Buying PlayStation and Xbox games on discs isn't going away

The days of walking into a local GameStop and picking up a new video game for your Xbox or PlayStation may seem quaint in the age of one-button app purchases on our smartphones. But it's still how a majority of the industry works, and it won't be going away anytime soon.

In fact, if research from consultancy PwC is to be believed, it may still be one of the primary ways consumers buy console video games five or even ten years from now.

That's a stark contrast to music, television and movies, for which Internet delivery has become commonplace with services like Netflix, Spotify and iTunes. Video games are still overwhelmingly sold as one-time software burned onto a physical disc, placed in a box and shrink-wrapped in plastic.

Though it may seem backward, particularly given the video game industry's reliance on bleeding-edge technology, both the companies and their customers appear resistant to change.

That isn't for lack of trying. There have been many new games offered as over-the-Internet downloads and the requirement that even games on discs be downloaded to a console's hard drive, just like a digital version. But the industry shows little sign of interest.

By the end of this year, global sales of console games delivered over the Internet, no disc required, are expected to hit $5.6 billion, up 14 percent from last year, according to PwC. Yet sales of games in disks, though in decline, are expected to remain the top sales generator in the industry, tallying $19.5 billion, or basically flat over the next four years.

Consoles gaming is the largest segment in the $70 billion-a-year industry, representing 37 percent of global retail spend in 2014, according to PwC. By 2019, sales of these games delivered over the Internet are expected to increase to $12.9 billion. But game disc sales for consoles sales will have dipped only 3 percent to $18.9 billion.

Persistence of game disks

Video games are often cornerstones of technical advancements, combining new forms of visual technologies, artificial intelligence and Internet connections to create stunning life-like characters and photorealistic renderings of imaginary worlds. Yet when it comes to the way games are sold and distributed, the industry remains far behind its media counterparts.

There are many reasons for this, such as the size of an individual game download (Activision's latest Call of Duty game, for example, measured in at 55 gigabytes, or more than 16 times bigger than the Walt Disney movie "Frozen").

But there's a more compelling reason things haven't changed: the used game market. Players often buy physical games so they can re-sell them at a later date, primarily to retailers like GameStop. Customers then use the money to purchase new titles.

Gamers opt for the disc when they're presented with a sticker price of $60 apiece for either the disc or Internet download.

Lori Driscoll, a partner at PwC, said gamers like the added appeal of a disc's portability -- they can literally walk it over to a friend's house. "You're getting the latest games you can take across locations," she said.

There are also new ways to access games ever faster thanks to retail companies like Amazon, which will ship consumers new releases the same day they are made available online. That alleviates the hassle of placing a pre-order at GameStop and picking up a copy in person.

PC to regain the throne

Though the games may still be delivered on discs, how those games make money is in a period of substantial transition away from an upfront retail spend and toward online payments for in-game items.

Console games still notch most of their sales by selling games, rather than add-ons. The sales from those additional storylines and services, though, is rising too. By the end of this year, PwC expects in-game add-ons to generate $2.4 billion, rising to $4.2 billion by 2019.

For the PC, the change is even more dramatic. By the end of 2015, PwC expects the amount of money spent globally on in-game add-ons and other items will reach $21.8 billion. By the end of next year, PwC anticipates the PC market to be larger in dollars spent than the console market.

The PC markets shift to sales over the Internet is largely bolstered by Valve's popular online "Steam" store. Internet sales were larger than disc sales as early as 2013 thanks to Steam, which is responsible for around three of every four PC games sold worldwide, and the gap will only continue to widen in the coming years, PwC forecast. Games for PCs sell far less copies than counterparts for the Xbox or PlayStation, but that market makes far more revenue from players' purchases of in-game items, like currency and subscriptions to online multiplayer services like fantasy game World of Warcraft.

Console game makers already see the writing on the wall, and many have begun designing games more as services that players spend money on over time. Companies like Electronic Arts, makers of the popular FIFA and Madden sports games, and Activision, the creators of World of Warcraft and the military shooter Call of Duty, are expanding each game they make through additional storylines and other add-ons, extending the life of a game from weeks to months, or even years.

Of EA's $4.3 billion in sales last year, a record $2.2 billion came from Internet sales of both full games and add-ons. Sales from EA's growing library of titles for smartphones and tablets also hit a new record, ringing up $524 million for the year. Activision said a record 76 percent, or $538 million, of its total revenue came from sales over the Internet of full-game downloads and in-game adds-ons.

Another aspect of the industry are games made for websites like Facebook and for mobile app marketplaces like Apple's App Store and the Google Play Store for Android devices. By the end of the year, PwC anticipates global sales for those games will reach $17.3 billion, rivaling that of both console and PC games.

By 2016, over 2 billion people -- more than a quarter of the world's population -- will have a smartphone, according to eMarketer. That means these types of games will become the most powerful force outside the US.

"The single biggest shift in total video games revenue will come as countries such as India and South Africa see social/casual gaming revenue overtake traditional gaming revenue by 2019," PwC says in its report.