I edited my post because of that typo. Anyway, theres a reason theres always firmware updates on PS3's. 

And what happens for people who don't have internet connectivity?

Other than that, there's the question of the cost of manufacturing the multi-layer BluRay discs, not to mention the time required to read them - do you really want a game with load times that get measured in minutes?

An optical disc will be cheaper per GB than ROM for the forseeable future. The reason the markup on writable Blu-Ray discs is so high is that there is no demand for them and the dies needed for a recordable disc are more expensive than a replicated disc. The markup on a memory card can get prety slim as there is a lot of demand. And profesional disc reproduction is not done by writing each disc individually with a laser like a home recordable disc, they are actually pressed into a "mold" which is created from a glass master disc.

Even using a 4:1 ratio a 64GB card is going to cost ~$10+ today and if you want fast read times then it's going to cost more, which is why Sony used such slow cards (topping out at 7.46MB/s vs SDXC tops out at 17MB/s currently and a 2x Blu-Ray drive which is in the PS3 is 9MB/s and the fastest Blu-Ray drives offer up to 54MB/s*) for the Vita which currently top out at 4GB (will go up to 8GB in the future) for games.

*the advantage of flash memory is in almost 0 seek time not actually bandwidth

It's been quite a few years since the hardware qualifications have been updated. I doubt everyone will need online to use a better Blu Ray player at launch unless they want to upgrade its use.

3DS games cost only $35-$40, and go up to 4 GB cards already.

Meanwhile, Transcend's 64GB SDXC claims 20 MB/s already. Lexar claims the same speed for their 128GB card. Sandisk claims 30 MB/s for their 64GB card. And as far as I understand it, the only limit to a card reader (other than the card itself) is the bandwidth that it connects with - USB 3.0 goes up to 5 GB/s, and they use that often with SD card readers.

So presumably, it only takes improved card technology to increase the speed of reading a card. And even the first ever SDXC card was able to operate at 400 Mbit/s, which is 50 MB/s (and that's a read/write speed - presumably, read-only would be faster), so I'm not sure where you're getting the 17 MB/s "maximum". And then there's the top-of-the-line Lexar SDXC card, 64 GB with 90 MB/s read speed. And if they're that fast now, they'll almost certainly get faster, with no need to replace reader hardware to do so. Compare with a disc reader, which is limited to the specification speed of the reader.

Also note that the 54 MB/s Blu Ray drive speed is for single-layer BluRay discs. For dual-layer, it drops to 36 MB/s, as far as I can tell. So let's compare SDHC 32 GB to BluRay 25 GB. Max read speed for Blu Ray, 54 MB/s, requiring top-of-line BluRay drive. Read speed for your typical "Class 10" SDHC card, 50 MB/s, requiring typical cheap SD card reader. Price after markup for single SDHC card, $32. Price after markup for single BluRay disc, $10. Which would suggest SDHC isn't worth it... except that you have to consider that BluRay discs aren't going to get much cheaper with time, because much of the cost comes from materials and basic manufacturing costs, whereas SDHC is mostly subject to process refinement. So in 2 years, it's likely that the SDHC card will cost more like $15, while the BluRay disc will still be something like $9. Also keep in mind that I'm quoting the official prices - you can get a Sandisk 32 GB SDHC for $15 new, already.

In the meantime, BluRay discs only really come in 25 GB increments. Most games wouldn't need so much space, really - so you could easily go with smaller cards for many games, bringing the cost down. This option really isn't available for BluRay discs, unless you go for DVD... which means a significantly different fabrication process.

17MB/s is the fastest minimum standard for SDHC (tho aparently they have increased that to 20 since last time I checked, and I made a typo there hen I put SDXC), some companies do make faster cards but they are not gureenteed to work at that rate all the time in all readers and they report peak rates rahter than minimum. But readers are not the bottleneck for card speeds which is why you can buy Class 4 cards which are slower no matter what reader you use. Faster cards are still far more expensive than a slower card to manufacture you are still looking at double digit prices per card vs sub $1 for a disc and the price of Blu-Ray discs is droping as well. 

You point out you can get a 32GB SDHC card for $15, but you can also buy a movie on a 50GB Blu-Ray dis for $15 and 70% of that price is the licensing for the movie. Discs are still far cheaper per GB and will be in the near future especially if you are going to be using high speed SDXC cards. 

Once again I'm going to point out that I'm not talking about using them now. I'm talking about the point that SDHC and SDXC prices are constantly decreasing (so that you can now get a 16 GB SDHC card for the price that you could get a 1 GB SD card for in 2006), whereas BluRay disc prices haven't really decreased by that much - maybe halved in price, if that. The reason for this is that BluRay discs aren't in any way subject to Moore's Law and its related effects - there's really no way to "refine" the pressing of a BluRay disc, beyond perhaps making the process a bit faster or a bit more energy efficient. On the other hand, SD-type cards are strongly subject to Moore's Law and its related effects.

What this means is that, while it is true that, right now, an SDHC of 32 GB is more expensive than a BluRay of 25 GB, this is not going to remain true. And the point I'm making is that using SDHC or SDXC based cards (I wouldn't actually use SDHC/SDXC itself - I'd go with a proprietary variation of it) would allow card sizes to grow with time without requiring new hardware or new firmware. What's more, they would be significantly more compact and less subject to accidental damage.

Consider that even the DS has some games that are as big as 512 MB, now. Indeed, when the DS launched, the largest you saw was 64 MB, up to 128 MB in 2005. By the end of 2010, it was up to 512 MB. Meanwhile, neither DVD nor BluRay discs have increased in size since 2006 (not counting those requiring new firmware/hardware). Card sizes can increase pretty much without limit, whereas discs are practically locked to certain sizes. So if a developer wants to make a game requiring, say, 256 GB of data, they can do it, and it's not going to require more than 5 BluRay discs. It just ends up somewhat more expensive to produce... but then if you're making a game that big, presumably you've already thought through the costs involved.

In short, it pretty much future-proofs the game delivery mechanism (no, downloadable games don't do this, because you can be sure that all potential customers will have storage attached big enough for the game).

well technically you do need new hardware for bigger cards SDHC maxes out at 32GB and SDXC was only introduced in 2009. And I can't see the PS4 supporting anything less than 100GB BDXL dics which really would be more than enough for the next 10 years unless devs start using 4k cutscenes or something. I actually see pre rendering cutscenes becoming less common next gen as ingame graphics reach such high levels it really shouldn't be needed unless they skimp on RAM and they still need them to cover loading. And really without HD video games bigger than even 50GB would cost an astronomical amount to make especially with modern compression and procedural ellements. Especially as digital distrobution becomes more prevelent even on high speed broadband downloading 50GB+ games is not really practical any time  soon for most of the world. 

There are advantages to flash media, but I just don't see it being cost effective for next generation. And as modern consoles are now media hubs and I think that blu-ray playback will be a big enough reason to go with that in adition to the cheaper media. 

Anyway I'm bored so unless you have something amazing to say this is my last reply, I think we will just be repeating ourselves. Have a good day : )

CGI cut scenes take up a lot of Blu Ray disc space confirmed. Next generation can not come soon enough for developers. 25 GB per layer on Blu Ray disc and Blue Rays are dual layered. Blu -Ray discs can hold up to 8 layers * 25GB, potentially 200GB of data on one Blu Ray disc.

While it is true that SDHC maxes out at 32 GB, it must be noted that that standard is a standard - hence why I spoke of a proprietary variation. SDXC is set to max out at 2 TB... but the main reason for that is that the standard calls for a FAT32 file system, which itself maxes out at 2 TB. Essentially, SDXC is now safe for a good 10 years, so if it were used now, that would give it plenty of life.

As for PS4 using BDXL... at this point in time, I couldn't find a BDXL for less than $130 (standard price) or $90 (discounted) on Amazon. Based on your assertion regarding SDXC prices, the PS4 using BDXL would be absurdly expensive. And because they're both non-standard (as in, most bluray players won't read them - the vast majority of home bluray players won't be able to be updated for them) and only a small improvement on regular BluRay (as in, only 2x the space), it's likely that manufacturing costs won't be coming down anywhere near as quickly as the BluRay manufacturing costs will have (I'm referring to early reductions in costs - I'm assuming that the expensiveness of them at the moment is due to the lack of factories capable of manufacturing them). Basically, as hard as it was to get people to move from DVD to BluRay, it's going to be 10x as hard to get them to move to BDXL, and that means mass production will be difficult.

On the other hand, a variant of SDXC would be able to be created without much hassle.

Mind you, I don't see why they couldn't just do both, really - use BluRay (or BDXL, where needed) primarily earlier on, with an SD-based card technology ready for use later on. Best of both worlds. Since SD card readers are trivial to add (compared with a BluRay drive), and relatively cheap, it wouldn't put much of a dent in the cost of the system to manufacture. This also gives it the ability to act as a BluRay media player.

Not to mention that it would open up the ability to use both of them simultaneously, thereby eliminating the need for disc-switching much of the time without needing an expensive card size.