Media retailers will certainly continue to have a place in the entertainment market ecosystem for a long time to come, and certainly so will broadcast and cable television, and movie theaters (and even more experience-based outlets like theme parks). But direct-to-consumer media sales is no longer considered a laughable proposition, nor is it seen as the mark of inferior content that was unable to find "proper" distribution. This model is now seen as innovative and competitive, and increasingly as the future of mainstream media distribution (and funding).
My current employer, Telltale Games, is an innovator in consumer-direct marketing and distribution. Telltale was one of the first successful game companies to build a business plan around consumer-direct sales as a primary revenue source. In fact, direct sales are essential to the episodic content model Telltale has borrowed from television and comics. Game retailers didn't necessarily have the infrastructure to cycle SKUs that quickly, so the direct model is essential to delivering the content in a timely manner.
Valve Software took this idea into the mainstream with their Steam platform, which started as their own self-distribution mechanism but was quickly and smartly turned into a direct-to-consumer distribution marketplace for other game developers (Iike Telltale).
Building off the revenue streams provided by their more traditional businesses, Netflix and Amazon have pioneered successful commercial direct-to-consumer linear media production.
First they established marketplaces for other producers to sell (or rent, in Netflix's case) their material. Then both vendors moved into direct production, using their own channels to distribute content produced in-house (House of Cards, Orange is the New Black, Alpha House, etc.) -- in a reversal of the Steam development process Valve undertook.
Apple, on the other hand, has eschewed in-house production and instead created a cross-media marketplace which delivers gaming, listening, viewing and reading content to their media-capable consumer devices (Amazon has followed-suit by expanding their device offering and improving their integration).
Thanks to all these competing efforts content publishers have a lot more options beyond traditional distribution channels these days. And direct-to-consumer allows producers and developers to more easily be their own publishers. True-direct sales on the producer/developer's website are part of this model, but even more essential are marketplaces like those provided by Valve, Apple, and Amazon (and, at least in the gaming space, Sony and Microsoft).
Direct distribution allows the producer to eliminate publisher overhead, and narrow margins in order to stay competitive much like Amazon always has. And digital-direct eliminates physical replication costs, enabling small players to enter markets with reduced up-front costs, which is great for independents. Equally importantly is control over the timing of releases; Telltale's episodic model relies on this, but so does direct-to-consumer episodic linear content (Amazon, Netflix, Hulu, , etc.), and the event-oriented release cycles of EDM music labels. (NOTE: control and profitability are best with true direct sales, where the producer is the publisher, without a third-party publishing/distribution entity taking a cut on top of the digital marketplace's cut. And I'm not talking about royalties from streaming, which we all know is a long way off from profitable, even for self-publishing artists with no middlemen, in its current incarnation.)
For the consumer, direct distribution theoretically reduces cost (though the way price is currently playing-out in the marketplace, it's more that it slows cost increases). Digital-direct also provides instant gratification, library management (though this needs to get better, and integrated cross-channel), and, most importantly in our mobile-saturated device landscape, portability. ersonally, as a consumer I used to be someone who refused to buy digital media (because of quality and DRM issues). I started buying digital-only media because various music and game titles I wanted were not available on physical media, and soon got addicted to the convenience, portability, library management, and reduced physical clutter.
An oft-stated major issue with consumer-direct distribution is standing out in a crowded market. But indirect distribution has the same problem, and increasingly publishers and distributors are cutting publicity and marketing budgets for all but a few "likely" blockbusters. So all but the very few favored titles in any medium face the same challenges in terms of finding an audience and standing out to them, regardless of who the publisher and distributor are. At least with consumer-direct there is the opportunity to achieve this through a direct conversation that is under the control of the producer/developer.
The power of a direct relationship with an audience can be especially seen in the success of direct-from-consumer funding ("crowd sourcing") markets like Kickstarter and IndieGoGo. With these platforms producers/developers can fund media projects by offering consumers pre-sales and premiums, based only on developing trust in an audience that the producer/developer will actually deliver.
A similar criticism is leveled at these systems as against direct sales itself: that producers/developers who are already famous have a tremendous advantage, and suck-up all the air in the room. And, again, this is also true of competing for traditional funding dollars as well. The difference is that by going direct it is possible to expend time, effort and talent to cultivate an audience in a way that compensates for some of the differential in publicity value between well-funded and famous entities and smaller producers.
Such an approach does add a layer of responsibility that is outside the area of expertise and interest of most producers/developers, but unless / until a producer/developer manages to secure a more profitable third-party distribution deal (which lately is often the result of first showing one can build an audience and sales through a direct model first), this opportunity to build an audience and sales does exist for those willing and able to put in the effort.
And as producers/developers experience the benefits of having that audience relationship, and of controlling prices, margins, release dates, marketing message and of course content, the direct model will remain the preferred model for many who could otherwise secure a more traditional distribution deal.