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Computer Video Game Companies Try Online Distribution

March 2, 2006

SAN FRANCISCO — Video game maker S2 Games plans sell its new title “Savage 2: A Tortured Soul” exclusively through Web downloads this October testing a new delivery system that both independent computer game makers and industry behemoths are trying.

By declining to box up thousands of CDs and distribute them in stores, S2 aims to cut the price of the game and hold on to a bigger percentage of proceeds, Marc DeForest, the company’s co-founder and lead designer, told Reuters this week.

The increasing proliferation of high-speed Internet connections is helping to drive interest in digital video game publishing, particularly among small game development houses looking for a direct route to fans.

According to research from Parks Associates, 42 percent of U.S. households have broadband Internet access, which is making it easier for users to quickly download video games, photos, music and other content. Broadband penetration in some other countries, such as South Korea, is significantly higher.

Digital delivery of high-definition films, which are enormous files, has been restricted by the limited deployment of high-capacity networks needed to deliver feature-length videos to millions of consumers via satellite, telephone or cable TV networks.

In the case of S2, players will be able to download the entire game to their computers. Online game play will happen on S2-run servers that allow the company to identify those players who have paid for the game.

The Northern California-based company’s first title “Savage: The Battle for Newerth” was introduced at $49.99 in 2003 and was primarily sold through retailers. DeForest said the company makes about $20 on the sale of each game.

He said the follow-on title, slated for release in October, will sell for $29.99. S2 will keep about $28 of each digital game sale, and unlike retail, payment will be immediate because customers pay the company directly.

“We get a bigger piece of the pie,” said DeForest, who added that he expects the online distribution to free up cash flow at S2, which he funds.

GETTING A DIGITAL LIFE

“Half-Life” game maker Valve Corp. is the industry’s best-known provider of digital game distribution through its service called Steam.

Launched in late 2003, Steam now has more than 6 million registered users, Valve spokesman Doug Lombardi said in an e-mail. The Web site offers games priced from $9.95 to $39.95 from Valve as well as other publishers and connects users to an online gaming community.

Valve has thus far offered only full games for purchase through Steam but this spring will begin selling an episodic series of “Half-Life 2″ games for around $20 each.

Electronic Arts Inc., the world’s largest video game publisher, will offer a “Euro Force” expansion pack, additional game content, for its “Battlefield 2″ PC game exclusively through its digital delivery service at www.downloader.ea.com.

And online media firm IGN Entertainment, a unit of Fox Interactive Media Inc., has its Direct2Drive service that offers A-list PC games such as “Civilization IV” for download.

Elsewhere, NCsoft Corp. the South Korea-based developer and publisher of games like “Lineage” and “City of Villains,” has been debuting massively multiplayer online games simultaneously in stores and through online download for two years and continues to do so.

The company’s downloadable game files vary in size and the larger ones, which would require a very fast Internet connection, are often preferred by gamers with state-of-the-art systems and the fastest Internet access.

Digital distribution has allowed the company to extend sales to such countries as Chile and Mexico, where it does not have retail distribution, and has had no negative impact on boxed game sales, said Dorothy Ferguson, NCsoft’s vice president of marketing and sales for North America.

Still, she said, sales data shows that most gamers prefer the brick-and-mortar store experience.

“People still want to touch and feel a box,” Ferguson said.




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