Welcome to the 21st century where every bit of media has gone digital. Newspapers are dying off unless they go online, nobody buys the newest CD when you can buy the couple songs that you really like, and digitally distributed video games are becoming more and more common. PC gamers have been aware of this for a long time and it's worked out really well on most occasions, but DRM restrictions on their software have been a thorn in their side. That's not to say there's no upside to it, Steam has led the charge for video game downloads for nearly a decade. This is due, at least in part, to their awesome sales. Many a wallet has been hammered by the Steam Summer Sale, and for good reason. With no physical copies to house and ship, Steam has a much smaller fixed cost on each sale, so even selling products at anywhere from 25% to 75% off can still net them a profit. But with streaming systems, like OnLive and Gaikai, that have no physical media whatsoever and EA, one of the industry's biggest publishers, talking about going 100% digital, this could pose a problem.
Right now, even though it is more than 10 years old, the whole idea of digital-only games is still in its infancy, some of the kinks are being worked out. For instance, if a new digital distribution company starts up, similar to how a mom-and-pop type of store could open up in your town, would you support them? If they have a good business model, the right games on sale, and special promotions, you might. So now you've got an awesome new game from this newcomer. You enjoy the game, beat it, but then something happens: maybe your hard drive malfunctions, you uninstall the game because you need space, you reformat your system, or maybe you get a virus. The list goes on and on. Now you want to play the new expansion, or replay the game just for nostalgia's sake. Back to that digital distribution company's site and-- They're gone. Closed down, bankrupt, whatever. Where's your game now? In all likelihood, gone forever. There's no protection for you as a consumer that you'll have access to software that you bought in such a way, unless you keep it backed up elsewhere, at possible additional cost to yourself.
Speaking of additional costs, what about used games? Right now, GameStop is one of the biggest video game retailers in the US and they continue to stay in business because of used game sales. Besides the amount they pay you when you trade in a game, all used games are basically 100% profit. They only make a small profit off of new games and consoles, but you have to buy those new games and consoles to trade back in. That's their business model and its working for now, but what would happen if distributors go digital? Those used games that consumers rely on to save money will disappear. You'll find physical game discs and cartridges at pawn shops and retro game stores, but GameStop won't be around for that. They're already working on developing a digital distribution system for themselves called the GameStop App.
There are other smaller problems that already have solutions, like the need for more hard drive space to handle all the games being stored directly on a system. While it's not possible to resell the digital games we buy now, there's hope on the horizon. The EU courts actually ruled that "The exclusive right of distribution of a copy of a computer program covered by such a licence is exhausted on its first sale." [Source]. This allows for the resale of a program's license by a consumer so long as the consumer makes his own copy unusable after the sale. This is a solution that poses its own problems, but as a PC gamer who's never been able to trade-in copies of games he dislikes (looking at you, Homefront), it makes me positively giddy.