How does Steam do it then? I've seen games that are on console for $60 sell as low as $10-$20 on Steam. If its all digital distribution and no brick and mortar operation to support, how can it not be cheaper? Console manufacturers get a royalty already so they should be set.
Aren't those older releases though? We've all seen the classic GOTY console editions sold for $19.99 in stores, so it roughly comes down to the same thing.
On the other hand, if we look at the ebook model as an example, we see them being sold for more than the paperback price, at least on Amazon, which technically shouldn't happen if we consider that they're digital downloads. In the end, it's up to the publisher to set the price, something I could see the same thing being done for game downloads on consoles. I think sales should happen more often giving people good incentives to download.