Although it is sort of like the expansion pack idea.
Not really, right now if I buy a game I can expect it to be a complete product, with a reasonable amount of entertainment for my money. If the game involves a plot, I can expect some sort of conclusion when I reach the end.
If I take movies as a metaphor an addon pack is a the equavalent of a book set in the same universe. I can perfectly well enjoy the main product without it, I if want some more, I can buy the addon. The customer is in control.
Episodic games is more like a film being advertised as "50c a ticket!" by my local movie theater, except 2 scenes in the house lights come up and the manager demands another $5 to turn the projector back on. By the end the movie has cost me $50. Control is in the hands of the publisers and I end up paying much more for my entertainment than I expected.
The episode way, the developers won't have their money invested for years with no return, as in a full new version of the game - they increment it out & get a faster return for their investment.
True, they should actually get a bigger return, but this isn't necessarily good for the customer. $20 for an episode via digital distribution is probably just a much as a game developer gets for a full game sale via traditional distribution. It dramatically alters the value proposition for the customer. If all this extra money goes into making a better game then all well and good, but I fear dev teams being cut back to maximise profit once they've made a few good episodes (particularly if big corporate publishers go this route) is the more likely scenario.
Digital distribution (the only really viable way for episodic content) also means I wouldn't be buying a copy of the game, just the right to play it. With traditonal distribution I can sell or trade in my copy once I've finished with it. I can't do this with the usename/password I get with steam.
Even if the price is reasonable, should an episodic game peter out into medocrity it'll leave me feeling pretty pissed off at having bought into it. With the current model reviews can give you an idea of whether or not to buy a game. An episodic model will make it much harder to find out if a game is good or not without buying into it.
One way to avoid this would be for developers to make each episode self contained (like a tv-series episode) but have certain themes carry on through. However part of the reason I like modern computer games is the feeling of being part of a large overarching story which is told in a cinematic style. Gaming will lose somthing if these epic plots are dropped for something akin to 30 minute "quick fixes".
There, that feels much better, I'll shut up now :-)