The Next Billion Dollar Videogame Opportunity';//--> 

The Next Billion Dollar Videogame Opportunity';//-->

While the majority of video game purchases are made at retail, digital distribution is quickly emerging as a significant force in the industry. Whether it's full fledged PC games, casual titles, or downloadable content and Arcade titles through Xbox Live, more and more gamers are making use of digital distribution.

In fact, while digital distribution is generally considered a nice complement to the retail model today, it could one day potentially replace retail as the main way people purchase their games. Bill Gates has said multiple times that all the hype concerning the format war between HD-DVD and Blu-ray won't matter in the long run because all content will be online. And more recently, SCE president Ken Kutaragi expressed a similar sentiment, noting that Apple has been successful with its e-distribution and that it's time for Sony to make a move as well.

So is this really the next billon dollar opportunity in the gaming industry? Stewart Alsop and Gilman Louie (who founded Spectrum Holobyte), of the investment firm Alsop Louie Partners, believe it is. The duo will be presenting a keynote on the subject at Strategic Research Institute's 2nd Annual Video Game Investor Conference, which takes place June 22-23 at Hotel Nikko in San Francisco, CA.

GameDaily BIZ recently caught up with Alsop to get a preview of the keynote and to find out what all the hubbub is about.

"We believe the change to digital presents the next billion dollar opportunity. Ironically, even though video games are inherently digital... the video game industry is stuck in what I call analog distribution. You have to encode it on a CD/DVD, put it in a jewel case and ship it physically to the store distribution system," Alsop began. "So we believe that once the video game business writes their games and delivers them to people through the Internet and through digital distribution systems, that the character of the business will be dramatically different, and that's what presents the opportunity to build a new billion dollar company."

"Whether it happens next year or ten years from now, that's the process we're involved in right now," he added.

And new is a keyword for Alsop, as his firm specializes in funding start-ups, unlike other firms like Elevation Partners, which have invested heavily in existing companies, such as Pandemic and BioWare.

Conceivably, the next round of video game consoles (or perhaps the round after that) may not even be disc media based at all. Maybe a "console" will become the equivalent of a cable or set-top box. Sony's Kutaragi believes the change will happen very quickly, and that within a couple years optical drives could become obsolete. He told Japanese site PC Impress Watch, "I expect even the hard disk to disappear eventually. If you have all the data on servers, you probably no longer need disk drives... but to do this, the server is crucial. It's a difficult problem."


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by James Brightman

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