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Lots of people have doubts about digital distribution of games. So long as we're not cloud computing I don't see how it's any different from gaming of the past three decades.
Games are likely going to be sold strictly through digital distribution in the not-so-distant future. I don't intend to be an old grandpa telling my life's story and being long-winded, so here's the breakdown.
All games have needed to be saved somewhere. Even if an Atari game didn't save your game progress or high score it had the game code stored on it. With NES and SNES it became increasingly mandatory to save a player's progress on essentially a mini-hard drive. When you go back and play those games today there's no issue, right?
I've downloaded 20+ games on XBLA, Games on Demand, etc. When I go to a friend's house I just bring along the detachable hard drive and we can play my games without a problem; but they need to be connected to XBL (not Gold, just XBL).
If I'm connected to my 360 I can play the games I've downloaded, online or offline. In other words twenty years from now I could pull out my 360 and play those same games. Unless Microsoft gets sugary sweet and allows backwards compatibility for digitally distributed games (which seems more doable than with discs)
People like trading in games they dislike. One other benefit of XBL is that all Arcade and Indie games must have a demo. That should be a precedent Games on Demand follow. That way people aren't wasting cash they made sleeping at their office desk. The other incentive which comes from digital distribution is cutting the middle man (the middle men can go make their own games). That makes prices cheaper. $60 games could be sold for $50 or less.
Cloud computing companies may fail and then you'd see all your games, media, and money/time spent go to waste. But, so long as there's a hard drive attached to the console, we're safe.
The future is still relatively similar to the past. And by the the time the logistics of cloud computing work itself out I'm pretty sure the hardware of the 360 could take up a tiny portion of a 3D OLED TV. Keeping the actual data in our house. As Ray Lewis says, "We must protect this house!"
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