The guy has some interesting points, and I seem to recall reading that retail stores sell consoles for very small profit margin, though I can't really verify that. But if that were the case, then content distribution moving online would definitely see retail profits shrinking a lot, and retail business is all about profit per shop floor space. So there is some valid grounds for his concern, especially when it comes to retail giants like Wal Mart. It's not like they don't have other products to sell in case they can make a better profit on something else.
Here's some info about Wii retail markup: http://www.engadget.com/2006/10/07/wii-retail-details-markup-and-endcaps/
Using those (outdated) figures, you'd get these profit margins:
Wii console 5.3%
Wii Remote 25%
Classic controller 37.9%
Nunchuk 37.9%
Games 21.4-25%
Other than the console itself, those seem pretty standard retail margins, and if you turn them into absolute profit it is clear that the (roughly) ten bucks per sold game is where the retailers make their profits. Touch that and you're on thin ice. That's the point the guy was trying to make, but he conviniently left out any mention of PC retail markups, which I don't think are much better than concoles. So what you're left with is a change in the retail structure of both console and PC gaming.
