Sony and Microsoft cannot let the retailers dictate game prices going forwards if they want to break free from the current over-priced model, their next consoles, PlayStation 4 and Xbox 720 need to be digital only, or they will fail. Once Apple add an App Store to Apple TV they could take over the living room games industry like they have taken over the handheld games industry with the iPhone and its flexible pricing and lack of distribution costs. The industry is transitioning from boxed to digital games.

If the next generation consoles have media drives like DVD to keep distributors and retailers happy so they can sell physical product this will make the machines uncompetitive. They will not be able to compete on price. The retailers will say to Sony and Microsoft “you can’t sell game X at retail for $60 and then sell it in your App Store for $2.” However, console-makers will need to sell games for $2 or else they will not be competitive with Apple. Nintendo 3DS and Sony Vita are not currently competitive with iPhone and Android game prices.
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Consoles have become like dinosaurs heading for extinction as their natural retail habitat begins to change. These ancient beasts must now adapt to a new environment where platforms like Steam, Facebook and Apple’s App Store are pushing innovation. People are already playing more games through digital download than physical media. For instance, Angry Birds has had more than one billion downloads, a sales figure totally beyond what can be achieved by boxed games sold in the likes of Game and GameStop. Since 2008, the sales of console games have been falling each year, as shown by this research from July 2011.