Microsoft's VP of strategic marketing and Live for the Xbox 360 in Europe, David Gosen, has said that there is “no question” that digital distribution will overtake traditional retail.

Speaking at Microsoft's Gamefest event in London, Gosen said, “There’s no question digital will overtake physical. It happened in music and will happen to our industry." He pointed to downloadable content for Guitar Hero and Rock Band, as well as the success of Xbox Live, saying they prove that “digital will be the dominant force in future”.

Earlier today SPOnG told you about the tidy $240 million Xbox Live Arcade has generated in revenue so far.

Gosen also said that Microsoft is readying itself for a big spend on Xbox Live in Europe to attract new customers. "We believe Xbox Live as the key differentiator in the business", he said. "But we haven't taken advantage of Live in Europe as much as we could have - it's been our best kept secret."

A bit more enticing was Gosen's statement that we should, "Expect to see some big announcements coming from us about Live, specifically for Europe, in the coming month."

There looks to be a bit of a clue in comments Gosen went on to make to Develop - "We’re going to focus on Live in Europe and we need to make sure that the content we offer is really strong. So in the US the deal they announced with Netflix is a big coup; it’s transformational in providing a significant amount of content on the video marketplace.”

A deal along the lines of the Netflix arrangement would go down nicely, thanks. Unless Microsoft's planning to scrap subscription fees as it did for Games for Windows Live. We can dream...

Oh – guess what? He ended his talk on a slide that said, ‘We WILL outsell the PlayStation 3’. Good for you!

^{Sources: MCV, Develop}