Welcome to Nintendo World Report's newest feature, the Weekly NWR Roundtable. As the name suggests, every week our staff will be presented with a topic of conversation, and we'll let the discussion flow from there.

This week our question is what our staff regards as the future of gaming-specific retail. With the rise of digital distribution and the expansion of big-box retail into the market, stores like GameStop face new market pressures.

QUESTION: What is the future of video game retail?

Jon Lindemann

I think the future is a mixed retail/digital model. Gamers will be able to pick up points cards and buy special edition game points cards in-store, probably coupled with Swag. GameStop has been making some acquisitions that are setting it up for digital distribution, so I don't think brick-and-mortar stores will go away any time soon. There are still millions of people out there that would rather buy something in a store. I don't think people are as tied to physical media as they say they are, though; look at CDs. Nobody cared when MP3s came along and made CDs effectively obsolete. I think games will be the same way...game companies just have to find a way to make digital media appealing to consumers.

Mike Gamin

Exactly, look at CDs. I don't have the specific numbers right now but CD sales are abysmal. The vast majority of new (read: young) music buyers are going the digital distribution route. The older ones are the only ones keeping CD sales afloat at all, just as they kept/are keeping vinyl sales going on some level. The problem is the young eventually become the old and then physical media sales will be all but gone. I see absolutely no reason why this same process won't occur with games.

I recognize that piracy really pushed CD sales over the edge, but I don't think it is what is sustaining the drought anymore. The (mostly) lack of piracy of console-based games just means the transition will take longer, not that it won't occur. The only thing holding me back from digitally buying every game possible is the storage constraints on the consoles. That has been fixed (to some extent) on Wii and my digital purchases have gone through the roof. If hard drives for the 360 weren't so expensive I would be taking full advantage of their "Games on demand" service for otherwise retail titles.

Digital distribution is the future. It benefits the people making the games too much. As long as they do it in such a way that the average consumer doesn't feel too limited, it should catch on. After all, allowing people to truly buy games when they want to play them, and not when they fear rarity, benefits the player as well.

Lukasz Balicki

I personally like new competition in retail regardless if it's traditional stores or online shops. Competition with prices just makes it better for the consumer, since it gives us better prices and deals. Though in the future I think that there will be a mixed retail and digital download environment for video games. If a platform is download-only, such as the PSP Go, then that is a huge handicap to the consumer, especially to parts of the world that still don't have good broadband internet service or broadband penetration.

I think that brick-and-mortar and digital games should be treated as two different entities, and keeping them mixed and separate would be a healthy model, since it encourages people to buy from both especially if you keep the content unique and enticing. I'm personally not a fan of Microsoft and Sony adding retail games to their digital services, because the price of those games usually reflect the retail price, which doesn't give any advantage to the consumer other than booting it directly from a hard drive or storage device. I think comparing digital video games to MP3s is a bad comparison since Nintendo, Sony, and Microsoft's downloadable services are closed platforms that they fully control, while you can download MP3s from many different companies.

Jon Lindemann

That's a great point, Luke. I think eventually we'll see these "closed platforms" fall away, and you'll have companies become digital content re-sellers, if you will. Instead of getting content exclusively from iTunes or PSN, Wal-Mart will allow you to download any console/portable game or MP3 from their particular online service, and you'll have other companies like Target and Toys'R'Us competing against them price-wise with their own online services. Right now digital copies of games aren't any cheaper than retail, simply because they don't have to be. If you truly prefer the digital copy of a game, where else are you going to buy it? You don't have any alternative but to buy it from PSN, XBL, or the Wii Shop Channel.

James Jones

Luke, I don't know that competition is going to drive down price-points. In the industry, prices are controlled by the publishers; it is very easy for a publisher to control the cost a retailer has to make up and can use that mechanism to control price. We see very little variation from those price points. If everyone holds firm then we don't benefit from competition in a monetary way. Where we may benefit is in the quality of service. Stores that sell the same product at the same price have to find ways to make the overall experience better in order to get your business.

Mike Gamin

Jon, this is already occurring as Amazon is selling digital codes for games. You may say that the prices are still controlled by the publisher, but let's not kid ourselves here. Publishers have been flirting with price fixing laws for 25 years. That isn't a problem with digital distribution. Microsoft and Sony have also already shown that digital games won't stay the same price indefinitely even when being sold on their closed platforms. Sony does seasonal sales and MS does weekly deals. Both of these are often significant price decreases, usually over 25% off. When supply is more or less infinite, it takes it out of the pricing equation entirely. If a game isn't selling as well as they would hope, they are forced to cut the price if they want to increase numbers. Consumers don't have to rely on "competition" anymore, which, as I said before, is more or less farcical in the current economic climate anyway, be it used or new games.

Jonathan Metts

I'm ready for the all-digital era. There are pros and cons to physical media, but in terms of the brick-and-mortar retailers themselves, I have no reason to give them my business. The prices are better online, and I don't have to deal with snotty or ignorant store employees. The only real advantage to in-person business is customer service, and all the major game retailers (GameStop, Wal-Mart, Best Buy, etc.) obviously fail on that front. These days, the only time I walk into a game shop is to trade in games, and that is happening less and less now that I no longer review games and am spending more of my money on downloadable games. 90% of my physical game purchases this year have been from Amazon, and even that company is going to sell fewer games as we move toward digital domination. My only concern with a retailer-less game industry is lack of competition, but that too will be okay as long as the platform holders (Nintendo, Microsoft, Sony) give developers/publishers a wide latitude in pricing their games, just as Apple has done with iPhone.

Zachary Miller

What's bizarre to me is that, despite having many physical retailers, there is no price competition between them. I've applauded Target lately for having poorly-selling games (on the PS3, at least) knocked down in price to free up shelf space, but this is far and away the exception to the rule. Super Smash Bros. Brawl will cost $50 at Wal-Mart, Target, Fred Meyer, Best Buy, and GameStop. At FYE (a mall music store), it will actually cost MORE. Prices are fixed by the publisher, sure, but that doesn't mean the store isn't making an enormous profit off the game. Look, after two or three months of not selling a particular game, stores will often slash the price by ten or twenty dollars--they're still making a profit. "Player's Choice" style re-releases across all three consoles invariably cost far less than they did when launched. Half as much, usually. Profit is still being made.

The more we can take physical stores out of the equation, the smoother the game-buying process will become. No more "ship on Tuesday, arrive god-knows-when," unlike DVD's and CD's. No more paying a printing, disk-writing, and case manufacturer. distributing vendor, no more buying shelf space, no more shipping costs. No more price inflation. I would happily buy just about any of my PS3 games as downloads at a cheaper rate. It's nice to have the physical box, sure, but Patapon 2 has shown me that I don't really care enough.

Patapon 2 was a strange case - digital distribution, but also boxes sold in stores with download vouchers sealed within. It cost $20 either way. I suspect that Sony's digital distribution will jump way up with the release of the PSPGo, at which time they've promised that most of the current crop of PSP games will see life in the digital world. Like the death of VHS, there will come a time when games will no longer see a double life as a physical store copy and a PSN file; it'll be just the latter. The question is, will it be cheaper? Current trends say "not a lot cheaper." The original Patapon just hit the PSN, and it's $15. That seems high. PSOne games are between $6 and $10.

So while I think digital distribution is the wave of the future, I'm also rather suspect of it. What we need to see is how much the industry itself saves by moving to digital-only. There must be some advantage in sticking with the brick-and-mortar stores, so what is it? Higher visibility? The sheer concept of pricing a game at $60?

James Jones

Zach, I'm shocked the "Last American Frontier" [Alaska, where Zach Miller resides. - Ed.] offers so many convenient retail options.

Here is why I like retail and physical stores: I spent my lunch playing Scribblenauts. I decided, "Hell, why not?" and went to get it from GameStop at lunch. In and out: five minutes. If I had to buy it

online I would have to wait a few days; no return on impulse shopping there. If I had to download it I would have had to get to a hotspot that I feel is secure enough for such a transaction and wait for the

download. Instead I got forty minutes hands-on while eating some scrumptious Chick-Fil-A.

Wonderful lunch brought to you by brick-and-mortar.

Mike Gamin

It's a nice story James, but it takes place in the current tech infrastructure when we are talking about the future. There is no reason for future hand-held systems to not be able to get online almost anywhere. I mean, look at the iPhone. There's also no reason that content providers can't keep your payment data on file, thus removing the requirement of transmitting any critical personal info, so security isn't a concern.

The reason digital distribution will take over is because all of these shortcomings that people bring up can get removed as technology improves. I mean, I read your story thinking... man, and digital delivery could have saved you the trip to GameStop entirely!

Lukasz Balicki

While that is true (let's make believe that there is a digital version of Scribblenauts on the DSi Shop and James had a DSi), if he wanted to download Scribblenauts he most likely wouldn't be able to download it from his workplace because of firewalls, and he would have to go somewhere with accessible broadband that won't block access to the DSi Shop. While something like this won't be a problem on the iPhone since you can access the 3G cellphone towers, I highly doubt someone like Nintendo would want to make their customers pay for access to a cellphone data tower.

Jon Lindemann

Indeed, digital distribution is still in its infancy; heck, it's barely in its "early adopter" phase right now. I think what you'll see is the model move to people buying "licenses" for games. That is, they buy a license to put a game on any medium they want. I understand that that's technically what people do now, but this will be more overt. Want to burn it to a disc? Cool. Put it on a USB stick? Sure. The games themselves will just be encrypted data, independent of any particular medium, but they will be tied to an ID of some sort.

Look at the Amazon Kindle E-Book. Amazon partnered with Sprint for content delivery, so you can download a digital book literally anywhere that you can get a Sprint signal in the U.S. The content delivery infrastructure is already there, and being used every day.

Mike Gamin

See Jon's Kindle comment. I guess my point to all of this is, don't damn the idea because of technology limitations. Damn the technology limitations themselves. Notice you didn't claim that the DSi's ridiculous storage limitations would keep James from downloading Scribblenauts. I can only assume that's because you concede that that problem should be fixed. No reason not to think the actual connection method can't be fixed too.

Lukasz Balicki

You also have to think, why would Nintendo want to pay Sprint or whomever a fee to access their cell towers, when the manufacturer can essentially do an about-face and stick the charge on their consumer via a monthly fee, or increase the price of the hardware?

If the device is digital-only, then retailers will want a bigger cut on the product they sell since they won't have any returning customer to purchase physical games, or content for their device, which unfortunately will raise the price of the hardware. While you place the blame on limitations within the technology itself, you have to realize that each company has a different strategy with their products and to who they are marketing them. Kindle is a very expensive product with a lot of bells and whistles in order to purchase virtual literature, while the DSi is a lot cheaper and has a different assortment of bells and whistles that plays both physical and digital media (and for the most part, has very different products available on the physical side and digital side).

While the DSi having small internal storage is true, how do you know how big Scribblenauts is in terms of file size? Physical DS games are measured in Megabits or Gigabits, not Megabytes or Gigabytes.

Pedro Hernandez

One of the things I've seen a lot happen is people freaking out over digital distribution taking over traditional shopping, and how they would "rather have something physical than a piece of data".

If you guys don't mind me bringing a different perspective on this, while I DO see digital distribution taking over, it is going to be YEARS before everyone has fully adapted to it. Transition takes time. There are still people who feel the need to own something physical, and think that the idea of owning a piece of data is too surreal. It's going to be a while until a great deal of the population accepts this, and thus traditional retailers will be around for a while.

I think what matters here the most is how people make the transition. Being abrupt about it will not help, since many still rely on physical media for their games and such. I think consumers should be given the choice of either owning the physical product or downloading the digital version. That way, people slowly fit into it without feeling freaked out about it, and the transition will be a very smooth one.

So long story short, while I do see digital distribution taking over traditional means of retail, it's going to be a while until it's set in stone.

Nick DiMola

While Digital Distribution is a logical step moving forward in the game industry, it is hardly in the benefit of the consumer. Convenience is the only obvious benefit players will get by purchasing

their titles digitally.

For convenience you sacrifice the entire second-hand market and all that comes with it. No more used game purchases, no more trading with friends, no more cheap games at the end of a generation. At this

current moment, using the PSPGo as an example, you also sacrifice packaging. Though the games no longer go through the distribution channel, you still pay the same amount and get less.

I have a hard time putting stock in providers not DRMing their systems, and giving me free use of what I technically own. Additionally, I don't feel that there will be adequate competition to

provide more reasonable prices.

A more consumer-friendly future is one with dual availability. Digital Distribution will offer the same game at a cheaper price while Brick and Mortar stores will offer the games in packaging, forcing players to pay for that packaging and the cost of running it through the distribution channel.

Jon Lindemann

I say let the market dictate itself. You can see what's happening with the slow death of CDs; consumers have spoken, and they don't care about packaging or physical media. I think over time we'll see the same thing with video games, once the appropriate price correction takes place (which has yet to happen). Remember when CDs used to be $20 each for 10 songs? Nowadays that price has come down to what consumers have dictated is reasonable to them: a dollar a song. This will happen with digitally-distributed games, but it will take a while to get there. Right now the digital services are getting that early adopter money while they can.

Nick DiMola

The market has also spoken that it absolutely loves to buy and sell used games (see GameStop Record Profits). While the path is obvious with music, I'm not sure the same applies to games.

I will agree that the market will dictate its own future, so only time will tell what people really value. While the packaging might not be important, the free use of the product clearly is.

Mike Gamin

I concede that the used game market is a definite sacrifice to the move to digital distribution, but I take issue with people claiming that they lose their freedom of use with a digital game. The fact is that you have no freedom of use with a traditional retail game (short of the already mentioned used game market). You can't play the game on other platforms. You are locked in.

As for the used game market, I think people are ignoring the only true competition in the game market today, and that's between publishers. That level of competition will still be there. Had this generation been digitally distributed, Nintendo would have still undercut the competition by ten bucks on all games. Retailers very rarely compete in any real way with new titles.

As for old titles, they will always compete with new titles. Right now, we see stores clear out inventory by lowering the price. In a digital distribution world there is no inventory so the games will always be available. However, newer games will always be competing with them. Publishers will be forced to lower the price because of the changing market. Just look at the Virtual Console now. Those games can't sell for the 30-70 bucks they sold for new, because they don't compete content-wise anymore. That same process would continue.

Lukasz Balicki

That's not entirely true, Mike. For example, if you grab Scribblenauts at Toys 'R' Us you get a $15 gift card, and I think if you buy Mario & Luigi 3 you get a $10 gift card. It doesn't always have to be a price difference; retailers can always throw in a voucher for the next time you buy something, or a gift card in order to entice more business.

Mike Gamin

Yeah, I concede that there are sometimes sales and offers now. But they are very rare. I see those just getting replaced by the great limited-time deals that Live Arcade and PSN offer on titles.

Lukasz Balicki

Right, but in closed systems such as Xbox Live and PSN you won't see a lot of offers, or you will see them very sparingly. Plus if you want to take advantage of Xbox Live deals you have to be a Gold Member, so it's essentially paying money just for the sake of saving money occasionally (assuming that you aren't taking advantage of the other benefits of Xbox Live Gold). Retailers always breed competition because they want your money and business, so they have to entice the consumer somehow to draw them in.

Andy Goergen

I sat in a car for 6 hours today reading these emails as they came in. As a result, now that I am finally out of a car, I don't have anything particularly unique or interesting to say that hasn't already been said.

What I will do is agree with Zach that I don't think things are going to change in the mainstream for quite awhile. Not the next generation of systems after PSWii60, and probably not even the generation after that. I think options will increase, not decrease. I don't see physical media going away in the next 10-15 years. Long term, I agree with Jon, things will change and they will probably change pretty drastically. However it took a long time after MP3s became available for them to replace CDs, and they still haven't entirely yet. CDs still take up shelf space in every Best Buy, Target, Wal Mart, and FYE on the planet. Apple popularized another option, but it hasn't eliminated the first option yet, and I don't think it will any time soon. I worked in a Sam Goody music store in 2001, and they still carried cassette tapes. This was long after cassette tapes became irrelevant. CDs aren't going anywhere just because there is a more popular option, and games will follow the same pattern IMO.

I think that it's very likely that when Nintendo announces the next hand-held, they will take a lot of cues from the iPhone, and a big part of that will be digital distribution. If this does happen, then we're going to see two completely different sales strategies butt heads - the $30 DS game vs. the $10 iPhone game. These two different price points are going to have to settle on a happy medium, because I don't think that Capcom is interested in selling a top-of-the-line DS title for $10.

The thing that the iPhone pricing seems to have taken into account is the one thing that everyone has been bitching about re: Xbox Games on Demand and (to a lesser extent) Steam - the fact that cutting out the packaging and shipping should reduce the price. Still, if EA could get away with charging $30 for a very good Tiger Woods game on iPhone, don't you think they would?

It'll be interesting to see these kinds of things hash themselves out over the next 10-15 years, and it all has to happen before digital replaces physical.

That's all for this week. Do you agree or disagree? Let us know in the forums!