The future of games - cheap and online

THE FUTURE: A scene from the online PS3 game Siren: Blood Curse. Game publishers are flocking to the internet to distribute their wares.

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Games publishers enjoyed record-breaking sales in 2008, but as the recession bites they are looking to new revenue streams via online networks.

Digital distribution of games online has many advantages over disc-based product for games publishers. Online games do not suffer as much from piracy, cannot be resold second-hand, there are no retail margins or manufacturing expenses, and lower distribution costs.

Consumers should benefit from lower prices and a bigger range of products than typically found on retail store shelves. There is also growing evidence that digital distribution services encourage innovation and risk-taking from games developers while enabling a greater diversity of software and price points.

Recent gems like Braid, Flower, Lost Winds, World of Goo, Peggle, Everyday Shooter, Bookworm Adventures and Pixel Junk Monsters would never have found their way onto retail store shelves, but are now thrilling worldwide audiences thanks to download services like the online PC network Steam, Xbox Live Arcade Marketplace, Wii Shop and the PlayStation Network Store.

Many people in the games industry have been concerned that as development budgets soar, publishers are becoming increasingly reluctant to experiment with unproven concepts, leaving innovation to emerging or independent creators at the fringes of the industry.

But digital download services are allowing developers of all sizes to make money on experimental and novel games that would never have been released through traditional retail methods. Their success is reminding risk-averse publishers that consumers value innovation and don't just want big-budget sequels of popular franchises.

Publishers are also starting to enjoy significant revenue from selling additional content directly to gamers, such as new maps for games like Halo, new songs for music games like Guitar Hero and SingStar, and even new story-based missions for titles like Grand Theft Auto IV.

Australian internet service providers are also finally coming to the party by offering unlimited downloads, such as iiNet's recent decision to add Xbox Live downloads to its unmetered content and Telstra Bigpond hosting Steam content.

But while Nintendo, Sony and Microsoft each operate robust online stores with rapidly growing catalogues, not to mention the countless PC gaming portals, it is still early days for digital distribution.

Screen Digest figures show that only 1 per cent of the worldwide console software market in 2008 was downloads, although PC internet connections are ubiquitous and about 50 per cent of PS3 and Xbox 360 consoles are now connected online.

Sony is trying to bolster its download revenue by offering avant-garde games such as Flower, Echochrome, Noby Noby Boy and Rag Doll Kung Fu on its PlayStation Network alongside much larger games that have traditionally been disc-based products, such as Wipeout HD, Gran Turismo 5: Prologue, Warhawk, Ratchet and Clank: Quest for Booty and Siren: Blood Curse.

While Sony's free online network for PlayStation 3 is still widely regarded as inferior to the subscription-based Xbox Live service, Sony has been the most aggressive of the three console manufacturers in experimenting with full game downloads.

Sony also allows PlayStation Portable owners to download games to their handheld via PC or PS3.

Nintendo is also experimenting with digital distribution for its new DSi handheld.