So, episodic and downloadable games have really started to come into full maturity.  This year's E3 showed that handily.  But, will these games be the future of gaming?  Will they continue to have a place in the market?  Or will they disappear back into the ether like light-gun games or the big survival horror boom?

I personally think that the future is bright.  While Microsoft has been targetting the downloadable market for casual titles successfully, Sony is proving that it can be home to more full-featured experiences as well.  Nintendo's WiiWare is still in it's infancy, but seeing the concept adopted by a company that is typically behind the online curve is telling.

The main questions is what can you do with an online game that you can't do otherwise.  Here is a list of the top 5 gains from doing an online, downloadable games:

1. Cut Costs - Online games cost a lot less.  Since online gamers are often checking the stores on a weekly basis, you need less advertising.  On top of that, the cost of designing, printing, manufacturing and shipping physical games disappears.  While these costs are not often paramount in the minds of gamers, they are hefty.
2. Smaller Titles - The first point of cutting costs leads us to the second point.  Small games with narrow scopes have traditionally been ignored by developers.  This is because these games would often cost too much at retail.  If it's costs $10 per game for shipping and other concerns and you have to recoup development costs, a small game might cost $15 - $20 at retail.  The same small title can be released for online distribution at a price of $7 - $10.  The price of $7 - $10 is something that gamers would be more willing to pay for a smaller experience.
3. Independent Games - Indie gaming has been alive online for quie some time on the PC.  Again, the first point of cutting costs allows independent developers to self publish titles to online services.
4. Niche Titles - Sony is releasing Siren in the US on the PlayStation network.  Siren is a Japanese survival horror title that has never sold particularly well in the US.  However, there is almost no cost to them to release it online.  They simply translate it and put it up there.  It is almot sure to make back the cost of translation and might make a bit of money.  The game is also being release in episodic chunks so that players might buy the first at a low cost and be enticed into the series.
5. Casual Titles - Casual titles are cheap to develop.  While the Wii has been selling a lot of them on discs for a bloated price, the other console audiences would not stand for this.  Simple puzzle and parlor games just aren't worth $40 - $60.  However, these games have been flourishing in the online marketplaces.

Now, we see how something as simple as cutting costs opens up the market place.  Many experiences that might not have been feasible before are not an option.  Clearly, the online sale of casual titles is not going to go away any time soon.  Both the PSN and XBL Marketplace have been doing fantastically with these titles.  However, the episodic games and larger games are what could be a trend as well.

Sony started the trend with Warhawk in August of 2007.  While available at retail outlets as well, Warhawk was release via the Playstation Network at a reduced cost.  The game offered only online multiplayer, with no single player campaign.  However, the online offering was as full featured and deep as other popular online games like Halo 3 and Call of Duty.  The game sold 100,000 units in it's first week.  The game also came in at over 800mb of data.  This clearly shows that there is an audience for these types of full featured experiences in a downloadable form.  Sony followed this by releasing Gran Turismo 5 for online purchase.  This Thursday, the survivor horror title Siren will be available for purchase on the PS3.  In the future, WipeOut and SOCOM will have full-fledged sequels released via digital distribution.

So far, Microsoft has lagged in this area.  While they have been bringing wonderful games to the market through their online service, they have yet to dive into the realm of full size games.  Much of this is due to the fact that at launch they had a version of the console available without a harddrive.  Becuase of this, they have been limiting the size of downloadable games to what could fit on a memory card.  However, they have started releasing full games from the original XBox online.  Hopefully, sales of these titles may convince them that the market for larger digitally distributed games is there.

For my money, the smaller games are here to stay.  Titles like Puzzle Quest Galactrix, Fat Princess, PixelJunk Eden, Mega Man 9, and Ticket to Ride will be hitting the digital distribution scene this year.  However, I think that the full size market depends heavily on Microsoft.  Nintendo has had a lack of quality titles on WiiWare and their lack of high capacity storage for the Wii makes it unlikely that larger games will arrive.  Titles like the Penny Arcade game and the recently announced episodic Watchmen games will likely further the appeal of full size online titles.  However, Microsoft is currently the top dog as far as online hardcore gamers are concerned.  Sony has always had niche content and will likely continue to do so.  For these games to come out of the niche, Microsoft has to get on board.  In short, they have to lift the size restrictions on the XBL Marketplace. 

However, I think that Microsoft will do this.  I think that they will begin to receive pressure from companies that are looking to sell games online that they may not feel confident in.  The online market allows the consoles to expand the types of experiences on the console without making the publishers fret over the cost of releasing an unproven title.