved. Blockchain gaming is a means of turning digital assets inside video games (such as collectibles or cosmetic skins) into real-world assets in the form of NFTs or non-fungible tokens. Because of its liquidity and the fact that gamers are used to tokenization, implementing blockchain in gaming is fairly simple. 

From a zero-value market size, the blockchain gaming industry grew to
$3 billion in 2021 and is projected to rise to $39.7 billion by 2025. Fuelled by free-to-play and play-to-earn models, the blockchain gaming industry has attracted over 1.5 million diverse gamers across the globe. According to January’s report by popular data resource, DappRadar, blockchain-based online games received over $1 billion in funding in January alone, as compared to 2021 seeing investments worth $4 billion in total.

Cryptokitties is an online game that runs on the Ethereum blockchain. The game involves a play-to-earn model of buying, selling, and breeding digital kittens. By December 2017, players had already spent an incredible $ 6.7 million in-game. The most expensive
Cryptokitten was sold for $172,000. One of the most popular recent blockchain games is Axie Infinity, which is a play-to-earn NFT blockchain game built on the Ethereum network. During the game, players earn Smooth Love Potion tokens, which can be traded for real money through a cryptocurrency exchange. Axie Infinity has made over $4 billion in NFT sales since its launch. It also shows that there have been 14.45 million transactions and 1.62 million buyers since its inception.

Cryptokitties has had several million being spent in-game and was almost revolutionary (and adorable to boot!)

Blockchain gaming comes with a few advantages. Firstly, it improves security. It is nearly impossible to hack into data across servers because of blockchain’s strength of decentralization and highly effective data encryption measures. Gamers and developers can also leverage blockchain technology to construct resource-rich games and apps, as well as upgrade game versions and earn awards through blockchain gaming mining procedures. The big question is what can NFTs and related blockchain concepts bring to games that don’t already exist, or can’t be replicated with centralised approaches? Another major problem is the lack of regulation of NFT transactions which has led to several scams.

As things stand, NFT games face many challenges, some of which include:

  • Valve has banned crypto- and NFT-based games on Steam, the biggest PC storefront, inhibiting NFT growth on PC.
  • South Korea has banned crypto-based games on Google Play and the iOS App Store, limiting growth in one of mobile’s highest-spending markets.
  • Players have advocated against NFTs in games, as shown by the backlash to Ubisoft’s Ghost Recon NFT announcement.

4. The Metaverse

One of the biggest things to look out for is the Metaverse. The metaverse may be worth $800 billion by 2024 due to a surge in interest during the pandemic. That’s up from $47 billion in 2020.  Facebook’s rebrand to Meta is a sign that they, one of the biggest tech companies, believe it is the future. Meta has also announced an investment of $10 billion over the coming years to develop metaverse technologies. In October 2021, Tencent established the F1 studio under the subsidiary TiMi Studio Group for focusing on metaverse development. In June 2021, Epic Games said that it has secured $1 billion in its latest round of investments in its quest to create the metaverse, a realm of interconnected virtual worlds like those depicted in novels like Snow Crash and Ready Player One.  Disney is developing a metaverse theme park

But what is the metaverse?  A
New York Times article described it as “a variety of virtual experiences, environments, and assets that gained momentum during the online-everything shift of the pandemic. Together, these new technologies hint at what the internet will become next.” Despite the lack of a universal definition, the metaverse is already seeing massive traction in the video games industry with Epic Games and Roblox blazing the trail. 

For instance,
Fortnite — an Epic Games property — hosted a virtual concert that was attended by over 12 million people, and a collaboration between Roblox and Gucci created a virtual Gucci Garden space that sold limited edition virtual bags. One of the digital bags even sold for $800 more than the actual, tangible version! Both of these companies are a great example of how the metaverse can be a superb virtual environment where everyone within can interact and enjoy immersive experiences and stories. While some might simply want to log into the latest FPS game to shoot guns with their friends, others will find room in these worlds to engage in socialising, chatting, or other forms of shared interaction.

Travis Scott's Fortnite concert set a record for number of attendees and was a global phenomenon.

5. Acquisitions and Consolidations in the Gaming Industry

In the last few years, we’ve been seeing an increased number of acquisitions and mergers in the video game industry. Behemoths have been acquiring smaller companies to improve their offerings, acquire IPs, and expand their audience base. In 2021, there was a spree of acquisitions starting off with the acquisition of Activision Blizzard by Microsoft for the massive sum of $68.7 billion and Sony acquiring Bungie for $3.6 billion. Several more have come through, such as Sony acquiring game development company Haven Studios and Borderlands developer Gearbox acquiring 250-person indie dev team Lost Boys Interactive to work on Borderlands 4 and a fresh IP. Other significant acquisitions include 2021’s newly-public ironSource acquisition of Luna Labs, Soomla, Bidalgo, and Tapjoy. Liftoff and Vungle merged and acquired GameRefinery, AlgoLift, JetFuel, and TreSensa.

This is true of the mobile gaming sector as well, with mobile
gaming giant Zynga acquiring two big Turkey-based developers: Peak Games for $1.8 billion and four-fifths of Rollic Games for $180 million. In 2020, they also announced the acquisition of a Chinese studio – StarLark for $315 million. Embracer Group acquired a total of seven studios in 2021. They also entered into an agreement for $300 million to acquire the development studios Crystal Dynamics, Eidos-Montréal, Square Enix Montréal, and a catalogue of IPs including Tomb Raider, Deus Ex, Thief, Legacy of Kain and more than 50 back-catalogue games from Square Enix Holdings.

6. Games and Cross-Media Storytelling

Recently, there seems to be a barrage of high-standard, hugely grossing media being released based on video games. The release of Netflix’s Arcane (based on Riot Games’ extremely popular game League of Legends) and The Witcher series (the characters based on Andrej Sapowski’s books which became world-famous after the release of the games) have proved that games can also be adapted into media and other IPs which can be extremely successful.

The Witcher is one of Netflix's most popular releases and has been renewed for a third season already.

“The Witcher,” was on track to be Netflix’s biggest first season ever for a TV series. Netflix said through its first four weeks of release, 76 million households watched the fantasy series. Future releases are also under production, such as the upcoming Last of Us and Borderlands series based on the games of the same name.

There are also reboots happening of franchises that were initially less than successful, such as the Resident Evil movies. It is being remade into Resident Evil, a new live-action series based on Capcom’s legendary survival horror game franchise, and is coming to Netflix. Another example is the Tomb Raider franchise, whose movies were box office failures. However, Netflix, Crystal Dynamics, Square Enix, and Legendary Television are teaming up for a brand new animated series based on the video game franchise to inject some life into the reboot.

7. The Explosive Popularity of Esports

In 2021, the global esports market was valued at just over $1.08 billion, an almost 50 percent increase from the previous year. This number is expected to increase massively with significant investments being made by game publishers, gaming organisations and their sponsors, and other parties in the gaming ecosystem. If you want to read more about this as well as revenue channels, trends, and the future of esports, check out our article where we get into the details.

Significant revenue comes in from sponsors as well as ads on broadcasts of tournaments, especially international ones. There are also other areas that are likely to explode in 2022 though and the foremost among these is esports betting. The
global esports betting market size is expected to reach $13.05 billion by 2025, from $7983.2 million in 2019. The number of esports events one can bet on is also growing exponentially, from 3,000 events available in July 2019 to over 50,000 events in July 2020.

Finally, with restrictions due to the Covid-19 pandemic finally being lifted, a lot of offline events are being planned. These kinds of events are usually held in huge arenas, with thousands of fans attending. This helps significantly with publicity and media impressions as well as increased revenue from ticket sales, limited-time merchandise, and more.

Esports isn't just about games, it's a cultural phenomenon across the planet.

8. VR and AR Gaming Developments

Since the release of novels like Ready Player One and Neuromancer, a fully-immersive virtual universe has been a dream for tech giants, gaming enthusiasts, and the like. VR technology is the furthest humanity has gotten to that lofty goal. Thanks to the falling price of hardware, VR gear such as headsets is becoming increasingly affordable. They also benefit from being capable of functioning both as standalone devices and being connected to a gaming PC to take advantage of their dedicated hardware to enable even more immersive and graphically-rich VR experiences. We’ve gone into VR and its evolution in detail in this article.

VR is the closest humanity has gotten till date to a fully-immersive online experience.

The global VR market was valued at $7.7 billion in 2020 and is projected to reach $26.8 billion by 2027 with a CAGR of 19.0% during this period. In the near future, cloud VR could become a reality – further reducing the size of headsets. 2022 might even see the release of Apple’s long-rumored VR headset (though there is no release date yet) as well as the Oculus Quest 3. The PSVR 2 is also due to launch towards the end of 2022. It is the next-generation VR headset that Sony is currently working on and will work exclusively with the PS5 games console. While Meta hasn’t provided an ETA for its next wave of VR products, according to XR hardware analyst Brad Lynch, Project Cambria could release before the Oculus Quest 3. The insider claims that the high-end Metaverse headset will release in Q2 2022, while the Quest 3 will make its debut at Meta’s 2023 Connect event. It is very likely that VR could see a lot more takers in the near future and might even be a major trend in 2022, depending on when the aforementioned technology gets released.

These are the trends which should have significant ramifications for the gaming industry that you should watch out for this year. We work with clients across the industry on custom requests and can provide in-depth data about games such as detailed game breakdowns which can help you identify trends. Reach out to us for data that can empower you to new heights. 

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Cloud Gaming: Is it the Future?

As a result of the pandemic, video games shot up in popularity as a way of entertainment during the lockdowns. COVID helped propel U.S. video game sales to a record $56.9 billion in 2020, a massive 27% increase over the previous year. Video games are constantly evolving in terms of graphics, mechanics, and more. They progressively require better computer specifications to run properly. It’s unlikely that you’ll be able to run a game made in 2021 on a PC you got in the 2000s, unless you’ve significantly upgraded your rig. Cloud gaming seems to be an increasingly viable solution to this issue. But what exactly is it?

When you usually play games, you download the game or (increasingly rarely) play it off a disc. The way your game looks and runs depends upon your device’s processor and graphics card. With cloud gaming, you stream the game as a series of compressed video frames which react to your input. The game is running on a remote server that bears all the processing load instead of your system. When you press a key for your character to move forward, this input gets sent to this server which tells the game what you pressed, then sends you a new video frame which shows you the result of your action.

A simple representation of how cloud gaming works.

The cloud gaming idea has been around for a decade or two, but has become a serious contender as of late. With the continuous difficulty customers are facing in securing state-of-the-art gaming hardware such as graphic cards, processors, and consoles, it is growing increasingly attractive as an alternative and was estimated to be a $1.5 billion industry in 2021. Current mainstream cloud gaming services include console cloud gaming services PlayStation Now and Xbox Cloud Gaming, as well as Amazon Luna and Nvidia’s GeForce Now. Google has also committed to bringing at least 100 new games to their cloud service Stadia by the end of 2022.

The future only seems brighter as cloud gaming is expected to expand at a compound annual growth rate (CAGR) of 48.2% from 2021 to 2027. 

Key Stakeholders in Cloud Gaming

Cloud Gaming Platforms: These are the services and content providers which let you play games on their servers and devices and provide you with the stream across the internet. They also provide games, game bundles, and subscription passes to users.  They include the likes of Google Stadia, GeForce Now, Playstation Now, and Xbox Game Pass.

Game Developers and Publishers: They make and publish the video games provided by content services. Examples are Activision, Tencent, and Ubisoft.

Internet Service Providers: An integral part of a successful gaming experience on the cloud is high-quality internet access. Examples include Xfinity, Comcast, and Verizon.

The History of Cloud Gaming

The first demonstration of cloud gaming technology was by startup G-cluster (short for Game Cluster), which introduced its product at the 2000 E3, and released around 2003. In their initial model around 2005, G-cluster offered PC games that ran on their servers. They used service and software providers to help their service reach network operators, and then offered the games through portals to customers.

In 2010, with improvements in data, video compression, and smartphone capabilities, the potential for gaming on the cloud rose. Services like OnLive and Gaikai were announced around this time. OnLive had acquired some support from large publishers like Ubisoft, 2K Games and THQ but they found it difficult to get other publishers onboard as they were wary of the subscription price model. Gaikai was acquired by Sony Computer Entertainment in July 2012 for $340 million, and by October 2012, was offering PlayStation games on the cloud. Ultimately, the technology behind Gaikai was used as the foundation for PlayStation Now, first introduced in 2014. OnLive meanwhile never made a profit and was acquired by OL2. After that failed as well, OnLive and OL2’s intellectual property was acquired by Sony Computer Entertainment in April 2015, then shut down in a month. The acquisition of both Gaikai and OnLive’s intellectual property gave Sony access to a range of patents covering cloud gaming.

By May 2018, a new chapter started in the history of cloud gaming with Electronic Arts acquiring cloud gaming assets and talent from GameFly. They announced “Project Atlas” to remotely process and stream blockbuster multiplayer HD games with the lowest possible latency. That month, tech giants Google and Microsoft also announced cloud gaming initiatives, with Google beginning to pilot “Project Stream” (including a closed beta featuring Assassin’s Creed Odyssey running via a client in the Google Chrome web) and Microsoft announcing the upcoming Project xCloud, leveraging Microsoft Azure technology.

At the Game Developers Conference in 2019, Google officially announced its cloud gaming service Stadia, which launched on November 19 of that year. In April 2020, Google removed the entry fee for the Stadia cloud service, thus making video games available to users for free.

Amazon introduced its own cloud service Luna in September 2020. Games on the service will be offered via a channel-style subscription service, with Amazon’s own games and those from Ubisoft available at the service’s launch. One of the most recent updates in the history of cloud gaming was in October 2021, when NVIDIA announced its next-generation cloud gaming platform — delivering GeForce RTX 3080-class gaming on GeForce NOW™ — available exclusively in a new, high-performance membership tier.

Samsung also officially announced its new game streaming discovery platform, Gaming Hub for their range of Smart TVs, at CES 2022. Gaming Hub is essentially a new software platform that brings other gaming streaming platforms together in the same place, while offering gamers suggestions and ways to discover new content.

Samsung Gaming Hub could help gamers find new content and unify streaming platforms.

Why Cloud Gaming is Increasingly Attractive

  • With cloud gaming, you don’t need to upgrade your PC or console. Instead of buying expensive gaming hardware, a basic laptop or even a mobile phone would do. You could also buy a cheap streaming box and controller that plugs into your television and home network.
  • You can play games on any OS or Device. The majority of high-end, non-mobile games are currently limited to PCs (mostly running the Windows OS) or consoles. Gaming on the cloud would allow games to become more platform-independent, allowing PCs and tablets running Mac, Linux, Android, and other operating systems to play games that might otherwise only run on Windows.
  • Television manufacturers could integrate support for cloud-gaming services into their smart TVs. The TV wouldn’t need any powerful, expensive gaming hardware — any TV with the correct software and a controller could work for gaming without any additional hardware required. Some smart TVs already include this feature via their OnLive integration, or plan to in the future, such as Samsung Gaming Hub.
  • A lot of games may require a download of 10GB, 20GB, or even more before you can play them. Cloud gaming would allow you to start playing games instantly, as the server already has the game installed and can start playing it immediately. This helps avoid waiting for patch updates as well.
  • Cloud services would allow for very easy spectating of games, such as professional gaming matches. Spectators wouldn’t need the game installed, as the video stream could be easily duplicated for many users.
  • If games ran on remote servers instead of your own computer, they’d be almost impossible to pirate. This makes gaming on the cloud an attractive form of DRM to publishers, if not to gamers.

Impediments to the Success of Cloud Gaming

While cloud gaming comes with several advantages, it does face some challenges as well. Let’s look at some of them.

1. The quality of your cloud gaming experience depends considerably upon the speed and bandwidth of your internet connection. Access to high quality internet is still a pressing issue in several countries and is arguably the biggest obstacle to gaming on the cloud.

2. The gameplay ‘video’ you receive from a cloud-gaming service is compressed, thus it won’t be as sharp and high-detail as what could be rendered by a high-end gaming PC. However, the compressed video you receive may look better than a game rendered at lower detail locally.

3. Cloud gaming services require a large amount of bandwidth. If you have bandwidth caps on your Internet connection, this could be a serious problem. If everyone played games using cloud services, bandwidth usage would increase dramatically.

Even highly optimized platforms like Shadow have higher latencies than local hardware.
  • Games react to your actions much more quickly when they’re running on your local computer. Reaction time is faster when your mouse movement just has to reach your local device than when it has to travel over an Internet connection, be rendered and compressed, and then travel back to you. Cloud-gaming services will always have more latency than local hardware.
  • Publishers love the DRM results of cloud gaming, but many gamers would be at a disadvantage if cloud gaming became the primary way to play games. Just as it’s impossible for people living in certain areas to play always-online games like Diablo 3, cloud gaming would have even higher Internet connection requirements.

The Future of Cloud Gaming

Cloud gaming is still very much in its infancy. That said, many players around the world are already seeing the benefits of cloud gaming and rallying around it as their favorite way to play. For this group, the future of cloud gaming is bright and it is already a viable gaming solution as a result of better access to high-quality internet globally. There are also developers like Mainframe planning to make cloud-native games which will help make the cloud more popular. They’ve raised $22.9 million to develop cloud-native games in November 2021. An increase in partnerships between cloud gaming platforms and game developers and publishers will also lead to the industry thriving. 

 

Mainframe Industries is working on their cloud-native game which might revolutionise the industry.

A proposed method to improve game streaming’s scalability is adaptive graphics processing unit (GPU) resource scheduling. Most cloud gaming providers are using dedicated GPUs for each person playing a game. This leads to the best performance but can waste resources. New resource management algorithms have been developed that can allow up to 90% of the GPU’s original power to be utilized even while being split among many users. Another idea is predicting the gamer’s input to try and reduce latency using algorithms. Stadia’s head of engineering Majd Bakar foresaw the future possibility of using such a concept to “reduce latency to the point where it’s basically nonexistent”, and called this concept “negative latency”.

Either way, the future of cloud gaming and the cloud-gaming ecosystem seems bright.

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