Let me share with you a quote from technical director of id Software John Carmack, "Everybody knows that eventually [everything] will be digital distribution like this - it's only a question of time. [...] Clearly, packaged goods sales are still critical on the big platforms at this stage, but that's all going to go away sooner or later. This is the model of the future."
Larry Ellison, CEO of Oracle Corporation, made a similar statement back in the mid-90's, "[...] Me going down to the store and buying Windows 95, I've got to get into my car drive down to a store buy a cardboard box full of bits you know encoded on a piece of plastic CDROM and you bring it home and read a manual install this thing - you must be kidding you know, put the stuff on the net - it's bits, don't put bits in cardboard, cardboard in trucks, trucks to stores, me go to the store, you know, pick the stuff out, it's insane."
And here is another one from Peter Moore, VP of Microsoft's interactive entertainment business back in 2006, "Let's be fair. Whether it's five, 10, 15, 20 years from now, the concept of driving to the store to buy a plastic disc with data on it and driving back and popping it in the drive will be ridiculous. We'll tell our grandchildren that and they'll laugh at us."
These are all smart guys. In particular, John Carmack has a genius IQ, has repeatedly proven himself to be a brilliant software inventor, and is one of my personal heroes. But I'm going to stick my neck out and say all three of these guys are wrong. The argument they're making is that digital distribution is "better", so therefore it will eventually kill the retail market. They're assuming that since buying digital is the most rational choice, it's the choice everyone will make. The important thing that they're missing is that typical shopping is not remotely a rational activity. There are a lot of factors that go into making purchases that have nothing to do with price, convenience, and features. What's more, there are some things you just can't get from a download.
If publishers switched to all-digital distribution tomorrow, then they would be leaving out a lot of potential customers...
1. The Collectors
Some people like to own things. They like to buy a game and set it on the shelf with the rest of their collection. People do this with books and movies, even though you can get those items digitally. I know publishers are always talking about how they're not selling products, but licenses. But to consumers the distinction is about as interesting and relevant as the contents of the EULA. They think of buying games as buying things, and after the transaction they like to hold their acquisition in their hand and say, "This is mine."
2. The Visitors
Hey games industry: How do I take my digital copy of Twisted Metal Gears of Warfare over to my friend's house?
I've purchased games because I experienced them through friends. It would be foolish to dismiss the power and importance of this viral individual-delivery demo.
3. The Gift-givers
It's Christmas morning. The kids come downstairs, and see there is nothing under the tree. Wait, no, there is! It's just really small. There this tiny little pile of activation cards, game time cards, gift cards, and cards with Microsoft points. Merry Christmas, Timmy! I hope you like typing serial numbers!