I've been saying for awhile now that games are slowly moving more and more towards an almost exclusively digital product, much like music. Sure, you can still buy CD's, but the majority of people today use mp3's to load up their iPods and what have you.
Steam is a great example of it working. The sales that they hold on older games proves this. Hell, just last week, I bought Knights of the Old Republic for $2.50. It's about the same price that I wouldn't have passed up had I seen it in a bargin bin. I've yet to even install it, but the fact that I can now go back and install it any time I want, without the hassle of a disc that will eventaully get scratched is comforting. The nicer thing is that the games are selling cheaper digitally than in-store. In that sense, it almost makes up for the inability to trade it back in. This is especially the case when you buy it ridiculously cheap. Last Christmas, when they had those massive holiday sales, I bought about a dozen games for about $20-25, altogether. That's just ineane. I picked up things like Braid, World of Goo, Machinarium, along with their LucasArts collection and others. I bought Max Payne 1 & 2 to for less than $5. When they sell the games that cheap, it's almost impossible to pass up on the deals. It's like flea market prices.
Now, PC games are certainly almost entirely digital these days. The shelf at my local Gamestop for PC games is pathetic compared to consoles. There is a growing number of people that are getting their PC games digitally.
Consoles? That's another matter. On the one hand, most games are still in disc form. But you know what? The majority of my purchases for PS3 have actually been through the PSN. Joe Danger, Turtles in Time, Scott Pilgrim, some PS1 games. While the big-name, big-money games are still on disc, I think right now, digitally-provided games are giving smaller studios something of a new Renessaince. The two-man studio who made Joe Danger, for example, turned a profit on the very first day the game debuted on PSN. I don't know if or when console games will move to all-digital, but it's slowly making its way there, now. You can now buy Infamous, for example, on PSN. Whatever the next consoles are, whether they're the Wii 2, the PS4 or the Xbox 720, I think you'll see a growing focus on downloadable product.
And I'll be right there to support it.