With the digital movie and rental markets starting to transition to streaming rentals and digital downloads for purchases, many expect the same thing to happen with the video game market. The problem with streaming video game services such as OnLive is that lag and the quality of the internet connection can make the games unplayable.
Sony's PSP Go so far has been a failure. This was Sony's first attempt at a download only game console and the Go was met with very mixed consumer reactions. Some stores even refused to carry the console. A Sony executive once proclaimed that he would be surprised if the PS4 had a physical optical drive. That proclamation may have led many to expect the PS4 to be more like the PSP Go than the current PS3.
Apparently, Sony has learned some lessons and Kaz Hirai has offered up a few factoids that point to physical media being integral to the PS4. Hirai said, "We do business in parts of the world where network infrastructure isn't as robust as one would hope." He continued saying, "There's always going to be requirement for a business of our size and scope to have a physical medium. To think everything will be downloaded in two years, three years or even ten years from now is taking it a little bit to the extreme."
Despite the fact that there will apparently by a physical optical drive for media in the future Sony console, downloadable game sales are booming. A recent report from the NPD group claims that almost half of all video games purchased in 2009 were online downloads. It appears that both physical and download games will continue to be important for consoles in the near future. NPD Group reported that in 2009, 23.5 million games were sold in the U.S. at retail and 21.3 million were purchased online.
Presumably, that would count games purchased for smartphones from the App Store and other smartphone markets.