PC gaming in the retail space isn't so hot right now but on the digital side it's a whole other story. Digital is booming on both console and PC and part of the growth on PCs is thanks to premium digital services like Steam, GamersGate, Direct2Drive and others. IndustryGamers can exclusively reveal that GamersGate saw its holiday sales surge 72% and its top three weeks were Thanksgiving week along with the weeks before and after Christmas.
GamersGate told us that it sold 65% of its catalog (now up to 2500 games), and the company's best selling titles were in the price range of $15 to $25. Also, it's interesting to note that less than 10 publishers represented 80% of the holiday revenues. IndustryGamers chatted with GamersGate CEO Theo Bergquist, who didn't hold back any punches when it comes to the competition.
IndustryGamers: When most gamers think of digital distribution, they probably think of Steam. With holiday sales up 72% for GamersGate, you've had some momentum. How do you feel you stack up with Valve's service? Do you have a market share break down?
Theo: Yes, we really feel that momentum. The overall number of customers increases every day and some of our major partners’ sales were up between 120-150% for the year.
To be honest, we’re not afraid of Steam. We think they are peaking now while the marketis still very hardcore. In fact, we know from the feedback we receive from customers, one of the reasons we have such great growth is because many gamers out there don’t likeSteam and see Gamersgate as a better alternative. Once digital sales are superior to physical sales, we believe Steam will have a harder time remaining #1. We’ve led the way with many things like weekend offers, promotion programs, holiday sales, and more and they’ve followed. We believe our focus on premium customer support, a client-free experience, a robust reward program, and a DRM-friendly policy will appeal to the masses once they decide to go digital.
We don’t have any market breakdown of the overall numbers. Some people say Steam has 50% of the market, some say 80%, but we don’t know. What we do know is that Steam’s marketshare will shrink in the future and thatGamersGate is well positioned as one of the digital distrubtion platforms that has strong momentum to gain marketshare.
IG: Do you think digital purchases are a more attractive purchase option for many gamers in the continuing bad economy?
Theo: Good question. Despite the bad economy, we haven’t seen a decline in sales. It’s almost the opposite. I don’t think the bad economy has had a great influence on entertainment products of our type. However, I think some of our competitors in the industry have experienced a little bit of a tough time. GamersGate works hard to provide the best offers and discounts to our customers, and I think many gamers appreciate our hard efforts to provide them with good games at good prices.
IG: What has GamersGate done over the last year to better position itself in the digital marketplace and to attract more customers?
Theo: When we analyze our numbers, we see two things. First is our loyalty program. After launching our loyalty program, the repurchase ratio went up 25%. Once we attract a customer, he or she keeps shopping at GamersGate – we believe this is in large part due to our loyalty program. Second, we refer to the size of the catalogue. GamersGate is the world’s largest digital store with more than 2600 titles, and we can see how attractive that is to many gamers out there. We try to add as many titles as we can and from what we can see, gamers really appreciate that.
IG: What do you think the concentration of just 10 publishers controlling 80% of revenues means for the digital industry? Can you provide a list of the top 10 publishers while you're at it?
Theo: We don’t reveal lists with publishers. The only thing we can say is that the ”big ones” keep growing in numbers faster than the small ones. From what we can see, approximately 3% of the games represent 50% of the revenue in Q4. The rest is a long tail effect. AAA matters, but so does the long tail. A large catalogue including AAA games is the best formula for a digital download portal and that’s also why I’m so confident about our future. Many competitors, including Steam, often say no to nice indie developed titles and we see no good reason for that. Indie developed games are fantasic and we do as much as we can to promote them. It’s part of our manifesto!
IG: The debate about if and when digital effectively replaces retail continues to rage among executives and pundits. What are your thoughts?
Theo: It’s a debate for sure. You should never underestimate the importance of the physical store. At the same time, the market is moving faster now. Some of our partners tell us that in only a year their revenues from digital downloads have moved from 10-20% of their revenue to over 50-80%. I think 2011 will be a tipping point for digital downloads in which they should really take off. Digital distribution is no longer a business development project for publishers; it’s an integral part of the sales organization. They look at the greater revenue split they can get from digital as compared to physical, and it’s easy math to decide that they should focus on digital.
IG: What are the biggest challenges and opportunities in the digital distribution market going forward?
Theo: To be honest, I don’t see so many challenges. The opportunities are huge. We are still waiting for the large masses to go online and download games, and once they do, it’s going to take off. Customers are used to buying things online now, including downloadable content. I think the only major challenge out there is to build a service that is better than torrent sites so that potential pirates realize the benefits of paying for a game. Luckily for us, gaming publishers are much more open to digital distribution than the music and film industry. Perhaps, it’s because it has spun out from the tech community.
IG: What are GamersGate's top goals for 2011?
Theo: To continue serving gamers with good games at good prices. Anytime, Anywhere. Also, we’re planning to release some really cool stuff which I can’t tell you about just yet. Stay tuned for more info soon!
IG: Thanks for your time Theo.
