Not sure I get the con of hardware failure. In all my years gaming only had one system die on me, an Xbox 360 RROD. Other than that all systems have lasted a long time, I still have a Genesis and SNES that are functioning.
On the flip side I have experienced all sorts of issues with internet connections at my business or places I've lived or visited. Also, having to get internet would suddenly make gaming a much more expensive hobby, especially the kind that gaming would require. I really do not like the idea of paying $50 a month just to access my gaming library that I already paid for.
From what I've seen on PSN and the Nintendo eShop, going digital does not mean cheaper. If anything digital games hold longer than retail copies of games. I can plan on disc based games of most major titles dropping 50% within 6 months of release. I also have that option to let friends borrow it or sell it if I should chose to do so.
There is absolutely nothing appealing about the cloud model and I honestly could see publishers using it as an excuse to charge more for traditional physical releases down the road.
