What do you see as the future of retail versus download titles? A lot more download stuff is coming, but a lot of people seem a bit cagey about going against retail. What do you think?

JH: Well, people are still very comfortable going to a store and buying a game. We experimented with that with Warhawk, when we released both, and I think we had a lot of success with it. To make our retail partners happy, we gave them a value-add. They had a headset that came along with the game. And we sold more at retail than we did on download.

I think what's cool about the download space is that we can release games that would just be noise for retailers. They'll take lower-cost jewel case games aimed at children on the PC side, but those aren't the games we typically do. We have higher quality games.

There's no mechanism to get a $10 game to you right now other than online, but the neat thing about it is that we can drive people back to retail with games like Warhawk, because now our customers hopefully realize that when we release one of these games, we're going to back it up with continued online content. We just released an expansion on Warhawk in September, and we'll release another one in April. Each one makes the game bigger and bigger.

It seems to me that retail has too much control for not being game developers, of what comes out in terms of games. You couldn't release flOw in retail as a boxed product for PS3. I don't know. It's a pet peeve of mine that people want to still please the retailers when they're making a lot more money off of games that developers sometimes make.

JH: Well, they take a huge risk. They're carrying an inventory. They don't know whether the customer's going to like the game or not, yet they're sitting on stacks of boxes of these things, and they've got to maintain stores, keep the lights on, keep the workers paid, yadda yadda yadda. And our costs for direct distribution are minimal.

We have a significant investment in the PS3 and establishing the network, no doubt, but basically, I'm not carrying an inventory around. When you purchase that game from me, boom, we download it from the servers, so the distribution costs are very low. We pass those savings along to our customers.

I understand the retail side of things, and we couldn't be here without them. That's important. And there will always be a place for big, epic games like God of War, where it's an event. You want to go to the store and be there at midnight when it goes up on the shelves and be one of the first people that play through it and brag to your friends about it. Those are fun. Those are fun events.

I mean, where are you going to get your hardware, you know? (laughs) A lot of the times, when you buy that hardware, you're going to buy a game along with it, and I don't think we're going to see retail just go away.

I don't think digital distribution is going to cut them out completely, and I don't think that will necessarily be the right thing. I mean, a lot of things have been available for a long time online, like with Amazon.com, and they haven't killed the book business. People still like going to a bookstore and hanging out, perusing.

Also, there seems to be an attempt with downloadable services to emulate a storefront, so you can still sort of browse. It's arguably a better experience, because you can actually play it before you buy it.

JH: Yeah. I think with these types of games, this is absolutely the right space to be selling them. We could not have gotten flOw to the consumer if we did not have PlayStation Network.