When Microsoft announced that they would be selling certain Xbox 360 games digitally through Xbox Live, it hinted at the writing on the wall for game retailers like GameStop. At a certain point, publishers would get closer and closer to releasing new games digitally right at launch, cutting out the retailer middleman. More evidence of the impending doom of video game retailers came today as BioWare announced that they would be releasing "Mass Effect 2" for PS3 both in stores and as a digital download over PSN. Both versions would be released right on launch day.
Granted, there's still a reason for people to buy video games in stores, and GameStop's successful holiday season sales attest to that. A digital download is limited in that it as no after-market value since it's locked to your account, whereas disc-based games can be sold back to stores or traded to friends.
But from a game-publisher's perspective, an all-digital future is great news. Think of the costs saved by not having to pay for shipping and packaging. Not to mention the fact that it curtails used game sales entirely, which has been a point of concern for major publishers like EA and THQ. The only groups in this equation that don't want things to go digital are the game retailers, whose business relies on people walking into their stores or ordering physical games online.
If you think it's insane to think that GameStop and its ilk might be gone in five years, think back to a little company called Blockbuster. With the popularity of on-demand video and Netflix, suddenly a brick-and-mortar rental place became obsolete. Video games appear to be on the same path.