Digital distribution is definitely the way forward because the actual end product (the game itself) is the same no matter what media is used, and digital distribution is much more efficient. Additionally, the majority of games now tend to be played on internet-enabled devices. This is where it is slightly different from music, which often isn't lossless and people often want to play them on devices that cannot easily access digital copies (e.g. older car steroes, hifis etc).
Realistically once the games industry (publishers etc) accepts that the traditional bricks and mortar sales cannot be sustained indefinitely there will come a time when "digital only" policies start to take shape. This may exclude some people from gaming at times but it is a natural progression and indeed as time moves forward more and more services we receive are likely to start requiring an internet connection in the same way that certain services historically have required a physical postal address, or phonenumber. Online shopping can only get more and more dominant, the only issue I can see longterm is whether the cost of delivery (currently subsidised) is sustainable amidst rising fuel costs, or whether we will start to see a situation where the days of cheap/free delivery on small items fade away.
From an efficiency standpoint there is really no argument - manufacturing, distribution, shelfspace, sales assistants etc etc are all things that can be elminated which in the long term can only be a good thing for the majority, albeit not everyone.