Why smaller firms are flocking to digital downloads

In fact these middle-tier teams could be the dark horses in the online race. They own powerful IPs, but are small enough to be agile in one of the fastest moving fields. Online businesses demand quick wits and good customer service.

Online games businesses need all that and more – specifically strong brands and good gameplay.

That’s why the next Lara Croft title is an Xbox Live Arcade one, why Atari knows its future lies in releases like Test Drive (which will straddle the boxed product/DLC gulf), and why it will be no surprise when Codies takes Cricket to browser game savvy players in India.

Giants like Electronic Arts and Ubisoft are doing the same thing, yes.

But some of their big bets – games like Just Dance and arguably even a retail giant like FIFA – make their money (or the bulk of it) through disc sales.

Even if they are produced with slightly different budgetary models funding their development, such games are still part of a distribution business that many others are re-evaluating their place in.

Just look at the Guitar Hero category – while still strong, it’s seen better days. Only a company like Activision is set up to handle something that fluctuates so wildly. It would harm other businesses too much – just ask MTV Games parent Viacom, which has admitted Rock Band sales moved slower than it expected.

Ultimately time is proving that the boxed business, while still very lucrative for many, is best left to the big boys.

That’s the big three, plus the format-holders and resurgent firms like THQ and Capcom.

Other people, like the companies in this issue and others like LucasArts (more on that next week), are fast learning to find opportunities elsewhere – and these days that is online.