The Sad State of Digital Software Distribution

In this era of pervasive broadband, I'm constantly surprised how often I am forced to buy a physical CD or DVD to obtain the software I want. Physical distribution methods have their place, but they should be on the decline by now. Software is best distributed digitally through our high-speed internet connections-- using BitTorrent if necessary.

This is a companion discussion topic for the original blog entry at:

I recently had the option of buying the Orange box from steam or from the retail shop. In the end I decide to go with the retail hard copy version.

  1. Quicker to buy than download

  2. Didn’t consume part of my download limit (5Gb out of 20GB) - paying for shipping here I guess (THIS WAS A BIG ONE FOR ME)

  3. Plus i felt secure knowing i had a hard copy - lame i know, but if my pc died ect . .

Bravo. claps


Digital distribution and Steam in particular is making good money for Valve, and created a great way for independent authors to make money. However, Valve’s (and other large developers’) own sales likely still have a significant retail component. In the age of digital distribution, here’s the deal you’re proposing:

  1. Developer offers retailers a product for 45 dollars wholesale, or whatever the price.
  2. Retailers buy the game, stock it on their shelves.
  3. Developer offers the product to consumers directly for 40 dollars, undercutting the retailer’s wholesale price.
  1. Retailer winds up with a lot of unsold stock.

It’s great for consumers who get somewhere between 5 and 15 dollars off. Yet retailers, forward thinking businessmen they are, dislike the entire concept, and will put an effort into killing it off or delaying it as long as possible. So rather than just buy significantly less of the product, they use their order as a bargaining chip and extract concessions from developers, who are often cajoled to accept by the publisher, if the decision isn’t already up to the publisher. These concessions are basically price guarantees or stock recovery programs.

Nobody undercuts retailers out of fear of losing their substantial business.

With every download at retail prices, you’re effectively paying vendors five times as much for the same software, and that’s a huge ripoff.

Looking at it the other way round - the software developers are getting ripped-off by the middle men everytime they sell a box retail.

Also good to consider is supporting the author and publisher. I’d rather the game’s creators get the most of my money, rather than EB games or Best Buy. The more money the publisher makes, the more likely you are to see a sequel, updates, etc.

Heh, I thought it was bad when I saw the prices for some software were the same, but downloads being priced higher than the box set? Holy crap. There’s not even the excuse that they have to rid themselves of older inventory.

This problem also seems to manifest itself in the world of ebooks as well. On release they are the same price if not more than their hardcover counterparts. Later they become much cheaper, but are still the same price, or more, than buying a softcover version.

For many of us who are located elsewhere, the exchange rates discount the digital downloads quite significantly, and the lack of shops that ship out of North America makes purchasing boxed copies infeasible.
What I have heard is that publishers are afraid of cutting out BM stores from their distribution chain entirely, and fear that making digital distribution too good will cause retailers not to carry their product. Until a large enough proportion of the population purchases online, the BMs will still have the balance of power for anything but smaller products.

I have to say, my experience with digital distribution has been the exact opposite of what you describe. Living in Australia, game prices are stupidly high and it costs me about half as much to buy through Steam as in a store. For example, the Orange Box sells for AU$100 in stores, but I purchased it through steam for about AU$55. But that may not be as much an advantage of digital distribution as it is the current exchange rate…

The only advantage of digital distribution is maybe time. If you have a good internet connection, you’ll have the game in few hours, maybe less. However, if your ISP does limit your badwith, then you don’t want to be paying more to download a full DVD. Plus, you don’t get a nice box, paper manual, and you have to stock it on yout own hard-drive, at your own expense!

I will always go for box model as long as there aren’t at LEAST 20% discount on digital copies.

Looks to me like something called “channel conflict”: the people who decide how to distribute have decided to encourage retail sales at the expense of online sales. This could be because they feel they need as much support as possible from retailers like Wal-Mart and hole-in-the-wall places like “Joe’s Code Shack” so they don’t want to do anything that would undercut them (a little mom-n-pop operation would get really mad if the company offered a big discount on their website). Or it could be a form of price discrimination ( ), we all know the people on the Internet are rich, after all. Or it could just be that they will charge full price as long as people pay it.

Regardless, it’s a backwards and half-baked strategy.

Broadband is not pervasive. In the UK things are still rather poor, and in other parts of the world they are worse. I object when programs insist on connecting to the internet for information when they don’t need to. I particularly object when this is for help topics in Vista, on a laptop. (After all, Unix has had a decent set of documentation distributed with it since at least the 1980s.) The whole point of a laptop is that you can use it anywhere, in particular, in places with no network at all.

Jeff, i was thinking about the same thing yesterday when i wanted to buy a book from Amazon. I could not buy it as a PDF. Today it is all about the feedback. So if i can’t have the book now, i do not want it.

As already mentioned, I think currency conversion rorts on physical boxes for those of us who don’t live in the US are far worse. It does not cost $40+ to ship a DVD-sized case to Australia, yet that, apparently, is the markup charged for it.

And that’s without going into the unnatural delays on actually making products available over here. Movies, games, etcetera. I absolutely refuse to believe that a major publisher can’t make enough copies of a DVD to ship some out of the country by the release date.

And then there’s the major delays on new movies in the cinemas. Major box office hits frequently come out weeks after they open in the US. TV shows can take months. WTF?

sigh Rant out.

Could it be suggested that software developers are concerned over piracy when using digital distribution? I get the impression some publishers would prefer the BM route due to fear of finding the ISO of their product all over the web 24 hours after going gold. Despite the complete irrationality in this fear, do you think that perhaps it has a factor? I certainly think so.

Jeff, you need to look at this from a broader perspective, or to be more precise - worldwide. In Croatia, Europe: Titan Quest BOX costs 68 US$, and the addon Immortal Throne is 50 US$.

Purchasing the game from Steam directly saves me 88 US$ !!!

Regarding the “charge what the market will bear” arguments … you have too simplistic a view of the market.

Digital downloads are great for the publisher. They WANT you to download from them. In fact, if they could put Best Buy out of business tomorrow and never again have to worry about their concerns, they would.

There is a certain value per digital download on the publisher’s part. It’s not equal to the extra profit they’d get there versus shipping hard product. It’s also not zero. It’s between those two. You have to also take into account market sculpting (in a new market, if you set your profits razor-thin you are shooting yourself in the foot for the next decade; you price high so you can periodically reduce prices) which pressures the price back up, hidden utility (the disc buyer can resell the product six months later; if he buys a digital download the would-be buyer in six months instead pays YOU) which pressures the price back down, and existing channel splintering which pressures the price back up.

All in all, the one thing that can be said is that when you tally the factors up for the average publisher, they end up with no substantial incentive to foster a download market. So, they sign the afore-mentioned distribution deals which instead give them a slightly better profit margin from the brick-and-mortar channel.

All that having been said, there is a significant factor - by far the largest in the above calculation - which is at play right now. How much do publishers gain from a non-fractured physical distribution market? As broadband becomes more pervasive, smaller publishers will start finding that they gain little or nothing from the retail channel which is already for the most part snubbing them. The threshold of the size of publisher who falls into that camp is increasing. I don’t know if we’ll see it plateau, or if we’ll see it climb until there is no more retail distribution. Still, right now, today, it is moving.

Physical media also have a resale value - sell the item on eBay or trade it in at your local game store for credit, for example. I’m guessing you can’t do that with downloaded games.

I cant remember what software it was, but not to long ago I purchesed a software online that allowed a download, and then also shipped out the box at retail price(I paid retail for both a download and the box). So I was able to use it immediately and I still got the box and disk for my shelf. I think that if more software vendors offered this option we would see a LARGE boost in online sales.