The type of consumer that would actually go out and buy a steam game at retail is not what I would call a "general" consumer.

I hate to agree with cliffy b on this but I think the retail model is broken. But you don't fix it with bandages, you abandon it all together. That may sound like suicide but is it really? Itunes proved that most people aren't slaves to the retail model. Look at netflix, hulu, amazon vs blockbuster. Why are people so afraid of retail? Their power is more perceived than real. One console maker with the balls to cut the cord is all it would take to ignite the digital gaming revolution. Microsoft is really the only one in the position to do something like this. Yeah its risky but it would either be a failure or a HUGE success. Unlike sony, microsoft can actually afford to fail, so why not go all out and take some risks?

Someone who just got a new laptop goes into a store and sees this new fangled Bioshock, Battlefield(I know origin), Skyrim.....ect game everyone is talking about and decides to give it a shot. I think that is a general customer.

Itunes can succede because people will continue to buy tablets, pcs, laptops and ect through retail/online channels and they have good profit margins. Game consoles have low profit margins to the point that no one would sell them or the consoles would have to take a $20-50 hike(in order to give to the retailer). So in the end the only place you could probably buy an all digital XBone would be from MS themselves without raising its current price that would flop harder than any idea.