grandmaster
Veteran
Amazon.com already does this for XBLA games btw. When you buy a XBLA game from Amazon (sometimes Amazon may have a good sale that isnt on regular XBL), you're just buying a download code.
Not much good if you have a crap internet connection. Secondly, the older generation would be far more likely to want to buy *something* as a present to give to a child rather than a download code.
Don't get me wrong, digital distribution is obviously the future, but it's exactly that. The future. And I'm not sure the actual physical product will ever go away.