"To quickly bring everyone up to speed, GameFly is Netflix for video games. Users pay a monthly fee and receive video games in the mail. It's a great service, I'm a member and I love it, but mailing video games to users is its core business. What happens when users can download video games directly? Can GameFly survive in a video game on demand (VGOD) world?
The shift towards digital downloads in the video game industry is natural. Microsoft announced the first download-only game for the Xbox 360, Marble Blast Ultra, back in October of 2005.
We already see this in music and movies with iTunes and Amazon's Unbox.
By selling directly to users, video game producers should make more money. They can sell their games for less, because the middle man is cut out. With lower prices, more people would buy games; the total amount of video game sales should increase.
We see this in the music industry. The new Nas album costs $14.99 at Best Buy in CD format. The same album costs $8.99 on Amazon as a digital download. That's a 40% difference!
If this trend holds for video games, we should see prices drop from $59.99 (on average) to $35.99, a 40% decrease!"