Predictably, Microsoft have just announced the new Games For Windows Live will also support full game downloads. Manufacturers, having taken over all the development studios, and recently the Indie and casual devs too, are now taking over the distribution channels too. It’s likely that we’ll see the first full, true AAA game distributed solely through the Playstation Network in the next year; full games are already available on the PSPGo. Even Nintendo distributes games through its Wii store. These all make it easier for consumers to get access to new and old games. So what's the problem?
The key issue here is that, like the App store and Xbox Live, these are closed systems which are bad from every angle, except the owners' profit – for example, developers' and third-party publishers' games will be competing against the manufacturer's own products that will be developed, marketed and streamed through the whole system with preferential treatment. Anything that is bad for competition is ultimately bad for the consumer, as it drives up prices.
For example, if GFW Live is bundled with new computers, that means new audiences will get access to Games On Demand, which is great for them in terms of ease of purchase - however, they won't have access to the range of choice and prices that the internet offers, and through that bundling they'll be tied into the Microsoft rather than the Steam model and network. Once they've emotionally or technically locked you in, they can charge anything they like - look at bank charges on overdraft limits or the premium cost of Xbox Live. Microsoft has done this before with Internet Explorer and used the glacial process of global law to destroy its competitor Netscape before competition authorities could effectively punish it. Their previous experience will hardly be a deterrent.
In terms of their competitors' disadvantage, manufacturers' ownership of AAA developers means that competitors are excluded from distributing those games, whether that's cross-platform or cross-digital distribution system. It's the same problem that Randy Pitchford raised with regards to Steamworks, but writ large. Gamers want to play on the system that has the widest range of games and features - we don't want yet another clunky downloader insisting on starting itself up as Windows does and swallering resources, just like we don't want to buy several consoles and a PC. To compete with this the other digital distribution companies are going to have to integrate social networks, match-making, remote saves and run endless promotions, just to stay in the running - and even then how can they compete with the big manufacturers' and Valve's AAA games?
Disentanglement of technology and openness of APIs/development at every level is the only fair option. It’ll be interesting to see if, for example, Sony blocks access to internet-flash games or merely fails to keep the PS3’s Flash software up-to-date, which would have the same effect of stopping indie development on that platform. Or if Microsoft allows indie, community or free games onto Games For Windows Live (I'd love it if they bought Kongregate and integrated that company's excellent flash games API into GFWL.) Or, even, if Valve unbundled Steamworks and its development studios from Steam itself.
It’s strange than an industry as advanced as games hasn’t distributed games digitally earlier but it's worrying that this vertical integration threatens to fragment the community. Ideally, someone needs to create a Kelkoo or Froogle client for games, that compares prices from other download sites, has the matchmaking/patching elements, and is bundled for free with machines; but only Microsoft could have realistically done that, and they haven't. With developers, third-party publishers and consumers all losing out from vertically-integrated closed-system game publishing, something has to change.