Purpose: The aim of this thesis is to explore the impact that increased availability of digital distribution has on physical distribution. The focus is on the effects that digital distribution has on the value creating processes of game developers with regard to distribution alternatives, strategic networks and consumer interaction. Additionally we examine if there is a future for physical distribution of games in an increasingly digital market.

Background: It is estimated that only the online gaming market alone will turn over more than $13 billion in 2013. In terms of market potential this means that video gaming has already surpassed the movie industry and is closing in on the music industry (Jöckel, Will & Schwarzer, 2008).

Digital distribution is gaining ground in the game industry (Cook, 2012), and access to high-speed internet connectivity is also increasing at a rapid pace. This creates a choice for game developers to adapt their strategies to the new ways of distribution. The previous view of the market was a linear value chain where developers must use intermediaries to reach an end consumer (Williams, 2002). The network dynamics appear to have changed, consumers have an impact on development and there are more complex interactions between the actors in order to generate better value.

Method: The thesis uses an exploratory qualitative research method by conducting semi-structured interviews with developers on how the distribution channels have changed. Secondary data concerning the value chain, networks, and value constellations and was gathered to support the empirical background of the market.

Conclusion: The value chain has been reconfigured from the classical value chain to a value constellation as increased online availability has changed the distribution possibilities allowing reciprocal relationships and user co-production as well as disintermedation of middle-hands. Value is created for the game developers through three different paths in our own value constellation: portals, direct sales homepage, and through publisher. In all three paths consumers play an important role through user participation in the value creation through user created content and user feedback through community and fan-base activities.. Our conclusion is that the future of physical distribution in the current format is threatened by digital alternatives, and will likely be discontinued in the long run and/or radically changed to include more physical value adding content.