Will Digital Downloading Replace Physical Media?

No, says Nintendo.  Here are a few remarks from Nintendo of Europe's MD of Marketing & PR, Laurent Fischer in 2011:

"We have never seen any link between growth in the mobile gaming market and decrease in the normal software market. It's two different markets, two different topics. We couldn't find any evidence of those two markets being linked.  There's always going to be requirement for a business of our size and scope to have a physical medium.  To think everything will be downloaded in two years, three years or even 10 years from now is taking it a little bit to the extreme." 

This is the critical question for Project Phoenix.  We can create the hardware, design the controllers, open dialog with software developers and publishers, and take the idea to venture capitalists and Sega.  The first thing they will say is, "Why would anyone buy a packaged title when they can download the digital version?"

Indeed, Sega is currently rolling out a series of "vintage collection" compilations for $800 on XBLA.  All three Streets of Rage titles for eight bucks?  That's a very good bargain.  I remember paying that much just for Streets of Rage 2 on Nintendo's Virtual Console two years ago.  How, then, can I persuade you to buy the physical Phoenix version?  How can I persuade you to buy a packaged version of, say, The Revenge of Shinobi on Genesis, or Guardian Heroes on Saturn, or Crazy Taxi on Dreamcast?

What is the appeal of the physical video game?  Is it the packaging, the artwork, instruction manuals, posters and maps?  Is it the tangible quality of holding something in your hands?  Is it the freedom to share, trade and even sell your game to others?  Is it the security of knowing that you own this game, not the publisher?

We could have this same discussion over music.  In an age when you can download MP3s to your smart phone for 99 cents per song, why are so many young people turning to, of all things, vinyl records?  Why is the Cheapo Uptown stocking cassette tapes?  People are choosing physical media over digital, and they're doing so in large enough numbers to make businesses profitable.  Why is this?  How can we observe this?  And how can we persuade people to make the jump from XBLA to Phoenix?

I don't have the answers, mostly instinct, a gut feeling.  I believe people have an emotional attachment to these old video game machines.  There are many people out there who love Sega, with the same devotion as Apple's legendary cult.  "Bring back the Dreamcast!" they say.  Independent developers work tirelessly to create new Dreamcast games!  Imagine that.  They should be making those video games for the iPhone, not a machine that's been dead since 2001.

All of this brings us back to the central questions: why should anyone want to buy "classic" video games, and why would they choose a retail package over a digital download?  As a business enterprise, this is going to be our biggest challenge.