Analyst Predicts Video Games Going 100% Digital by 2022

Having the option to choose between physical and digital games these days is pretty convenient for [...]


Having the option to choose between physical and digital games these days is pretty convenient for a lot of players. But a pair of analysts believe we'll see a huge change in this market in just over a few years' time.

A report from Piper Jaffray, provided by analysts Michael J. Olson and Yung Kim, suggests that the video game market will change entirely to digital by the time 2022 rolls around.

The report indicates that the physical gaming market is shrinking roughly 10 points per year and we've seen some indications that this is affecting retailers. This includes Gamestop, who are currently looking for a buyout offer.

"We believe it is a certainty that video games will be 100 percent digital in the coming years, and while exact timing is hard to pinpoint, we think 2022 is a realistic expectation," the analysts state.

Another interesting note in the report is how an all-digital video game industry will affect publishers as the analysts believe margins will be "dramatically" higher. You can see this breakdown in the statistics below, which look at revenue for the next few years increasing for Activision, EA and Take-Two Interactive.

Digital 2
(Photo: Piper Jaffray)

It also states that a movement towards subscription and streaming-based models could lead to a "higher recurring revenue mix" for publishers. Microsoft has been pushing such a model with its Game Pass program and has also expressed interest in creating a streaming service.

"Our expectation is that major publishers will increasingly test and commercially develop streaming game offerings over the next 3-5 years. Streaming games from the cloud, without need for dedicated hardware or massive downloads, would materially grow the TAM (total addressable market) for high end console-style titles. Specifically, today the primary market for major video game publishers is tied to consumers that own an Xbox One, PS4 or gaming PC, which currently has an installed base of 150-250M (depending on how gaming PC is defined) and a minimum price point of $199 (Xbox One S), which creates a barrier to entry for many would-be gamers. With ongoing datacenter build-outs and improving internet speeds, streaming games from the cloud could be a commercial reality within 2-3 years."

In conclusion, the report says that publishers aren't too thrilled with the idea of a subscription based model but are keen on the possibilities with streaming services. That said, not all of these services are successful. PlayStation Now does have a fairly strong audience but not as overwhelmingly popular as Xbox's Game Pass, which goes for a much lower price.

This is an interesting read to say the least. And it leaves us wondering if physical games will in fact go the way of the dodo. Sure, digital is convenient but a lot of gamers believe in the value of having a physical copy of a game that they can hold in their hand.

Do you think physical gaming is on its way out?