Predict: The Next Generation Console Tech

[aaronspink]

If you want to undercut retailers on your online store, then they won't stock your console, unless they had at least a 40% profit margin on it. Then your console is suddenly being sold for much higher than your competitors, which puts you at a distinct disadvantage and negates the puny $20 you saved by not putting in a disc drive.

This is a false argument and always has been. Retailers regularly sell things for much less margin than 40%. The vast majority of products sold at retail have smaller margins. And they'll carry consoles even if they are being undercut on games because they will still make margins on accessories and warranties. The reality is they don't have much choice. The retailers can either get nothing or something and will take the something. Retailers like gamstop are simply the next blockbuster or tower records.

 

[Rangers]

DD will have to be significantly cheaper than optical disc to be popular. $35 DD vs. $60 disc or so, since the profit margins for everyone except retailers will stay the same or improve that way. However we actually have the reverse for ME2, where it was $36 at Amazon and $60 at PSN. If you want to undercut retailers on your online store, then they won't stock your console, unless they had at least a 40% profit margin on it. Then your console is suddenly being sold for much higher than your competitors, which puts you at a distinct disadvantage and negates the puny $20 you saved by not putting in a disc drive.

Hate to say it but if manufacturers go DD only, they wont cut game prices a dime. They will still be $60 (actually, I think they may try to move to $69 next gen)

That's just the way it is...

And too be fair, there is an advantage to digital, not having to swap discs. Mock all you want but imo it's not an insignificant one. Swapping discs to play different games on a whim is a chore. In my case I'm sitting 9 feet away. I dont know that it counteracts no resale, but it isn't insignificant.

 

[Gerry]

Hate to say it but if manufacturers go DD only, they wont cut game prices a dime. They will still be $60 (actually, I think they may try to move to $69 next gen)

That's just the way it is...

And too be fair, there is an advantage to digital, not having to swap discs. Mock all you want but imo it's not an insignificant one. Swapping discs to play different games on a whim is a chore. In my case I'm sitting 9 feet away. I dont know that it counteracts no resale, but it isn't insignificant.

This is all true. Personally going DD wouldn't trouble me if consumers were passed on the benefits (price wise). But I think you're right in saying the price of DD games wouldn't come down at all. Older also seem to keep their price on DD (I'm talking XBL here rather than Steam). Shadow Complex, for example, is still 1200 points - there seems to be little attempt at pushing older games by price reduction. I'm a little nervous that on the consoles we'd end up with £49.99 games at launch that stay that price for ages and no resale value.

 

[bkilian]

Well the complexity can certainly be debated. I'm in the camp that net based DD is less complex than retail live disc based distribution. And there are always options for kiosk based and portable distribution of DD content. It has been done with steam forever. Personally, it vastly simplifies things for me.

Net based DD. Now _that's_ a hornet's nest. If MS went net based, it would be basing it's business model on the largesse of _other companies_. In my case, Comcast. Here in the US it's not so much of a problem yet, but elsewhere in the world consumers have traffic caps. Europe has always had them, Canada now has them, and the US is starting to roll them out. In South Africa the traffic cap is an average of 5GB per month.

You're also limiting your customer base to users that have broadband. Not a great idea if you want to hit the true mass market.

 

[corduroygt]

Hate to say it but if manufacturers go DD only, they wont cut game prices a dime. They will still be $60 (actually, I think they may try to move to $69 next gen)

The reason retailers have sales is to spur demand. About $17B of disc movie purchases vs $680M DD movie purchases shows that consumers are willing to pay a lot more for something tangible. That's just the way it is...They will have to offer lower prices or far fewer people will buy the games, and consoles will be just like steam, with little revenue. PC is a cesspool of piracy and low margins.

 

[NRP]

bkilian,
What about rolling out DD as an option to physical disks in select markets? If I could get a DD version of a new release day and date with the physical disk version, I doubt I'd ever buy another disk game again.

I really hate swapping discs.

 

[corduroygt]

bkilian,
What about rolling out DD as an option to physical disks in select markets? If I could get a DD version of a new release day and date with the physical disk version, I doubt I'd ever buy another disk game again.

I really hate swapping discs.

I'm sure that's possible, just like ME2 was possible on PS3. It's just that they probably wouldn't be able to undercut retailer prices, so still $60. I see no issues with that from either side. In fact, that's probably how it will be next gen.

 

[hoho]

Europe has always had them

Not all of EU, I'm not even sure if half of EU has them. In Estonia I'm pretty sure there are no landline/cable based internet with a cap. Only caps are for mobile networks. I've dowloaded a few terabytes per month without anyone saying anything about it. I also haven't heard anyone actually planning to cap the connections here.

 

[3dcgi]

bkilian,
What about rolling out DD as an option to physical disks in select markets? If I could get a DD version of a new release day and date with the physical disk version, I doubt I'd ever buy another disk game again.

I really hate swapping discs.

You can solve the swapping discs problem without DD. Just authenticate with Xbox Live. I tried to convince a project manager at Microsoft to do this before Xbox 360 shipped, but all we got was the half way step of installing to the hard drive, but still needing the disc for authentication.

 

[corduroygt]

You can solve the swapping discs problem without DD. Just authenticate with Xbox Live. I tried to convince a project manager at Microsoft to do this before Xbox 360 shipped, but all we got was the half way step of installing to the hard drive, but still needing the disc for authentication.

How would that work after I install the disc and sign on to live, then lend the disc to someone else who uses it without being connected? Now you have 2 copies of the game instead of one.

 

[eastmen]

I'm sure that's possible, just like ME2 was possible on PS3. It's just that they probably wouldn't be able to undercut retailer prices, so still $60. I see no issues with that from either side. In fact, that's probably how it will be next gen.

He is talking about select markets. So the USA , Europe , Japan would be DD only while other places like perhaps canada (their goverment is screwed up trying to make 25GB limit a law ) and then 2nd and 3rd world countrys would have disc and DD as an option.

 

[corduroygt]

This is a false argument and always has been. Retailers regularly sell things for much less margin than 40%.

Why not convince the retailers to sell games for much less margin than 40% then? It must be much easier to do that than to convince them to sell a console for much less margin. It must not be as easy as people think here.

 

[bomlat]

I just checked a few days ago the available BB providers in my are ,and half of them have GB limit,and the remaining half fair use policy (usually they slow down after two gigs....)
And if you using mobile net,then no chance.....
My sons Steam library occupy 80 gigs.No chance with BT broadband....

From the other side,the 40% of the software sales could go to the distribution channels.If they cease to exist,then the game console will be next to the satellite receivers/dvd players,in a dark corner of a shop(and of course there will be no gamestop).currently all retailer give free advertisement to the software companies-in the case of the DD it will not exist.

And the last point : the only good,working DD model is the Steam.The PSN/XBL have idiotic restrictions,basically they handle the contract connected to the hardware,not to the person.

And how will look like a transition to a new hardware?you will have to scrap all of your invested money?

 

[3dcgi]

How would that work after I install the disc and sign on to live, then lend the disc to someone else who uses it without being connected? Now you have 2 copies of the game instead of one.

I don't think this is a big deal since as more and more games are having online elements most users will want to connect to an online service. So what if you lose a few sales. I'm sure console/game vendors are more paranoid than me though.

Apparently EA is trying this with Dragon Age II. You must connect to the internet before playing and you don't need to keep the disc in the computer.

It's too bad DVDs don't have the equivalent of an eprom. If the disc has been installed then it knows not to run in another system without authentication.

 

[Squilliam]

Net based DD. Now _that's_ a hornet's nest. If MS went net based, it would be basing it's business model on the largesse of _other companies_. In my case, Comcast. Here in the US it's not so much of a problem yet, but elsewhere in the world consumers have traffic caps. Europe has always had them, Canada now has them, and the US is starting to roll them out. In South Africa the traffic cap is an average of 5GB per month.

You're also limiting your customer base to users that have broadband. Not a great idea if you want to hit the true mass market.

The reason for the traffic caps is that theres always an assumption that all data will be international data. So places like New Zealand, South Africa etc have low data caps whereas places in the U.S. where the data is all national data have no/high caps.

What they do in my country is they peer the data with the ISP. So for instance I can have only 20GB of normal internet but if im using TVNZ on demand or our local Sky on demand the data is free and fast without effecting the data caps. If anything ISPs would love for people to want to pay more for a faster connection in order to use what is effectively local loop data. Direct download would be a boon for them and the ISP/Console maker interests would be very much alligned.

 

[Tahir2]

Sounds great so now we just need data servers for local loop data set up by....... ?

Would it be the hardware vendors?
Software vendors?
Service Providers?

Who guarantees up time?

We are shifting distribution costs from physical media to digital downloads, the infrastructure is going to cost a lot to create and then to maintain.

 

[Squilliam]

Sounds great so now we just need data servers for local loop data set up by....... ?

Would it be the hardware vendors?
Software vendors?
Service Providers?

Who guarantees up time?

We are shifting distribution costs from physical media to digital downloads, the infrastructure is going to cost a lot to create and then to maintain.

It'd be the console vendor/network operator if the console vendor doesn't operate the online network.

In the case of Microsoft, they have one of the largest content delivery networks in the world. I think they can manage, you do know where those 100+ MB patches for Windows 7 come from, don't you?

 

[Tahir2]

... you do know where those 100+ MB patches for Windows 7 come from, don't you?

We are talking about the downloads not impacting your download caps imposed by your ISP, so it would have to be somewhere local and not Redmond.

 

[aaronspink]

Net based DD. Now _that's_ a hornet's nest. If MS went net based, it would be basing it's business model on the largesse of _other companies_. In my case, Comcast. Here in the US it's not so much of a problem yet, but elsewhere in the world consumers have traffic caps. Europe has always had them, Canada now has them, and the US is starting to roll them out. In South Africa the traffic cap is an average of 5GB per month.

Caps are generally off provider network caps when they exist. I would assume that if MS et al are smart enough to use a CDN that is using on provider bandwidth like they already do!

You're also limiting your customer base to users that have broadband. Not a great idea if you want to hit the true mass market.

Once you go to a DD model, the pipeline for the data hardly matters. You can utilize USB/SD/Net/ODD/etc all equally as easy.

 

[aaronspink]

Why not convince the retailers to sell games for much less margin than 40% then? It must be much easier to do that than to convince them to sell a console for much less margin. It must not be as easy as people think here.

Because small things selling for low prices that take up a lot of shelf space and are easy to steal, etc, etc, etc, are sold at higher margin to make up for all the hassle. Most media is sold at significant market because it require a significant investment in catalog to be viable at a retail location.

Someone like walmart would just at a kiosk that they didn't have to do anything with except plug in and get 10% of revenue from. They would gladly replace whole isles with a fleet of people managing them. Go into your local big box store and compare the area devoted to media vs something like TV et all. In general the media area vastly dwarfs any of the electronic/kitchen sections.