If retailers are cut out of the games business, they won't make loss leading special offers on HW anymore, it wouldn't make any sense for them. So the burden of pushing HW sales, particularly in the first years after launch, when production cost is still high, will entirely fall on HW producers shoulders, they'll have to offer retailers a far greater profit margin on it, like it already happens on any appliance or device that doesn't push other sales for the retailer. So forget forever overpowered consoles or short lifecycles, even now 6 years from previous launch has already become a bare minimum, with 7 or more years for those that can afford it, 7-8 years could become the new minimum, with 11 or more years total lifecycles. Every power and graphics whore will have to come back to PC.
PC will rule the gaming world again! W00t! W00t!! W00t!!! 
Edit: OOOPS! Joelcool7 beat me to these considerations... But he missed the logical conclusion, PC DOMINATION!!! 
BTW, PC will always have the physical media option available, it's a quite open platform, except for the OS, but even about it, MS won't ever drop the support for physical media, it will always widen it instead, as it sells Windows as a general purpose OS that happens to be a huge gaming platform too.
