The only way I could see full-blown digital distribution working would be if the companies set it up like Steam, where you can usually preload big-name games (but with better servers that don't get raped on launch day even with that provision in place). Again, people want to be able to play on launch day, and again, it wouldn't be discs just being harder to find; it'd be new games ceasing to be released on disc at all.
You have to understand that a lot of game companies are really bad at a lot of this stuff. It's why Activision released a billion
Guitar Hero games in a single year, and why UbiSoft implemented DRM on their PC games that requires you to be online to play a single-player game. It's why Jim couldn't buy BioWare points so he could buy DLC for
Dragon Age. And it's why you'd see disc releases stop entirely rather than just slow to a trickle. Like I said, there are already download-only retail games on at least one platform. The companies' logic: if you go to digital-only, you eliminate the used game market entirely, and as a bonus, you get to set prices however you want, so you can keep charging $60 a game (or more) even though you've eliminated most of the costs that should justify that price. Even better, if it's all-digital, you can always legally disable people's accounts and access to games they purchased at your discretion! (If you think they wouldn't do this: Some people have been banned from Xbox Live not for modding their system or other unwholesome activities, but rather for
using a third-party hard drive.)
I really do like the idea of being able to download games a part at a time and them being set up to be playable like that, and it could work even during this generation (and, as a bonus, it screws over the pirates as well as the used game market, since as I understand it, it's basically impossible to pirate XBL Marketplace stuff), but companies would have to be willing to program a game like that, and the console manufacturers would have to be willing to let things work that way. And you'd have to work out all the possible bugs with the system, which includes testing on every possible model of your console rather than doing Sony's retarded thing and having every one of your dev systems be the same model.
As an example, I've talked with one of the devs from
Rockin' Android, a company who licenses
doujin games for English release. They recently released
Gundemonium Collection as a set of downloadable titles on the PS3. Unfortunately, the games in the collection have a problem where if you download them all at once while you're playing whichever finishes first, the audio gets screwed up (I think it's more complicated than that, but that's the gist of it). And they couldn't possibly catch this in testing, because every dev console Sony supplies is the same model (though apparently it probably wouldn't have mattered because it's incredibly inconsistent with regards to which models do or don't have this problem). And they aren't going to be able to do a patch to fix this problem or any of the other problems the team that ported the game (unaffiliated with Rockin' Android) introduced, either, because apparently Sony makes you go through so much red tape to do anything that it's not worth the effort. (Said red tape would be another issue relating to the all-digital idea, along with the sheer size of games on Sony's console - Blu-ray discs are absolutely massive - versus games on the 360.)
And I like the idea of DLC. I like the idea of being able to buy extra stuff for a game - maps, challenge levels, full bonus campaigns, whatever - to extend its playability. You know, basically like what an expansion pack used to be, except cheaper, and you don't have to go to the store to buy it a year after the base game's launch. I don't like what companies do now, which is sell a purposely-incomplete game at full price and then release the rest as paid DLC (as well as DLC being on the game disc to start, which is just an open admission from the company that they're trying to milk you). And it's not going to stop, because gamers let it work. (Note that I have less issue with releasing an incomplete or ultra-buggy game with the intent to release massive patches or free content additions shortly after launch. It's charging extra for stuff that should've been in the game to start that I hate. And I'm aware some of this is Microsoft's fault more than the publishers' - they really don't like free DLC in XBL Marketplace, so companies don't have a choice but to charge for stuff that should've been free.)
Oh yeah, and I missed this before:
Another [way to combat used sales] would be to simply lower game prices. I'm not sure how feasible this one is, because I don't know how much of a margin there is between the cost of making a game and the new game price
I think the prices of new games basically boil down to costs for everyone
except the developers (again, devs make far less than they should), plus publishers knowing they can get away with charging high prices for new games. Aside from boosting sales numbers, which I guess would look good for the stockholders and probably fuel more anti-video game arguments ("video games are bad because they sell so well and kids could be spending that money on more wholesome things") but is otherwise not particularly important, the publishers wouldn't really be any better off if they sold two copies of a game at thirty dollars each than they are selling a single copy for sixty now, so there's no reason there to lower the price.
Theoretically, digital distribution should involve lower prices than retail, since it eliminates things like retail and manufacturing costs and (in most cases) limited supply from the mix, but I think gamers are just used to spending fifty or sixty dollars on a game at this point, and the publishers certainly aren't going to stop if there's a market for it.