Episodic content is something that has intrigued me for some time and i'm curious if a large portion of the gaming industry could move toward this model. The model seems to be working really well for Tell Tale games with games like Tales of Monkey Island and Sam and Max. Peter Molyneux talked today about Fable 3 going episodic and that they are shooting for 150m in revenue which now brings this model into products that are much more main stream.
I've thought a lot about this and even in the development of Red Faction: Armageddon I feel like Episodic is something that could work(though this would have to be the plan from the beginning). Imagine releasing the first 1/4th of a game on a disc or through xbox live for only $19.99... from a developer standpoint this would get all the underlying tech and some of the content in the player's hands for a very small price and with a smaller dev team up front.
For those that don't understand the submission process for games on consoles, let's use a game that is going to release in March 2011 as an example :) The game has a submission date of December sometime because Microsoft and Sony have to have their internal testers make sure that the game doesn't violate any submission laws (like hard crashes, etc) and they need time to do this before it can go to the disc creation process. The process to get an approved game through disc creation and onto shelves takes a few weeks on its own. So, as you can see...it takes some time to get a game ready for shelves.
Now, while that first piece is in submission...you could then have the team working on the next quarter of the game content and have it ready for download 30 days or so after the first game piece releases. This method is already being used by some development teams when it comes to Downloadable Content to release shortly after the game, but why not entire parts of the game itself? This could drastically shorten development times before money starts coming in. Hmm...I'm thinking I should look into this a bit more for my next project.