Saying packaged goods are dying is "a total exaggeration," according to SEGA's Hayes

SEGA West boss Mike Hayes has said he believes digital and physical can exist side-by-side for years, with great success and all this talk of packaged goods dying is "a total exaggeration."

Speaking in an interview with IndustryGamers, Hayes said people are playing more games and the industry itself is growing, but in order for packaged goods to thrive, there needs to be "a lot of necessary pruning and good husbandry."

"[This] means that the quality for the consumer in the end is actually going to be better, because people are going drill into what they know is going to be successful," said Hayes. "I think everyone’s saying it’s becoming all digital and no packaged; I just can’t see that. I think both are going to coexist to a greater or lesser degree. I do like the comment I heard at GDC [made by Cliff Bleszinski], which is that the day of the double-A game is over.

"I think that that’s something that we would absolutely agree with. If you’re not going to be in there with a product to really compete then your chances of making a return on that are going to be really limited."

Hayes said SEGA's current strategy is to focus on its triple-A core games for console platforms, with "one or two new IP," and innovate where it can and allow its separate groups to focus on digital offerings.

"In fact, 15 percent of our revenues are now from this broad digital area, whether that’s iOS or ESD (Steam, Direct2Drive, etc.) or XBLA or PSN and so forth and we figure that’s going to grow to around 20 a quarter within another two years. So we’ve spent the last two years already transitioning that. So we have divisions set up for all those different groups.

"One of the interesting things for us is how we allocate the development budget. Because at the end of the day, that’s the most important thing. So for every new IP that we don’t try, that releases $30 million - that $30 million is being allocated across the mid-console download and on the low end apps, and what we’re announcing over the next few months are a lot of new IP on XBLA and PSN, which are pretty cool.

"So we’ve been able to use our development monies in a more spread about kind of way."

Hayes doesn't think SEGA is "unique in that process," but the firm benefits from its IP so "a lot of it can now be unlocked."

SEGA is set to release Virtua Tennis 4 on Vita at launch along with another unannounced game, telling VG247 that the firm plans to give its full backing to the new Sony system.