I personally think downloads work great for steam, so pc games should stick to downloads while consoles should stay hard copy. With the Xbox360 install-to-drive feature were getting ever closer to a console that doesn't require discs, and while that's fine and dandy, the games definitely take up too much space for a console.
The only problem with this is that Valve is like the only company to have a good download and keep forever system on pc, the rest usually involve one download to drive, and we all know that hard drives don't last forever.