Personally I think more needs to be done before people will switch over.
As far as I am concerned content is content, regardless of how you get it - but having a physical copy of something is more for customer reassurance than anything else because it makes them feel like the provider can't turn around to them and go "Sorry, we lost your stuff - so pay for it again".
With the speed of the internet ever improving I suspect that alot more 'cloud' solutions will take over and digital distrubtion will be replaced with simple client machines that access games on a central server.
To work the new digial ditrubtion needs to re-think its pricing plan because if you charge £40 for the physical item and £40 for the download people will take the physical copy everytime because you get more 'value' from it (the box, the reassurance and all the extras that feel like you're physcially getting MORE than a download).
Its the reason why music downloads are so much more popular than buying CDs is because its far FAR cheaper. Either you can buy the album for £15 and end up with some tracks you hate (and therefore feel like a waste of money) or only spend 99p on tracks you DO like and feel like you get more value for money. With CDs you'd only end up ripping the tracks anyway and throw the disk into a corner to gather dust.
However if they charged £40 for the boxed game and £20 for the downloaded game you'd find ALOT more interest in digial downloads - and games should be cheaper because you don't have the manufacturing costs of all the manuals, disks etc.
If games are eventually 'cloudware' and downloads are no longer required then users need to be able to have a few more pricing plans - free demos of games (for a short time), pay per play or full purchase (unlimited access). This means that players will gain more from the cloud solution because of the ability to try multiple games or pay games for short periods without having to suffer buying games that they don't like etc.
As for having physical boxes for collections etc, thats all well and good - but personally I find that its only so that people can feel smug or show off. If you have 1 million songs at home sitting on shelves its great until you come to USE them, where as 1 million tracks on your ipod / MP3 player is far more useful (even if its not as impressive

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