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dib8rman said:
In otherwords you described a solution a long with the problem.

Game Stop either turns into a hardware retailer or fades away.

Retailers don't make sales happen consumers do, unless they buy their own merchandise.

DD is the way it's leading, prehaps a happy medium?

I picture Sony being the biggest fighter of this, Nintendo and Microsoft being the first to make the move. That's as far as consoles go, if I remember correctly it was either Phillips or Maxwell that were working on a new Disk type, I'd figure this would become the new HDD rather than a medium.

That's just from what I've seen though, so it could be wrong.

Are you kidding? Retailers absolutely make sales happen. Walmart can single-handedly destroy any product they want. They easily killed HD DVD. Gamestop certainly can kill a game console. You are grossly underestimating their importance and the percentage of video game sales they represent. 

Not to mention, Gamestop isn't the only retailer that would refuse to stock a console that sold no games.  Best Buy was threatening to drop the PSP just last year and it even has retail games.  You don't think the other major retailers would do the same?  Of course they would.