A new report from Screen Digest predicts that digital distribution (in the “Western World”) will reach $400 million by 2010. While this figure is relatively small compared to the billions of total software sales for the game industry, digital distribution has grown to a size where publishers must take this sales channel very seriously.

The report splits the digital distribution model into digital download and streaming (i.e. Games on Demand services which are generally subscription based).

Many in the industry view current digital distribution as primarily focused on PC gaming, but 11 percent of core download sales in 2004 came from Microsoft’s premium content downloads through Xbox Live. As Xbox Live is only used by a fraction of total console users, this must mean an extremely high penetration of digital sales to the Xbox Live user base.