If you've been reading The Escapist, you've read of how the market is moving toward the mainstream, and you've read about how the retail channel is about to undergo a cataclysm. But the industry isn't ready. Like the music industry in its resolute defiance of digital distribution, the games industry will hobble onward, ensuring by its own actions that these don't come to pass until they have absolutely no choice in the matter.
It comes down to mainstream acceptance, and the industry isn't set up to allow it. In fact, they're practically doing everything they can to prevent it. There is one critical problem, and most developers, publishers and retailers don't want to see it. Gaming is too expensive for the mainstream.
Looking at the Future: Movies
To get a glimpse of the future, just look at film. The 2005 version of King Kong cost somewhere around $200 million to make. While the costs for King Kong: The Official Game of the Movie are more elusive, we can be certain that it wasn't close to that. Yet, movie tickets are less than $10 each, and the inevitable DVD release is unlikely to retail for just over $20. But the film will make a profit off those alone, not even counting the promotional tie-ins and the sale of pay-per-view, cable and television airing rights. It can do this for two reasons:
1) Many, many people watch movies. Really, just about everyone does - all ages, all demographics, across most of the world. Gaming isn't there yet, but it's heading in that direction. For some titles, like The Sims, it's really close.
2) The buy-in is low. It's very easy for many people to purchase a DVD or go to the movies without serious consideration of the cost (as long as you don't get popcorn, ouch!).
The business around DVDs is the example to look at, here. You can get a DVD player for $20 at many grocery or convenience stores these days - it may not be a great one, but it will play DVDs. You can't get any modern game console for significantly less than $100, and definitely none with games currently in production.
Lower prices + greater volume is what happens as an entertainment medium heads into the mainstream. And lower prices have to come first - for both the hardware and the media - before the mainstream will latch on. It's going to require a shift in the way the game industry does business - consoles aren't going to be able to become obsolete in five years, and games aren't going to be able to disappear in six months.
The Long Tail
Games can do this. There is no good reason why games cannot have a shelf life longer than six months. You can play Final Fantasy IV on a GameBoy Advance today, and it's just as good as it was 15 years ago, when it was originally released. Any gamer that has been playing games for that long could think of a dozen other titles that are still just as good today - just like a quality film, a quality game doesn't become obsolete with age.
This is one way quality books, music and movies continue to make money over time - they're still available for purchase, and (in the case of the latter two) they're in standard formats accessible on modern equipment. This is one way Amazon succeeds, they sell a lot of media that isn't brand new, and may not be available in retail, but is still relevant.
This isn't the case with gaming, and can't be under the existing system. To play Final Fantasy IV these days, you would need to either find a SNES and a copy of the game on eBay, or purchase a re-released port for another system. For a game that doesn't have a port available, like the equally classic Secret of Mana, you're probably out of luck. And the constant cycle of console replacements will even make ports obsolete in a few years.