I'm afraid I disagree with most points in your analysis.

1. Steam doesn't "invade on GOG's territory". I doubt that Steam is even actively pursuing older games, this part of the market is too small to be of much interest for them. Look at the player statistics of games like System Shock on Steam, compare them to the player statistics of other games, and you'll see what I mean.

What happened is that some publishers (namely Night Dive and Square Enix) are currently exploring the viability of releasing old games on Steam. The games _are_ selling, but they don't move many units, so it's probably a viable business strategy, but not one that would obsolete a specialized place with a community specifically interested in that niche.

2. GOG is still _the_ Go-To place for people searching for classic games. The vast majority of GOG's classic catalog isn't even available anywhere else.

3. I strongly doubt that the GOG crew feels "threatened". They have no reason to. In fact, of all of Steam's competitors, GOG probably has the least reason to feel threatened due to dominating a specific niche of the market.

4. The recent sales mechanics are no indication that GOG feels "threatened". GOG has always experimented with new sales formats. It's part of their general marketing philosophy to experiment a lot and then stick with the stuff that works. GOG has experimented with different sale and promo formats long before classics like System Shock arrived at Steam.

So, to answer your question - no, I'm not worried. I do expect some major shifts in the market in the near future, but GOG is probably the distributor I'm the least worried about.

they have to UP THEIR GAME

Nah.

Pretty sure GOG was aware this was going to happen sooner or later which is why they've been expanding into Indie's and looking at other things to expand into (hence the surveys). There's no reason for the publishers to sell their classic games only through GOG, it was only a matter of time before they realized there was a proper market for it outside of GOG as well.

Take a towel. And just don't panic.

Sausage!

GOG or CD Project Red would be buying up older IP if they really felt threatened.
Like HumbleBundle and DotEMU there are spaces for them, so long as the buyers feel confident. The long term is still a long way off for digital distribution and apart form the future of Steam going into the home console market there is nothing guaranteed. Just like the XBox could have ruined Microsoft, so the Steam Box could cause massive losses for Steam.
For now we all just need to wait and see. So long as people feel confident in buying from GOG, and they continue to add games to their catalog then I am sure they could weather other sites moving to selling older games too.

A third reason is they've become Stockholm'd by the Cult of the Gabe to the point where they will shit-talk any distribution service that isn't Steam, including GOG, for no reason.

For instance (the board for the recently released - on Steam - Realms of Arkania trilogy, another instance where I guess you could say Steam is "invading" "GOG territory"): Though this one might not be a serious post, I dunno, hard to tell... Now this is a man who has been so completely and utterly absorbed by the acidic jelly that composes most of Gabe Newell's body that he has become One with Him.

LOL, I read those quotes with ReviewtechUSA's "Gay for Gaben" voice in my head.

Don't forget about how GOG is an illegal warez site selling pirated games they got from Abandonia.

Oh wow, I kinda forgot about those braindead exist %)

But on a more serious note I do hope that gog will stay really different from steam and will invent something new but I'm not sure what it may be.

Another thing keeps me wondering if there's a way to tell if games will go gog after they appear on steam or not. Coz I bought some indie titles from steam some time ago simply because I didn't expect them to be on gog %)

The US version of PCGamer magazine, February 2014 issue, pages 70-71. Review of Redshirt. "Copy protection: Steam".

So far as I can tell the game was released both on gOg and Steam on the same day. Copy protection: we trust you with our product, if you buy it from gOg.

It's an uphill battle, to be sure, and unless Steam adopts gOg's DRM-free stance (and that includes making their entire DRM-client optional) then that service isn't on my radar. Is this small subset of the buying public - those who buy games like I do - enough to sustain gOg's efforts and allow it to grow? We shall see.

But I know I can't be alone in buying games here because of the things gOg do NOT do...

I feel for that guy. It wont be long until Steam go ahead and do something like it too. HB already went and gave it a go, they got the same feed back as GOG did. Yet when Steam do a shortage sale they will know better.
10000 copies of Jack Keane 2 for them at 75% and they will be happy. BAWHAhahahahahahahahahahaha.
(Off to go troll the Steam forums as LundB :-p )

Not more than usual. There is still a a lot of mismatch between the top sellers of GOG and Steam although the loss of Fallout really hurts. And also a bit more direct competition was expected - it's only natural to happen over time.

Generally I'm sad that the big publishers cannot let go of DRM and cannot offer their AAA titles from yesteryear DRM free here on GOG. But neither me nor GOG can do something about it and worrying about it also doesn't help.

We are only small players in a big game.