The main reason I stick with physical games is because I can buy them used, and potentially even break even on games when buying from craigslist or whatever. I usually don't ever actually get around to selling them, but I still like having the option. I hope physical games stay around as long as I'm still playing them.
That being said, I think it's coming sooner rather than later due to it being more profitable for developers. Console makers can even make additional money selling proprietary storage.