Despite the current market slump and the rise of digital downloads, distribution remains the lifeblood of the games industry.
Without suppliers, the route from product manufacturer to retail is blocked, and High Street stores are still vital to the video game consumer. But with VAT now at 20 per cent and retail space limited, the need for distributors to go the extra mile is greater than ever.
Fortunately, many are already embracing new ideas and avenues that live up to our industry’s strong creative nature.
Koch is one such company. It entered the film distribution market last year to expand its reach, as well as continuing to offer its game sales, marketing and logistics services. It also has its own game publishing arm – Deep Silver – and accessories brand Blue Ocean.
“The market now requires so much more than physical pick, pack and ship,” says Koch Media’s MD Craig McNicol.
“We have waved goodbye to the endless flow of cheap casual product, and have instead had to consider how retail can interface with digital so all parties maximise.”
But Koch isn’t the only distributor that also publishes games and dabbles with DVDs – Creative Distribution embraced the publishing market last year with debut release Real Heroes Firefighter on Wii. It also aims to expand its DVD and Blu-ray range this year.
“By dipping our toes into the publishing world it gives us a much greater insight into what we could expect moving on,” Creative’s commercial director Craig Lewis tells MCV.
One distributor – Bright Red Entertainment – has picked up several big retail deals this year after trialling game display units in non-traditional outlets such as petrol stations, and garden centres.
The focus on specialist areas is increasing, too. Realtime Distribution is seeing a big demand for its high-end console accessories such as the Razer Xbox 360 controllers, while distributors like AntiGrav, Meroncourt and Impact Global Solutions continue to offer core peripherals and licensed products.
But perhaps the biggest news to hit the distribution sector this year is the fact that Sony DADC has introduced a primary distribution service, providing publishers and developers with an all-in-one offering; It’s already well-known for disc replication.
The firm is billing itself as a rival to triple-A game distributors such as Centresoft, Koch Gem and Advantage. It is discussing direct-to-consumer deliveries on behalf of stores who run low on stock.
“We’re the only service company which offers both in-house media replication and physical distribution based in the UK,” says Sony DADC’s general manager Darren Houghton.
The firm even has plans to distribute games digitally.
That online game download market shows no signs of slowing down, with services such as Steam, Direct2Drive, Green Man Gaming and more offering direct-to-consumer games and codes.
But should physical product distributors be concerned of these business models or embrace the digital aspect?
“There will be an ongoing shift to digital distribution, but I believe there is still a place for the high street, similar to how music has gone and film and books are shifting at the moment,” Interactive Ideas’ marketing manager Andrew Miles tells MCV.
“We haven’t seen any negative impact in our business so far and our sales of physical software and peripherals are up year-on-year.”
Koch’s McNicol adds: “I see the High Street and digital distribtion as symbiotic in may ways, however it cannot be ignored that the casual market has moved to iOS.”
Creative Distribution is confident there will always be a place for box product – especially console games.
“Digital is certainly more prominent than it was a year ago, but boxed product is still selling very well,” Lewis tells MCV.
“I think the PC market has seen the strongest shift, whereas console has not yet been massively effected. We have seen no dramatic changes in trend.”
Others believe distributors can’t change what is happening, just adapt.
“We are a reactive company and hence must be able to maintain quality service and an improving range of titles at the right prices,” says USD’s director Dave Cotton.
“DLC is a phenomenon we have no control over. We can however ensure all our boxed product customers are happy enough with the service we offer to repeat buy.”
The bigger boxing ring
Since the demise of distribution giant EUK two years ago, the market has seen more distributors enter the ring, opening opportunities for new services. However, some believe price cuts and the amount of emerging firms should be monitored.
“It would be nice to put a ban on prices being slashed at all levels of distribution through to retail,” says David Jones of Keyne’s export sales.
“And also a ban companies offering ridiculously low prices, not being able to keep their heads above water and going under after taking companies’ money, just to resurface down the line with a different name.”
The market is also changing in other ways. With sales of the Wii slower of late, there is less demand for budget Wii accessories and games due to their sheer quantity, making space for more premium quality products.
AntiGrav’s Robert Orchard adds: “The Wii delivered huge growth for the sector but was also responsible for the resultant flood of ‘throw away’ white plastic accessories.
“As the next generation of consoles take the lead, we have to ensure that products we offer reflect the change in market and the more savvy gamer who is more focused on quality as opposed to the often gimmick-led offerings.”
And it’s this kind of clever, reactive decision-making that the distribution sector has to embrace to ensure it remains the lifeblood of the industry for years to come.
Open vs exclusive
The debate over exclusive distribution deals and the open model continues, with the latter allowing multiple firms to distribute the same product. We asked for distributors’ views on the matter.
Darren Houghton, Gem
“We work very hard for our exclusive partners, investing heavily to make sure that product launches are as successful as possible. Exclusive distribution has also allowed us to put in place street date agreements with our customers that have helped level the playing field for all concerned. Other benefits include a single point of contact for our customers, enhanced marketing programmes to support releases and our Xbox Portal for indies which offers exclusives, competitions, bundles and promotions.”
Paul Williams, Ideal Software
“Open distribution is the only way forward and the recession will make the publishers explore this avenue’s potential even more.”
Steve Walsh, Meroncourt
“I prefer exclusive distribution where possible as it prevents reductions in price just to win business – hence the erosion of margin and, in many cases, customer service.”
David Jones, Keyne Distribution
“Keyne support open distribution. We find customers like to have a choice when they buy their stock, especially when some of the other official companies have such high prices.”
Mark Williams, Bright Red
“I can see the pros and cons for both options. However, in the current economic climate a smaller publisher may suffer if they are exclusive with a distributor who also has larger exclusive deals in place, as credit limits are quickly used up. All medium and small-sized publishers would benefit from an open distribution model thus leaving all routes to market open to them.”
With independent game retailers feeling the heat from lower prices at bigger national chains and supermarkets, MCV asked distributors what they’re doing to help the independents.
Chris Malone, Impact Global Solutions
“Third party accessories have a much higher margin. We’ve seen more interest in licensed merchandise which make impulse purchases and have good retail price points. This creates an increase to the retailer’s revenue stream. An indie will make more money on a £10 plush toy than a game at £39.”
Adam Harris, A Game Distribution
“We have introduced several deals exclusively for independent retailers. Our ‘Day Three Delivery’ pricing offers a better price on triple-A titles delivered on the third day after release. This month we offered ‘Complete A Game’ where the final game in any carton is free. For example, buy 14 PS3 games and get the 15th free. This is all part of our commitment to providing extra value to the independent market.”
Craig Lewis, Creative Distribution
“There are many additional products that retailers can sell in keeping with the video gaming genre. This allows retailers to maximise their potential earnings. Our video game-themed T-shirts which we started selling last month. These have proven to be a great seller and an additional stream of income.”
Richard Marsden, Realtime Distribution
“The market is changing and independent games retailers need to find new and innovative ways of engaging with their audience to ensure repeat custom. This can be done with new products that will appeal to both a gaming and lifestyle audience. One such product is TwistDock, an elegant PS3 stand, charger and advanced cable management system. This facilitates the customer’s experience and tidies their living room.”