Microsoft: We don't want to upset Xbox 360 retailers with Games on Demand

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SvennoJ said:

High initial costs. A secure software system to handle 'printing' games won't be cheap.
Low usage expectations. Digital music kiosks do exist here and there, hardly anybody uses them, and you don't even need to buy extra transfer storage media for that.
Is it going to burn a blu-ray on the spot? Or does the customer have to invest in a fast writing 50gb usb stick for transfer? (The fastest SSD cards take 20 sec per gb atm, over 6 minutes for a 20gb game, about 10 minutes for an 8 speed blu-ray burner)
Low user experience. Why go to a store to browse on a machine, plus only 1 user can print / browse at a time.

It makes more sense to have display cases on the shelves to browse. Then when you want a digital version (linked to your account, no need to have the disc in the drive) you get a cheap disc in a sleeve with a code to take home. A shop can pre-burn the discs and have a secure machine to dispense the codes to save on shipping costs.

Anyway what incentive do shops have to actively help eliminate the 2nd hand market?
What incentive do customers have (apart from not needing the disc on startup) to get a one time use disc over one that they can resell later?

The consumer only has an incentive if the price goes down.

Best Buy, Wal-Mart, Toys-R-Us don't really care about the second-hand market.  If they're in it, like Best Buy is, they'll take new sales over second-hand in the long run because the only reason they entered the second-hand market is because Game Stop is so financially successful doing it.  That SHM starves BBRs like Best Buy and Wal-Mart not only with the original sale, because a kid walking into Game Stop will trade in a game to buy the next one he wants, but another potential gamer will walk in and pick-up the game taking away another potential sale.

Kill the SHM and new unit sales will increase.  Make it digital, make it inclusive for BBRs, and give customers an incentive to use it and it'll work.

I personally like a digital library of games.  As someone who had 8 Xbox 360's go bad, 7 of them because of a DVD drive failure, I can atest to the benefit of a digital library.  Would not want it any other way!

I can go to my nephews console, download a game, and play it on his console while I'm logged in to Xbox LIVE.   I don't need to remember to bring a disc or take it home.   That's awesome to me.

Do I lose the ability to sell the games?  Sure, but you're talking about a feature I don't really care about.  I kept my original Xbox games long after I sold my Xbox.  My nephew wouldn't agree with me, though I could convince him of it.

There would be trade-offs and the trade-offs have to offer value.  I won't disagree with that. 

Oh...If I don't have Internet, and the only means of getting a game is via a kiosk that makes me wait all of 6 minutes to transfer 50GB of content...I'll wait.

A kiosk can be multi-faced with a single data store.  For example, a cube.