Then it will be an all-out battle royale between the many Digital Distribution services. We'll see Xbox Live and PSN trying to claw their way to Steam's back, and Battle.net will keep stomping everyone else.

If hardware becomes irrelevant, what will Nintendo do?

And how will all the other services be able to compete with Steam as the top dog?

mp3 downloads have been about for ages, people still buy CD's we wont ever see complete digital distribution, there will always be some sort of solid format to purchase

Nevermind

Hardware will never become irrelevant, total digital distribution is an ilusion, like Duke Nukem Forever or Natal.

That's quite an 'if'. Your proposition assumes that DD will be a key factor in competition, when it hasn't been much of a factor at all so far. DD will take over when customers want it to happen. If it comes to that, Nintendo will step up, but we're nowhere near it yet.

I don't understand the "If hardware becomes irrelevant," part I mean Nintendo will still have their system with their own unique controller right or do you mean like any game can be played on any system. 

How does hardware become irrelevant in concerns to DD?

DD is a way to distribute software, therefore it relies on hardware. That is, unless your talking about OnLive and cloud rendering, which is not feasible for another 20-30 years.

Consoles as we know will eventueally disappear, because TVs with 3D cameras (motion), Wifi (connection), USB (charging)& Bluetooth Wireless controls will be standard. PC and Console gaming will blend together. Hosting capacity, quality IPs, exclusive controllers and beyond gaming will determine a userbase for network owners.

Hosting is a money issue. Can hosting be funded by advertising? Or will developers pay a fee to outsource hosting for X amount of years per game? Independent devs and publishers will support both sorts of networks to reach a massive target group. Network owners will be competitive in price tagging their fees (third party support is still important).

IP depends on first party. Will great developers (2nd party) stick with network owners? Their game will be exclusive, also less marketing expenses. They will give away their freedom, total amount spend on project and rushing release dates. Going independent will give them freedom, risk is higher due to marketing expenses.

Exclusive controllers depend on R&D. Logitech, Madcatz, Nyko, Total Immersion need to focus on R&D. Will third party devs support their hardware? Natal, Wand and Wii-mote are patent-free by that time. However controllers will be so important that Nintendo, Microsoft and Sony will never license their hardware (controllers) to support an other network. Problem for them patents expire. Retro hardware revised (wireless) will become a hype. Imagine a wireless NES controller. Hardware will become a console, however it will always be a niche.

Beyond Gaming: Social Networks and non-gamer friend-lists important? Will Facebook rule casual gaming? Will they buy Spil Games for example? Community is a very powerful weapon these days. Video and Music are obvious. All-in-one account is preferable for most users.

Just because consoles will eventually disappear hardware is still needed. Nintendo will pioneer and exploit their IPs to prove their hardware.

That's a very one dimensional analysis there Distant Star. I'm sure the tech utopians have all that set in place for their master plan, but it's not that simple.

We've had "blending" of devices and services, in fact we have it now. People in general don't really like it so much. Also, you're forgetting Apple and Nintendo, which are integrated hardware and software companies. The integration of both is something very important, that the consumer loves and I believe will come to appreciate increasingly.

You can't do a software utopia just because it sounds good on paper, the consumer is always king.

Since steam only sells pc games, and console games are more popular nowadays, I don't think steam will take over. Will that said, I would much rather download a game then buy a disk.