as some have pointed out, download content is far from perfect yet, the biggest problem for me is I live in a slight rural area so broadband speed if I'm lucky get just over a 1mb its really annoying as I can't really enjoy most online games, it just too slow, and to download just even the simple updates to games or the ps3 takes ages, reminds me of the old spectrum days, setting it up to load a game and then going for a bike ride or tidying up for half a hour and then finally I can play, this is what I sometime have to do with the ps3, not really progress is it.
Plus like people say the online prices are sometimes more than physical copies and there is going to be less competition if we just have one central store for each platform wich is what seems to be happening at least in the pc market their is a little bit of competition.
so I do feel physical media is still needed.