The real problem for download only purchases vs. physical is that it directly competes with the old fashioned brick and mortar outlets, which last I heard still accounts for the lion's share of revenue for triple-A game releases. To date, few publishers are willing to undercut the likes of Gamestop and risk damaging what is still a reasonably profitable relationship and loosing most of their income if those shops decide to cease stocking their product.
Granted those same shops really take the piss by making *huge* profits by actively pushing trade-ins and used game sales, which makes it a bit of an abusive relationship when you think about it. Even more so since the publishers seem intent of passing this abuse along to their customers.
I must admit that I'm at a bit of a loss as to why they haven't partnered up with the likes of Amazon as an alternative to in store sales. I mean it would seem the logical compromise as their business model allows for lower price points and yet the customer still gets a physical product rather than a code for a digital service that may or may not evaporate a few years down the line.
Well, those same shops have no qualms about cutting new game sales by offering used games. There's no way you can argue that used game sales have no effect on new game sales. Do you really think GameStop or whoever else will not have Call Of Duty and Madden on store shelves due to damaged relations to with the publishers? If so, I say go ahead and pull that trigger. As a primarily new game buyer who rarely sells his used games, I'd appreciate some acknowledgement in the form of a price cut for a digital download. I'm sure somewhere down the road the cost of used games was factored into the $60 price tag anyway. Why should I continue to subsidize used game sales?
My key point is that publishers have to be willing to give a little something to get rid of used game sales. It can't be all one way anti-consumer policies as Microsoft just learned.