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Digital distribution won't kick in during this generation strongly enough to kill physical distribution. We should already be seeing the marks if there was to be any chance. No, normal games will stay on physical media at least for this generation unless we move to smaller - that is, more casual - games.

Anyway, I'll stick to physical distribution until the very end - or until there's absolutely no sense in using buying discs.

Oh, and Xbox 360 doesn't even have a HDD by default. Also, net speeds are still too slow for big games (that's for all platforms).