Jagex: Physical games retail gone within 10 years

Jagex CEO Mark Gerhard believes that the decline and eventual closure of high-street retailer The Game Group is now inevitable.

Speaking as part of an expert panel at the BAFTA Question Time event, sponsored by GamesIndustry.biz, Gerhard stated that the efficiency with which the internet serves the modern consumer's needs - easy access to a wide range of content at lower prices - has started a process that will eventually eradicate physical retail for games.

"I think, 10 years out from now, we'll be talking about [physical] retail nostalgically, as a museum piece," he said. "I don't think there's much there that would give it a second life."

Physical retail, Gerhard explained, is part of a system that takes "huge chunks of margin" from developers, facilitating the decline of the independent development sector.

"That all erodes the economics for developers being able to make money," he continued. "They take a chunk - say 20 or 30 per cent - the publishers take a bit, and after inflation it's no wonder that the independent games industry isn't alive and vibrant, because they're not making any money."

I think, 10 years out from now, we'll be talking about [physical] retail nostalgically, as a museum piece

Mark Gerhard, Jagex

"[Developers'] response is almost desperation. 'We're going to go straight to the customer. We're going to go online. We're going to bypass the sequence that's taking so much from us...' I recognise that it's sad, but I think it's a fait accompli."

"It's sad to see an institution decline, but the writing has been on the wall for quite some time - the internet didn't happen yesterday... People are still playing games. They're still doing business; they're just doing it in a different place... If you don't adapt you die. It's as simple as that."

Jason Kingsley, owner of the UK studio Rebellion, compared watching the rapid decline of companies like HMV and Game to studying a mass extinction on the fossil record. He admitted to always being puzzled that the games industry sold data, "on bits of plastic wrapped in cardboard and the cellophane and put on the back of lorries."

"I always thought data should go down wires and fibre optic cables," he said. "It's a reforming of an industry, and a refocusing away from selling data - which is more easily distributed in other ways - to offer a very different kind of service."

UKIE's Jo Twist warned the other panelists not to "undersell" the importance of a one-to-one retail experience with engaged sales staff. To those unfamiliar with gaming or shopping for somebody else it can be the only way to make an informed purchase.

However, Kingsley disagreed, arguing that personal recommendations through social networks already provide the same service in a more meaningful way.

Frontier Developments' David Braben went further, saying that major chains like Game and HMV never offered the level of service Twist described, and were instrumental in the decline of the independent retailers that once did.

"In a sense, they're just getting a taste of that medicine," he said. However, Braben also added that internet speeds in the UK weren't yet capable of supporting a full scale shift to digital retail for "the next year or two."

This will give physical retailers some time to find an effective way of serving the needs of consumers, and potentially allow a more passionate independent retail sector to regain some of the market.

Nevertheless, Braben echoed Gerhard's belief that, in 10 year's time, it would be "hard to imagine" any games being sold in "shrink-wrapped retail."

"Whilst I am tremendously sympathetic to all of those that work in the shops, the fundamental problem is that they've got to look at their business to reposition it anyway - that's irrespective of whether it's a good or bad thing."