What follows is a piece I originally wrote for Edge.  It's more developer/publisher focused than what I'd typically write here, but given some of the questions I often get in the Ask Capcom forum, I thought some people would find value in it.

The future is incredibly bright for digital distribution, but there are a few myths and caveats that they don't tell you about when you leave the DD cult compound. 

To provide some perspective, Capcom has a very aggressive digital distribution strategy at play. We still have the highest revenue generating XBLA title on 360 (Street Fighter II: Hyper Fighting). We're still the only publisher to simultaneously put out our digital titles on XBLA and PSN. I suspect we'll soon be the only publisher doing digital distribution across XBLA, PSN and PC with the releases of Bionic Commando Rearmed and Age of Booty (formerly Plunder). Mega Man 9's recent announcement made some waves as our first Wiiware title (and first title to appear on all three first party services).  Suffice it to say, our product roadmap in the digital space stretches far off into the future. 

We've had a few successes; We've had a couple of failures. Here are a few bits we've learned that may help you: 

1. A Switch in Mindset is Required - Most larger console publishers are very focused upon building awareness via crescendo marketing far in advance of a ship date. Activity continues when the game ships, into a short window thereafter (while retail reorders are still possible), then the marketing team and PD team move on to the next project. With digital, your product never goes off sale (unless MS delists it). There are always activities that can have a meaningful impact on sales, even a year or more after launch (note of how Steam promoted Painkiller after the Zero Punctuation review, years after its release). 
2. Announce Later, Not Earlier - Most major physical titles announce their existence a year (or sometimes more) in advance. We have a digital title (SSF2THDR) that will have been announced around 18 months in advance of its eventual launch; this was not by design. We're finding digital consumers have much shorter attention spans. If they can't buy the title shortly after first hearing about it, the value of that early announcement and the activities that follow are somewhat muted. For the future, Capcom is trying (dev cycles permitting) to keep that to a six month or less window from announcement to launch. Ideally, it might even make sense to begin looking at announcing titles as they are submitted to first parties and digital distributors, given the timing required (see below). 

I'd summarize points 1 and 2 as: "Marketing for digital titles is very different than marketing for physical titles." It's going to take some time for some publishers to understand what works and what doesn't. Capcom is definitely trying to get ahead of the curve and learning from some mistakes along the way. 

3. Submissions Are a Bitch - I don't care who you are or what disc-based games you've done in the past: You will bounce on your first digital submission (quite possibly multiple times). Plan for it in your schedules and budgets. 
4. Different Parties Move at Different Paces  - Trying to align simultaneous game prop across multiple platforms and multiple territories is like herding cats.

   Trying to align simultaneous game prop across multiple platforms and multiple territories is like herding cats.

   It's still our end goal, but we've yet to manage a true global cross-platform launch (we've gotten close). The process is different from physical goods distribution in that the propping schedules vary for different reasons: Sony Computer Entertainment Europe has a ton of individual, localized language stores to align before going live; Microsoft typically has a backlog of content to prop (a byproduct of being as successful as it has been) while PlayStation in the US, so far, has been ready to rock with very little delay post-approval. Publishers are often left with difficult choices and you obviously want to time your marketing effort ramp-up to hit when the game is on sale everywhere, or as close as humanly possible. We're learning to assume two to three months between first submission to eventual commercial prop if we're going to start to get things aligned properly.  
5. Plan Add-on Content At the Front - There's about a six to eight week window after launch of the initial product where the active userbase is at its peak. That's the best opportunity you'll find to keep them interested in buying additional content. To hit that window, you need to plan that add-on content early in the development process. Going back to greenlight in the average organization means you'll miss this opportunity, so plan and budget accordingly. 

Points 3, 4 and 5 deal with schedules and planning. If you think you're going to crank out these games in 6-9 months, the odds are against you if you're planning on being truly competitive. A year is Capcom's minimal timeline these days, from development initiation to prop, with 16 - 18 months being more typical. This leads us to... 

6. The Bar is Moving Faster than Physical - Content that would have done "well" at the time it was green lit on PSN or XBLA is struggling. The numbers that were there a year ago are no longer there. And the numbers from a year ago are different from the numbers from two years ago given the same sales windows. Either through issues of product overcrowding/sorting, competitive factors or the raised expectations of consumers, we've had a few titles that would have performed better than they did if they'd hit their original release dates. On the whole, the difference between March and August isn't nearly as critical in the physical goods world. In the same period in the digital environment, three other games similar to yours may have launched and you may have missed your competitive window entirely. Similarly, budgets are climbing (ours included) and the smaller guys are going to have a more and more difficult time competing for dollars/points.  
7. You Can Lose Real Money with Digital Distribution - Digital Distribution advocates claim that you can recoup almost any investment over a long enough timeline,. I've even heard myself say the same thing in the past. While time is a forgiving factor, waiting for 2067 to recoup is a loss no matter how you'd like to rationalize it. Some publishers are also starting to consider the cost of capital on some of these longer-term recoups. Capcom has always had forecasts tied to an expected sales lifecycle; you should measure yourself accordingly. 

There is no question that the bets being made are becoming larger and larger. Price points in this space are climbing as the level of quality and depth in digital titles closes the gap with physical goods (I'd also argue that many digital titles are better games than many retail products...). As the size of the bet climbs, so does the level of risk. 

So, with those caveats dispensed, here are some elements that Capcom has discovered that digital titles excel in: 

• Bandwidth Management/Studio Growth - Let's say you run a great single team studio, but you have the desire to eventually move to a two team studio OR you want to manage your studio's transition from one larger project to another while keeping a reasonable cadre of your people fed. A digital title is a great way to avoid the "feast or famine" cycle. It's also a way to slowly grow your studio in order to avoid ramping in size too quickly and/or making inappropriate hires to meet workload demands. 
• Technology and Personnel Development - Projects of a digital nature are great ways to monetize tools development, pipeline/process optimization and to improve personnel skills. Shipping products of any size or scale are valuable proving grounds and, in some cases, not working on a three year project can help revitalize morale and team energy. 
• Developing Publisher Relationships - Starting a relationship with any new publisher or developer has some risk on both sides. Starting with a more manageable project lets both parties get comfortable with each other without the hard-to-swallow $20M+ wedding ring associated with AAA product development.

These are just a few of the elements that Capcom has learned so far and we continue to learn more with every project. As we look into the future, the next great hurdle will be the simultaneous shipment of both physical and digital goods cross-platform, globally. Naturally, that will have a new host of challenges and benefits but that's fodder for another rant at another time...