Case in point: Prey was released in 2006 on disc and digital distribution via Triton (or Venom, I think). That company went under about two years ago and those who'd purchased the game from them were given game discs as backups. I'm not saying that Steam or even Games for Windows Live will suffer a similar fate but I wouldn't completely rule out game discs in the future either.
John Carmack, the head of id Software which designed games like Doom or Quake, said in an interview that in the future digital distribution will destroy the market of video games sold on media. While digital distribution has been dominating the software market on the software platform, desktops and consoles are likely to continue usage of media for foreseeable future.
"Everybody knows that eventually will be digital distribution like this – it’s only a question of time. Clearly, packaged goods sales are still critical on the big platforms at this stage, but that’s all going to go away sooner or later. This is the model of the future," said John Carmack, the head of id Software, in an interview with the Telegraph.
Games for mobile devices are not large in size, therefore, they can be downloaded pretty rapidly using mobile networks or Wi-Fi. But high-profile games for personal computers or video game consoles are currently distributed on multiple DVD discs or even on Blu-ray discs in case of PlayStation 3. It is hardly convenient to download more than 10GB of data, which is why traditional games on discs will continue to be sold in the coming years.
In case of PC platform, there is Steam service that gives access to a broad lineup of games, many of which are simply not available in the retail nowadays. Personal computers may be upgraded with additional hard disk drives, therefore, gamers are able to download as many games as possible. But modern game consoles have limited amount of storage space (if any, in case of Wii of Xbox Arcade) and they will continue to exist for at least three or even more years from now. For that reason, video game developers will have to "cut deals" with publishers and distribute their titles on packaged media.