The Digital Distribution Advantage
Once the digital deal is in place, a retail publisher is in a much less advantageous bargaining position, especially where it comes to IP ownership issues. Digital distributors, at least for the present, have no interest in obtaining IP ownership for the games they distribute. The so-called casual games, or “Pop Games” as I like to refer to them, have been building this model in the PC market for several years. And with the present broadband penetration, the download of full-blown PC games is a reality. I recently purchased F.E.A.R. digitally, and that's an over 1GB game, unzipped. And we all know of Valve's success with distributing its games via Steam.
Digital Distribution for Console Gamers
Up until now digital distribution has been something unique to the PC market. But the Xbox Live Arcade (“XBLA”) is changing all that. The size of the game that can be downloaded on XBLA is limited to the size of the 64MB memory card, which limits things somewhat when compared to PC downloads. But it is a huge potential market. Of course, access is also an issue.
If access to the XBLA pipeline gets clogged with aggregators who are already XBLA certified, we could potentially end up with some of the same issues we have now with the retail channel. For example, although MS has no interest in game IP ownership, at least one of the XBLA aggregators is looking to acquire IP rights to the games it distributes through XBLA. But hopefully this one distributor is an aberration and there will be enough less greedy options for developers to just go elsewhere. After all, the marketplace is a great influencer of predatory policies like this.
The big question is, will the PS3 and Nintendo Revolution also have a digital distribution capability? I suspect they are considering this right now since XBLA is doing a brisk business and leaving this potential market open to a fierce competitor like Microsoft could be a huge blunder. So, it is at least possible that Sony and Nintendo will also do some sort of digital distribution in their next gen consoles. And they may even do it better that MS."