In recent times I have read many articles questioning whether games face a download only future. I am personally saddened at this prospect as I like having a physical product which I can have as part of my collection which I could never lose because of hardware failure. However, it would not surprise me if in ten or twenty years time purchasing new games would be a strictly downloadable-only affair as it is not only cheaper to produce and distribute the product (due to no packaging or transportation costs), but these services result in people not being able to trade in their old games, and as such everyone will have to buy their games new. In the eyes of games developers and publishers this will result in more profits getting to them, making this prospect tempting.
A business which is doing well at the moment using this business model is the downloadable service which is Steam, which sells a variety of new and old games, making it convenient and comprehensive, as the user has a large selection to chose from, without having to leave their home, and without having to wait for a delivery. Additionally, another positive point about this business model is that it has resulted in independent developers finally being able to succeed without being sidelined by higher-budget games, making brilliant games like World of Goo a success. My main criticism of these services is that they will often have inflated high prices, regardless of the price that the non-downloadable stores on the internet offer the same products for.
Superb - as an occasional Steam user myself (and as someone who does not share your love of physical media :-) I found the ideas discussed in your post very interesting. Why the inflated price? How do they get away with that?
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