The shift from physical software distribution to electronic is being driven by faster broadband connections and an increasing number of consumers and businesses buying online, owning more connected devices and expecting to get software delivered how, where and when they want it.
It's clear that this is changing the world of software distribution: The future of sales is on the Web.
The business of software is changing. In the last five years, the industry has gradually moved away from established business practices and towards alternative platforms and delivery channels. This shift, once believed to pose a threat to the industry's future, has paved the way for new ideas and technologies to take hold, establishing independent revenue streams and opening up the existing market to a wave of new creators and consumers.
However, as the global software industry grows and adapts to these changes, more and more long-standing business practices have come face-to-face with extinction. The future of physical software media and traditional brick-and-mortar retailers has been the topic of wide debate in the industry for a long time now, pushing both publishers and retailers to come up with a viable solution. While some have argued that progress is impossible without risk and loss, others maintain that the industry should strive to find a way for both old and new business models to work side by side.
Software sales down
According to analyst house PWC, the amount of money made from physical software, hardware, and accessories at the retail level has been in steady decline year-on-year across the US, UK, Japanese, and Australian markets. The first half of 2012 saw a double-digit percentage decline every month, with June hardware sales down by 45 percent and software sales down by 29 percent. With physical sales slowing, the industry has turned its attention to the rising digital market. According to a Q1 2012 NPD report, digital format content sales in the US increased by 10 percent, compared to the same period last year, generating USD1.38 billion in revenue, compared to the USD1.5 billion from new physical software. Similar statistics have been reported in Europe: digital format sales in the UK, France, and Germany generated USD959 million in revenue in the first quarter of 2012.
While the worldwide increase in digital distribution and revenue has increased the debate surrounding the future of physical software sales, this shift has measurably impacted retailers. But those of us in the industry who have worked closely with retailers believe that things aren't as simple as waving goodbye to physical retail and saying hello to digital.
Firstly, there's the idea that people enjoy owning tangible products: it's easier to attach oneself to something that can be seen and touched. Secondly, there's the realisation that a digital marketplace will never be able to replicate the experience of dealing with other human beings, something that physical retailers so easily do. This latter point may not be of concern to the experienced, core consumer who may prefer to do everything digitally, but it remains an important part of the point-of-purchase experience for the mainstream consumer. The key is for everybody in the channel to address these shifts in customer behaviour and expectations to adjust their business models to utilise electronic software delivery in combination with traditional models and support to increase customer satisfaction, reduce sales and product costs, grow revenue and improve profitability.
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