Net gamers reshape distribution

A change in the booming games software distribution market is on the horizon, according to four industry gurus who met for a brainstorming session at Milia '99.

Lawrence Schick, executive director of interactive entertainment at America Online; Robert Gehorsam, senior vice-president of programming and platform development at Sony Entertainment; Ed Fries, games general manager at Microsoft; and Timothy Ewing, president of E-Pub, discussed the future and effects of online gaming. The conclusion drawn from the meeting was that traditional software distributors will face a daunting challenge from the internet.

'There is a question of how retail is going to be affected by online gaming. The internet makes the supply chain fuzzy, with companies blurring across different areas,' said Schick.

The number of online gamers is already swelling. In Japan this number has increased dramatically following the launch of Sega's Dreamcast console, which has the capacity to log onto the internet. This pattern is set to repeat in Europe as the next-generation consoles go on sale.

'We are talking about huge audiences in the future, not hundreds of thousands, but millions - even a billion,' Ewing said.

The result of this will be an alteration to both buying habits and the structure of the channel. Gehorsam pointed out that games were already outpacing films in profitability and that production costs had also rocketed. This has lead to consolidation and cost-cutting exercises.

'Distributors will choose to distribute games via the internet instead of through retail. It will allow us to reach a much broader audience,' predicted Fries.

He added: 'However, putting a box on the shelf undoubtedly gets a product sold - there is definitely something about the touch-feel factor.

There will be a situation with games being demonstrated on the Web that could lead to an online sale. However, the sale models will probably run in parallel, rather than only one dominating.'