Narration: Nearly seven years after it was launched all the way back in 2003 as a way for iPod owners to buy music legally for their devices, Apple's iTunes service remains the biggest digital music store in the world, selling millions of songs and albums each day. However, the biggest money maker for iTunes isn't its extensive song library: it's actually its video game service, which delivers digital content to Apple's video game consoles and Macintosh computers. The iTunes store has a storefront exclusively for games, and business is booming: on average, Apple sells over $10 billion worth of digital games annually on its service, and that segment of Apple's business has seen a sales increase every single year since its introduction. iTunes does 44 percent of its digital content sales in games, 41 percent in music, and 15 percent in movies, and all three segments are steadily growing. iTunes benefits from an extensive library of current video games, as well as classic titles from both Sega and other companies, including companies like Capcom and Konami. While far from a one-stop shop for video games, since the iTunes service doesn't carry titles from rival companies such as Nintendo and Microsoft, it offers over ten thousand titles on its service, a library that grows every week. Reggie Fils-Aime, the head of Apple's gaming division, says that a major goal of the company has been to add new classic content every single week, in addition to a steady lineup of newer games. More than half of the original Sega Genesis library is now available for download on users' iTwin consoles, iPod music players, and iPhone devices, while classic systems like the Sega Saturn and Sega Game Gear also have significant fractions of their libraries, including most of the top selling games on those platforms, available for purchase.
Reggie Fils-Aime: We want to deliver content to our customers so that they have an incentive to purchase games legally. It's the same as it is for music, back when iTunes was launched, the only way a lot of people would be able to download digital content would be through piracy services, and the people working so hard to make those songs weren't getting paid. And then Apple and Steve Jobs came along and said, "hey, there's a better way, and everyone can get paid", and that's how iTunes was born. And we're always listening to our customers, if there's an old game that hasn't been available for a while, and there's enough demand for it and we can make a deal with the company, then that game will show up on iTunes.
*Fils-Aime is shown scrolling through the iTunes video game marketplace on an iPhone.*
Fils-Aime: There's so many games here. You could never possibly play all of them.
Narration: It's that sheer volume of available content that's elevated the iTunes Store far above its contemporaries. Nintendo's online digital store offers only a few hundred classic titles on its service, though most modern Nintendo games are available for download to their current Sapphire and Supernova systems. Microsoft's storefront offers up classic PC games and current Xbox titles, giving it a slightly larger library than Nintendo's, but one that pales in comparison to Apple's huge collection. PC owners, however, have the Steam Store, the brainchild of Gabe Newell, founder of the gaming software company Valve. Valve was once known for its popular Half-Life series of first person shooter games, but in 2003 started the Steam service as an easier method of online game distribution. The company has surged forward to become the leading seller of PC gaming content, even fending off a hostile takeover effort in 2007 by Microsoft, which failed after that company experienced a downturn in sales. Though Steam sells games on both the PC and Macintosh platforms, its greatest success has come on the PC, with Apple's iTunes store having a slight majority of Macintosh gaming market share.
-from a February 1, 2010 report on CNN
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Meanwhile, brick-and-mortar chains like Gamestop are still doing well, even in the age of the digital marketplace. Indeed, the prevalence of digital gaming sales has generated a bit of an arms race, with Gamestop pushing used sales and digital stores offering incentives to get gamers to buy new at a slightly higher price.
"We offer increased rewards for used sales, and we're also using pre-order bonuses for those who choose to buy new," said one Gamestop regional manager we talked to, who says that physical bonuses are the most enticing rewards for buyers, and that exclusive digital content hasn't caught on as well as Gamestop and some of the gaming companies like Ubisoft and Activision would have liked. "Call Of Duty fans aren't pre-ordering the game for special skins or costumes, but if we offer something like a half-priced strategy guide or a t-shirt, that tends to generate more pre-orders."
Apparel bonuses have proved popular. Gamestop offered up a physical replica of Alex's hat for pre-orders of the original Thrillseekers, and for Thrillseekers 2, people who pre-ordered the game got Emma's punk inspired t-shirt. Some stores have gone so far as to offer media bonuses: For Fullmetal Alchemist 2, Best Buy offered up the game's entire soundtrack on a three-disc set, though those were limited to the first 50 pre-orders per store. For pre-orders of Squad Four Protectors, Nintendo and Target partnered up to give away a special Sapphire disc with the original Squad Four and Squad Four Eclipse, those discs are now fetching upwards of 50 dollars on Ebay.
Digital storefronts are also choosing to go with the carrot rather than the stick when it comes to buying games, with Apple's iTunes store frequently offering up $5 or $10 credits to purchasers of new games, so for example, someone buying the latest iTwin game might get a $10 coupon that can be used to buy an album for their iPod or iPhone. This approach has helped the iTunes Store become the most popular digital gaming storefront, and has made full-priced digital titles viable when one can simply choose to go to Gamestop and get the same title physically for $5 less used.
These efforts to offer up more value for consumers during continued tough economic times are helping to keep the video game industry strong, but will these bonuses and special offers stick around once times improve and once some of the bigger companies begin to clear out some of their competition? Only time will tell, but for the moment, a savvy gamer willing to shop around is likely to get a little something extra with the purchase of the latest big games.
-from a February 21, 2010 article on Games Over Matter
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Walmart, Feeling Pressure From Competitors, Begins "Aggressive Pricing Strategy" For New Video Games
You might have an easier time finding a deal on a new video game at Walmart, if an internal memo from the company proves accurate. Walmart has long avoided so-called "sale pricing" on video games, frequently selling most newer titles at full price long after competitors have slashed prices on the most recent games. Now, feeling pressure from companies such as Kmart, which has begun offering deep cuts on certain games and bonus incentives to frequent customers to purchase certain titles, Walmart will begin a new pricing strategy on certain video games, offering up games at discounts more often, with price cuts on certain games designed to beat some of its competitors to the punch. The company takes great pride in its "everyday low price" strategy, avoiding temporary sales in lieu of offering lower prices on most of its items 24-7. It has avoided using items like video games as "loss leaders" in order to get people into its stores, and instead, chooses to sell those games at full retail price until finally cutting the prices permanently once that item's MSRP has been reduced by the company. Now, over the next few months, the company will introduce a strategy in which it will permanently cut the prices of some of its new games just weeks after that game is released, offering those games up at $49.96 or $39.96 and keeping them at those prices indefinitely. The aggressive pricing will be accompanied by an ad campaign specifically geared toward gamers that will be rolling out in the spring of 2010.
Walmart, which remains the world's top retailer, has seen slightly reduced sales growth in recent quarters, owing to the economic recession, the rise of digital marketplaces like Amazon, and aggressive pricing by competitors including Target and Kmart. Though the company's overall growth profile remains strong, stock prices have dipped and there are some indicators of a corporate restructuring on the horizon.
-from an article on Gamespot.com, posted on March 12, 2010
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"According to the report, rumors of a potential acquisition of Valve by Google are not accurate, and overstate the financial strength of Google while underestimating the value of the Steam service. However, there is a desire on the part of both companies to work together on certain projects in the near future, and this could be related to either the Android service or a potential new piece of hardware from Google, possibly a miniaturized PC to play Steam games. The companies have definitely been talking, and the talks are much more friendly than the talks between Microsoft and Valve ever were, even when the companies were cooperating to bring exclusive games to the Xbox 2. There's a shared culture between them, a shared taste for innovation.
Whatever it is, they're working on something. Maybe it's Half-Life 3?"
-from a rumor column on a Valve gaming forum, posted on March 18, 2010