I think this is an important factor as I still don't see global consumer internet connection speeds improving enough by 2013 to allow any significant chunk of the market the ability to download a 25GB game in a reasonable timeframe.
In that I wouldn't expect the same 25GB retail releases to be made available for DD,it'd just be too much bandwidth for PSN and XBLA. The complete adoption of single layer BD next-gen would make it even harder for publishers to combat retail used game sales with DD, hence why I don't think it would really help publishers in their efforts to conqueor the used game market.
I think it's more a storage issue than bandwidth and they will have to swallow the bullet anway. But I disagree I don't have a crazy internet connection and if the games available through game on demand were not that old, I would go for it no matter the time it takes to download. In fact xbox live is surprisingly fast even on my not that good internet access. For those who can wait some hours or a night there is still BRD. Being able to play without swapping disk is worse it. I would not be surprised if Ms reduces the gap in the future between physical and on line releases. They have to find a equilibrium without losing support from retailers.For those who can't wait some hours or a night there or are interest in the advantages of physical format well BRD will still be there.
I'm not sure about your point on episodic content though too, since whilst this may work for MMORPGs (of which there are currently next to none on consoles) and GTA (i.e. relatively quick to create scenarios in the same open world environment), I'm really not sure how well episodic content will work with other games and genres. It certainly hasn't faired too well with the half-life series (in terms of dev time and release frequency)
Again I'm not sure that the global gaming market is really all too keen on episodic content if only for the value proposition aspect. How many DD copies of GTA IV: TLATD were sold in comparison to retail copies of GTA IV on the 360? The sales success of such products will ultimately dictate where publishers go next.
I'd also be bold and suggest that recent trends show that publishers are wanting to add a lot more to your $60 retail package (with online multiplayer options alongside a sizeable SP campaign) than dropping the price and shipping smaller retail games at a lower price point.
Yes I agree that episodic content will likely become more successful with the availability of DD content, however as of now retail titles sell much more and generate far greater profits for publishers (albeit with the added risk and exposure to the rental/used game markets to steal a good piece of your pie).
I don't think episodic content will play a significant roll yet for maybe one or two more generations, unless someone comes up with a radically different and novel concept for content frequent content delivery and game design (i.e. how long can R* keep churning out GTA IV episodes before people get bored of liberty city?).
It's my personal opinion but I think that downloadable/episodic content that easily extendible to most genres. It's already there for multi player part of most games the next jump is solo/single player experience.
It's true that costumers are iffy on DLC/episodic content because they more than often feel ripped, thinking I'm paying for something that could have been on the game I bought to begin with (capcom behaviours with RE5 is not here to reassure them...). So I guess there is a need for a proper marketing effort about how you market a game split in episode and how you price it too. We don't know how ODST will fare but by the reviews it sounds like Ms may not have found the proper balance for example (sales will tell).
For Rockstar I'm not sure that my memory is right but I remember ~2millions figures and the DLC will be release on DVD too, episodic content doesn't forbid physical release. Rockstar will imho have made the most of their efforts with GTA4 but I've the feeling like they must feel like they didn't charge enough for the DLC (not like they were free anyway). Physical release is a good back up if online sales fails to meet expectations but I feel like it must also allow for cleverer game budgeting. What I mean the first iteration of the "game X1" costs and would have cost XX millions dollars. You know you will release "game X2", it would have take one year to make it. Basically your business plan is to split the part 2 in two parts. You ship the first part only six months later and start getting returns on you investment. It's a lot less risky now to found "game X2" part 2. You ship "game X2 part 2" on line and then (add one or two months) the "full game X2" on BRD.
I see quiet some advantages here for the editors. First they earn money during the process of creating "game X2". They keep the game "hot" and that's something editors for heavily multiplayers oriented games have already understand, players don't want to wait X years between two release of a franchise, they need to get fed content to continue playing. Not every franchise is GTA, GT or halo and is likely to sell well no matter when it's release and won't fall in oblivion in the mean time.
In regard to the second hand market, well it's about the timing of the release and creating desire. You can sold you game and wait for "game X2" release but If you don't you will access content way earlier than you would if you have wait for the physical release. It's even more relevant for games that have a consistent story line, for something like GTA4 you don't really in the urge to know "what comes next?".
I think it's a nice way to capture the enthusiastic part of the market and to tone down their "second hand market habit impulse. You also dismiss the loss due to the "rental offering" for this part of the market.
In regard to the content creation I think that it would not be that tough as long as you know more or less where you're heading with the story and on how many iterations you intend to split the content. I could even see optimization in the utilisation of your existing asset.
In some games you go through different environments almost rush through to the story is a bit cut may have profit from more development, etc. In the end game designers/developers have to make you through a whole story with only finite resources whether it's human time or disk space, I think that removing the pressure to finish the story in one take may ease things quiet a bit and prevent for too obvious dash work.
Overall I hope they will go that route SP campaigns get shorter and shorter, it looks like editors and publisher have realize that multiplayer is right now is a better way to keep players stuck to your franchise (and spending money on your franchise) my trust is that episodic content and DLC could help solo single player gaming to regain relevance.
They have to learn from the Hollywood series business. Costs are going really high when something works they have to make the most out of it till it works. What they need is proper Story and good scenarists.
But I've a bad feeling about that as multiplayer will more than often ending being a cheaper solution... I'm unsure publisher will search for way to fond more consistent SP experience