This is the first article in an upcoming series of articles analyzing the status of PC gaming in 2011.

Talks of piracy, development costs, MMO dominance, eastern vs. western markets, the port syndrome, and digital distribution have become all too common as the downfalls and saviors of PC gaming.  Probably the most important factor for both gamers and publishers/developers is undoubtedly cost, and in that regard nearly all of the discussions about the future of PC gaming stem from that.

Cost to develop and publish a product, like in all entertainment industries, must not exceed the profit margin.  That’s simple economics.   What’s not simple economics are the factors involved in collecting revenue in our current PC market space.  Retail games have been steadily on the decline with the advent of digital distribution platforms such as Steam and Direct2Drive.  Production costs are minimized in the digital market, as is the shelf space competition of traditional brick and mortar, and to a lesser extent online warehouse retailers.

Quarter year sales aren’t quite as important in the digital market since the games will have a long shelf life. In addition, older titles can be (and are) discounted as part of a sale.  The downside to this is the expectation for big 50-75% off sales that gamers, myself included, have come to expect from the big digital distribution platforms.  In the process of fueling sales and demand through temporary slashed prices publishers ‘train’ gamers to wait for but price cuts.  Big bundles including an upwards of 20 games are offered for less than the cost of one recently released title at full price.  Several people I’ve spoken to have amassed huge collections – think 100+ games – primarily through such sales.

This strategy of digital sales is not unlike the one featured in the mobile games market on the iPhone and Android marketplaces.  Whereas $1-2$ seems to be the sweet spot for mobile games and apps, Steam and direct2drive seem to move a lot of software in the $10-15 range during sales.  I have in fact bought games on sale for $5 (after a 75% discount) simply to add to my collection.  Some of the games haven’t even seen the embrace of an installation and test run.

Statistics from digital distribution are unfortunately absent as big companies like Steam and Direct2Drive do not release such information to the public.  Still, if the current retail sales are to be compared with my findings and the nearly 2 million players online on steam at any one time, profits however small, are being made. In the wake of rampant piracy, publishers want every potential bittorent download to becomes a legitimate Steam purchase, even at the cost of marking down the product by 75%

The other school of though in the PC industry is quite the opposite: increase prices to make up for lower sales.  The three big publishers – EA Games, Activision – Blizzard, and Ubisoft – have all launched products in flagship franchises at $60 a pop both at retail and through digital download.  Call of Duty, Splinter Cell, Assassins Creed, Star Craft , and Crysis have been marked out, because of their success and popularity amongst PC gamers, as premium franchises.  Extensive anti-piracy measures have been taken by the companies to protect their products, most of which have been received with ardent rejection and stark criticism by the PC community. Ubisoft’s attempt to keep gamers tethered to an internet connection in order to play several games was particularly unnerving and served as one of the reasons for me skipping out on the latest Splinter Cell and Assassin’s Creed games.

Somewhere between these two polar opposites of $60 juggernauts and $60 twenty game collections there must exist a happy medium where publishers and gamers can coexist happily.  Companies that have traditionally passed aside PC gaming, such as Capcom, have offered more support over the past two years – and in the case of Capcom, promise to improve even more.  Microsoft has made a monumental decision of releasing it’s Flagship role-playing game on Steam, a sign of their intent in seeing the growth of the PC gaming industry as a whole and not just their Games for Windows digital distribution platform.

My one hope is that PC gaming doesn’t devolve into an industry of only  AAA $60 blockbusters and $5 indie games.  Growing hardware sales and increased interest in developing markets will assure that PC gaming will never ‘die’ as some have been quick to point out. Game experiences on the PC platform such as the ever-growing Team Fortress 2, Warhammer Dawn of war II, Star Craft 2, the upcoming The Witcher 2 (so many sequels!)  and Star Wars: The old Republic  stand out for PC users. The PC market is an ever evolving one, and with hundreds of millions of capable computers on the market it’s only a matter of coming up with new ways to harness that potential and make a good profit.

Next topic in the series: PC DLC (download content)