DMN article on HL2, or why Kyle's wrong

[Torgo]

I read it the articles on my own and since Kyle brought it up on the front page, I might as well comment on it. Now, we agree on many things but there are times that we disagree. He's probably forgotten about the bet we made a year ago that there would be separate versions of games created and sold for nVidia and ATI chipsets (only a little less than a year to go on that bet). I have a feeling that this is another one.

So, what did Kyle say that I'm taking issue with? Here's everything he said in the article. There are some quotes that I think are flat out mistaken and others that I agree with:

• "Steam, as far as a concept, is awesome," said Kyle Bennett, the Plano-based editor-in-chief of technology enthusiast site Hard OCP.com. "I really do like the whole cutting out of the middleman. I like Valve getting all that money."
• "Those distribution companies will have the money to invest to make it work correctly," HardOCP's Mr. Bennett said, referring to the fact that the Steam servers were overwhelmed for several days after Half-Life 2 was released.
• Mr. Bennett said that the publishers will figure out eventually, though, that online distribution is a potential revenue source that can't be ignored. "You're not seeing major music, movies or games online, because they're so scared of the piracy problem," he said. "But I really believe if they gave me easier access, then I would be a lot more inclined to buy it if it was a trouble-free exchange."

Kyle, my friend, you're falling into the trap in thinking that online delivery is the best solution for getting me the games I like while giving the most profit to game developers. This is certainly not always the case. Online delivery works best with small development teams and smaller titles. The cost of online delivery is maximized in this situation with a small delivery package, better able to handle support issues and the cost of the infrastructure required. A great success story is Stardock which released several games online and also as a boxed version.

With AAA titles, the cost of doing it yourself will outstrip the potential profit that could have been realized with a large publisher. If Valve were to totally drop Vivendi as a publisher, they would have to have up front capital to develop games (usually provided by the publisher), invest in large amounts of infrastructure to handle delivery of 2 GB of content to every consumer, have their own support staff; essentially duplicating the duties of the already existing publisher.

Does all your money really go to Valve? After the ISPs and server lease people take their cut, yes a larger portion would go to Valve. Keep in mind, they also have to pay more internally. A larger question is the gamer getting a better value for their money? That can be measured in several ways, but one thing we do know is that it costs more to buy online than it does to purchase it at a retail store. I picked up my copy of HL2 for $35 bucks the first day it came out at Best Buy. (A pricematch was involved, but I was still able to get a discount). So why wasn't the supposed savings passed on to the consumer?

Let me skip to something that I do agree with. Distribution companies will figure out to get the system working. However, that will be the large publishing houses and not the developers who do it. Why? It's just more cost effective for two or three guys to come up with a good system for content delivery and everyone else just "rent" the usage of it. Cable and Satellite companies do it for video today. Same thing with telephony. The future of online game delivery will be like the movie industry does it today. A few large theater chains serving up entertainment, with a few "art houses" doing specialty flicks. Large publishers serving games with a few developers distributing their own content.

Last myth that Kyle is perpetuating is that piracy is preventing content from going online. That's a cover story used to protect the status quo. No, that isn't a foil hat on my head. There's a horde of union people that would be out of a job if the majority of content went online, not to mention the loss in the retail sector. People forget that it's really already here. For all intents and purposes, Amazon.com pulls this off by giving you what you want with next day-shipping.

With the music industry, they use piracy to justify their high prices on CDs. For television, they fear the loss of commericial advertising. The movie industry... well, I can't figure out why they're trying to use piracy as a whipping post. They still make money every year and make an absolute killing on DVD sales. To be honest, there just isn't enough bandwidth currently available to handle the online distribution of the visual medium. Content has always outpaced bandwidth by its size. It took me a friggin' hour to prepare my HL2 purchased copy for play because of Steam. Factoring in pre-loading, it took days to get HL2 to everyone's machines.

There are plenty of problems and issues surrounding online content delivery. It's getting there, but it's not ready for prime-time. I don't think that online content will be the primary way of getting games for a long time; at least ten years if then at all. The current system isn't perfect, but it has several advantages. You get a box, manual and a physical CD. It's almost always cheaper as well. That isn't to say that online-content delivery doesn't have it's place. It's perfect for some situations like demos or play-it-and-forget-it-when-you're-finished. I am saying that it is way overhyped and not as rosy as it would seem.

 

[M1ster_R0gers]

After reading everyones comments I believe there are a few points worth mentioning. As Far as online delivery is concerned, we have the test for that and even with the glitches it has proven effective. I agree that getting 5 GB worth of information is a hefty download, I can see ways to effectively improve this. As you mentioned there should be companies dedicated to broadband delivery. That would include high traffice servers located geographically around the world that would automatically mirror downloads. I am pretty much certain with all the steam mirrors this is being done, but it would be more cost effective to approach ISP's so it can become something that is done on a more local level.

Piracy in regards to online authentication has proven to be much more reliable. While 50 thousand people loaded up doom3 on bittorrent before the release we saw no "early releases" in the mainstream that allowed for the average PC gamer a way to get ahold of HL2 early. I understand there is a "cracked" version floating around but that made it to what I am guessing to be a small percentage of the overall persons playing the game.

Torgo, when you talk of distrobution costs to the consumer are you factoring in everything? That includes me getting out of my chair and going to the store. I consider that time and money wasted. One of the things I do not like about store shopping is seeing a game in a box that looks attractive, but having no idea of what the reviews are saying. With me shopping from home I can see if the reviews are matching up to my expectations to what and how the game fares to the professional writers.

Bandwidth is getting cheaper all of the time, as of now my brother is paying 42 dollars for nauticom DSL 3mb/768k sdsl, and the same goes for cable. Many ISP's now have unthrottled their client connections due to them overdesigning the infrastructures to local communities, which I look at as a good thing.

For time-delivery, lets take an example of the two week minimum it takes for a game that has "gone gold" to be in the hands of the consumers, and the communications to every retail outlet announcing when they can place the product on the store shelves. This breakdown was seen with doom3 and we saw the fiasco of what happens if as much as one store releases the game 3 days early affecting overall sales.

The physical retailers are going to push back against online delivery for the simple fact that the average PC joe who shops there will garner them 15 dollars profit for purchasing the game, and possibly 30 to 500 dollars profit buying new hardware to play the game with. This is unavoidable and unless compusa and bestbuy figure out that the best way this can be done is for the indivdual stores to download and burn multiple DVD's to give away for a small or no profit, they will lose people who purchase high end PC games. They have already started bending towards the PC enthusiast by becoming competitive with videocard pricing so they might chage their business plan thinking to compete in the online delivery field. This has yet to be considered and probably will not be until more titles are released in the same manner as HL2.

As far as support staffing goes, the cost of human resources is far less than a physical distrobution as long as things were done smartly, with automatic fail-safes included in the overall infrastructure design. Personally I work with a retailer that has both physical outlets and an online outlet, and the online outlet always has a better ROI than the physical stores.

 

[7718]

steam gave me a kewl hat Yippeee!

 

[Torgo]

Torgo, when you talk of distrobution costs to the consumer are you factoring in everything?

First, great response and thought out. Am I factoring in everything? The way I personally look at it is that if I'm going out to eat at lunch, I can stop in at Best Buy on the way and purchase my game of choice. I save $20 bucks (which pays for lunch), I get the fringe benefit of a physical copy (which I can sell later if I choose) and a printed manual (if included). Or I can purchase online and wait depending on file size to get the install files and then install it. To me, I'd rather purchase it in a retail store. The variable on convenience and cost is based on the value you place on it. I'll take the physical copy as a backup and the savings at the price register.

Bandwidth is getting cheaper all of the time...

That depends on the price you pay for the service for the amount of service you receive. My cable rates have gone up every year for my cable modem, and I'm actually having reduced service this year after the attbi.com domain goes away. Thanks for nothing Comcast. It all depends where you live. YMMV.

The physical retailers are going to push back against online delivery...this has yet to be considered and probably will not be until more titles are released in the same manner as HL2.

Sorry for the large snip here. Interesting points, but I'm not so sure that people in retail stores will like the "burn while you wait" concept. CompUSA here in Dallas has tried it, but I've always seen the kiosk sit idle. People just like the concept of having something physical to hold and read. It's a comfort factor that online delivery just can't do.

As far as support staffing goes, the cost of human resources is far less than a physical distrobution as long as things were done smartly, with automatic fail-safes included in the overall infrastructure design. Personally I work with a retailer that has both physical outlets and an online outlet, and the online outlet always has a better ROI than the physical stores.

Don't bet that farm on that last statement. Know how much it costs to make a complete game box from start to finish, including manuals? It's less than $3 a box. That includes labor, equipment and quality support. I'm being very generous with that figure. (I used to do consulting for a CD plant that did games.) No one really has the numbers for actual online distribution. I've seen studies all over the map. Some say there's great savings, others say you can lose money. Honestly, I think it's too early to say. I will agree that a two-pronged approach is the best way to go about it. You make everyone happy from a consumer standpoint. I think that Valve is going about it the wrong way about it, using themselves when they should be forcing Vivendi to offer it online and making them shoulder the burden. They're going to have too many conflicts of interest they way Steam currently works.

 

[theNoid]

I agree in some points.

Steam for one, as a concept is a Great idea. But as it stands, Steam is failing and IMO junk. Mainly because Valve is dragging the burden of having to ...

A. Develop the game
B. Support the game
C. Now develop AND support Steam.

Online delivery will no doubt be part of the future for sure. But it will be YEARS before it becomes the primary distribution system of choice, no question. Systems like Steam will be better created and supported by the existing publishers NOT the game developers.

I think Valve has good intentions and great ideas, however I think they need to leave distribution to the publishers and just stick with developing games.

In a nutshell, another vote here for future online distrubution (althought it will take years), but a BIG thumbs down on Steam, its Alpha at best

 

[MrWoot]

Don't bet that farm on that last statement. Know how much it costs to make a complete game box from start to finish, including manuals? It's less than $3 a box.

And while we're on the question of cost, $3 a box does sound very inexpensive, but multiply that by the millions of people that are going to purchase this game. that $3 price tag does make online distribution seem a little better in terms of getting more profit.

 

[M1ster_R0gers]

Honestly, I think it's too early to say. I will agree that a two-pronged approach is the best way to go about it. You make everyone happy from a consumer standpoint. I think that Valve is going about it the wrong way about it, using themselves when they should be forcing Vivendi to offer it online and making them shoulder the burden. They're going to have too many conflicts of interest they way Steam currently works.

You came across the main point of online vs hardcopy distribution. The conflicts involved between publisher and studio. I believe this is always going to be an issue, just as there is always a battle between artist and content provider in any sort of medium sales.

I wish I still had the email from the valve business manager (his name is escaping me) when he directly answered a few questions of mine regarding steam for use as business software delivery. Valve is more than happy to work with anyone wanting programs distributed, they give the steam SDK away for free and charge what he referred to as a "minimal" ammount for bandwidth and a resonable content distribution fee.

I have also conferred with Jeff Tunnel (from the defunct dynamix and now owner of garagegames) and he seems to be aligned the same way. I know through research that he and his associates broke away from vivendi soon after tribes2 was released, the details of that I am unsure of. If you go to their site you will see that they have been actively selling their independantly published games through online means also. As you can note, none of their games are anywhere near as large as a AAA title, so I can understand your reasoning around a limit as of now.

I have a belief that the companies with a passion for games other than a passion for money will win out. Online delivery allows for the developer to have a direct line with the consumer while cutting the fat out of game development.

 

[Torgo]

I have a belief that the companies with a passion for games other than a passion for money will win out. Online delivery allows for the developer to have a direct line with the consumer while cutting the fat out of game development.

It's that same belief and passion that is causing development houses to consume themselves though 80 hour work weeks, lack of quality management and little to no accountibility for success or failure. Valve is a prime example of how not to follow a game development schedule.

Believe me, there's more fat to be cut out on the developer end than on the publishing end. It really scales on larger projects. You'll notice more problems and issues on a Popcap title than you will on a Valve title.

Mr. Rogers, I think your heart is in the right place. If you have too much passion for a game, you overthink, overwork and overdevelop a title. Too much passion for money and you'll cut the game to the bone and release a title that lacks depth and meat. It take a balance, and I think that only the smaller publishers are getting it. Why? They are forced to manage the game budget down to a "t" while still trying to make an interesting title. These are your 10-man teams who might also have a few members working another full-time job. Contrast this with the large 80 to 120 person teams where the money trail gets lost quickly, management becomes muddled and everyone becomes burned out and looses their passion.

Yeah, this strayed from the topic somewhat, but I feel that they are tied together. Which companies are making online content delivery work for them? Small, tightly managed ones with niche audiences. The AAA games shooting for the mass market are going to fail.

 

[Torgo]

And while we're on the question of cost, $3 a box does sound very inexpensive, but multiply that by the millions of people that are going to purchase this game. that $3 price tag does make online distribution seem a little better in terms of getting more profit.

Until you factor in the cost of doing online distribution. Argh, I need to find that study that came out recently that broke down those costs of doing online business. It was interesting because at one point it illustrated how you began to compete against yourself.

 

[arentol]

So basically Kyle is saying the online content delivery is a potentially good deal because it can potentially put more money into the developers pocket, and that it has a ways to go before it's working they way it should be, and that publishers are having a hard time getting behind it for various reasons.

Meanwhile Torgo is basically saying the online content delivery is a potentially good deal because it can potentially put more money into the developers pocket, and that it has a ways to go before it's working they way it should be, and that publishers are having a hard time getting behind it for various reasons.

WTF?

Everything Torgo said was exactly what Kyle said, except with the benefit of a proper explanation because of the virtually unlimited space of a message board on which to write it.

I think Torgo may have taken Kyles quotes to be more positive than they really were because of their context in the article in which they were placed.

 

[M1ster_R0gers]

Until you factor in the cost of doing online distribution. Argh, I need to find that study that came out recently that broke down those costs of doing online business. It was interesting because at one point it illustrated how you began to compete against yourself.

please do find that. Its not that I do not believe you, I believe the cost of bandwidth is continually going down, and the cost of equipment is definitely cheaper than personel. I have worked in this field for a while and have handled international software distribution, and the cost associated with that is definitely different than the costs presented here. Then again we were handling 50 thousand packages a year and not a half-million. I would also like to see the cost difference between selling a 100MB program and a 5GB program for online distribution.

 

[Stiler]

umm....


Valve DID fund half life 2. They took most of the profits from HL1 and rolled it into HL2, Gabe himself even said if he needed to he'd dip into his own pocket (he did work at microsoft you know?)

I would love to see companies have the sole right if they choose to have a nice secure online distrubtion to sell their games within having to use a publisher.

Many smaller comapnies have been doing this already, (like the combat mission dev's).

The problem is that if they could all band together and form a more logical front for it all, so it would allow people to easily browse and learn about all the games offered and who makes them, etc.

Another thing that would be helpful, is having the choice of d/ling the game or getting a cd in the mail.

I know If I had the choice to go to a store and pay retail, where the publisher gets almost all the money and the dev's get a small cut, or order it online and get a cd or d/l it and the publishers get a much bigger cut , i'd choose the ladder.

However some other problems arise.

Some people think publishers "only" handle retail releasing a game, as in making the cds/boxes and sending them to stores, this isn't true.

The publishers also handle things like the advertising for a game, putting it out there in magazines and promitions, etc. Some are good, some are bad at it.

 

[S1nF1xx]

Let's use one million sales.

$3 x 1,000,000 = $3,000,000 which is the cost of boxing a game.
Plus, how much are you selling the game to the store outlets? Probably less than you could sell it for online, they have to make a profit too.

Let's say $10 per copy, so now we're at a total of $13,000,000 more that it would cost to sell it in the store.

On the flip-side. Let's say each download via steam is 2GB, that is 2,000,000GB or 2 petabytes. How much would that bandwidth cost you? A whole freakin' lot. But I'm sure it wouldn't cost you $13 million.

I'd imagine they can save a great deal doing online distribution.

<warning>
None of my figures are accurate, I'm just speculating for the fun of it.

 

[Torgo]

I can't find that darn report. I'm going to pull a few strings and see if I can't get some numbers from my game development lists or get something from Greg Costikyan. He'll have it for sure.