2 reasons why I like physical more:

1. I can have way more games without having to always worry about hard drive space. Sure, the PS4 and X1 kinda make that a moot point since you have to install huge amounts of data no matter what, but every other console, that's a big deal. I have over 80 360 games in physical form. No way those would be able to fit on a normal 360 hard drive. Otherwise, have to spend $100+ to fit on an external hard drive.

2. I just love having a collection. I'll honestly sometimes just kinda stare at all my games (all 250ish of them). I like swapping discs and putting them in the console. It just doesn't feel the same selecting a game from a menu to start playing it.

2.5 I can lend my games to people if it's physical.

I doubt I'll ever want to go full digital. I like physical copies of my games too much.

In the end, current gen consoles are more or less digital only already. Day 1 patches, online gaming, firmware updates. Especially patches are more a thing than it was last gen, many games release broken, just to be fixed by a day 1 patch (or even more patches after that).
You don't even play off discs anymore, they get automatically installed on your disk. The only reason to buy a disc is if you want to sell a game afterwards.

Again this argument comes up and again we in the UK say the same thing. PRICE.

I am not paying £55 digitally for a game I can get for £35 in a shop. When this is reversed, when buying a digital game is worth it over buying a retail disc version, then I'd consider buying games digitally.

Adding to my post - Those saying physical is cheaper or the same price of digital is simple. Digital on consoles is still expensive because companies want you to buy the store copy first because its cost them more to write on disc and supply the stores with. The moment we remove physical copies from store shelves digital will take off and if you have ever used Steam before you will see the benefits of there sales they offer every week.

Sure its nice to have a box and disc with our purchase but lets be honest here. Are we playing the game or are we too busy looking at the box art? They don't supply booklets anymore, you require day one patches to run your game most times and instead of eating up hard drive space, your eating up your actual house space. Install the games you want to play and the other games sit there waiting for a simple click of the download button. Its a much better convenience in my opinion then trying to search though 100s of games and then having to carefully place the disc in your drive to play it.

We don't own the games anymore like gamers like to think. Games are run off servers and there networks now. You can own all the games on a disc but if the company shuts down there network and you require a day one patch to play it, it becomes useless and goes back to my point about becoming junk. Hard copy games were great in the cartridge days, ever since CDs and the internet, its become nothing more then an old habit then a benefit.

This is just my opinion, again I own 100s of hard copy games but I am now losing interests in collecting them because I don't see the point anymore. A great example is I can go over seas, visit my friend who owns a X1 or a PS4 and log in to my account and download the games straight off his machine (as long as I have purchased the game on my account) and it saves me bringing over boxes of games or rebuying them at the store. This is a great point because I recently went interstate and my mate had a X1 which I used to play my games on and it cost us nothing except download memory which he had heaps of.

You need competition. How is removing games from store shelves helping anyone but the console manufacturer's own stores? If there is only 1 shop to buy your games from, prices would be fixed, they kind of already are (see Killzone Shadowfall, a launch game, £35 on PSN, you can get this for a £5). There would be no companies competing for your money for pre-orders or 6 months down the line once everyone has forgotten about the game, it'll be £45 and it'll stay £45. The option and solution is to allow retail stores to sell digital codes, and because there is no disc, no returns and no exchanges on these code, it should be cheaper. If I goto GAME in the UK and see a £40 disc game and next to it a £35 digital , I might think to myself "Yeah, I know I'll play this, I might as well just get the £35 digital code instead." Once digital codes are available like this in stores, PSN would have to compete against them, reducing the cost.

The rest of your points are valid from a convience point of view, except the server thing. Regardless of if you have a disc copy or digital, if they turn the servers off, you can't play. 

The laws of demand exist in digital space too. I don't think console manufacturer can fix prices for other publishers. Let's say EA does $60 pre-order for a new game, Activision can counter and go for $50 instead. At the moment development costs are gathered mainly from physical retail sales, that's why the pressure to drop digital price is not there. Physical copies are already manufactured and thus take precedence, the money has been already invested by the publisher. When it's all digital and a high budget game bombs then the publisher has no other choice but to lower the price. PC digital space will keep console equivalent in check. Game costing $20 more on console digital store will not have any chance against PC digital version, when both are digital only.

Will it work like that? I mean, sure EA and Activision compete with each other for game sales but with prices too? There are few gamers who actually try and consider their purchases between 2 games based on price. People usually either want a game or they don't and then price decides where they get it from. If there is only 1 outlet, the retail price of $50 for Game A vs $60 for Game B is pointless if the customer only wants Game B.

They could make it more appealing to buy digital, whether it's by price or by other options in a highstreet store, then many might consider buying digital which has a better turnover per copy sold, has no '2nd hand market' either. Manufacturing costs will go down as over time they'll need to produce less physical copies.

... but they don't. While PSN has games listed as RRP (£50 plus) and retail compete with each other to release a game at £40 or less, buying games digitally is not appealing.

Yeah, that's what Ubisoft said. Too bad that plenty of PC games have both the digital and physical version, with the digital one being usually cheaper (or so at least I hear from the PC gamers). And no, the cut taken by Sony/MS/Nintendo isn't relevant, since it applies to both.

Regarding digital taking off.. Not with my internet connection. The digital divide is still big around the world. Still, with those prices, I'd stick with physical. In Europe we get a good saving in many physical pre-orders, let alone once the games are a bit old. My opinion is that digital prices (on consoles) are kept artifically high because there is a lot to milk in there. Any other explanation from publishers is just bollocks.

Personally I prefer physical, I like having a collection. I can see the appeal of a digital collection though

Really? It's rare for a AAA game to be under 40GB, Especially seeing as after a week of coming out they'll have 3-5-7GB patches.