Man Xcom is a great game! I hope someone brings that back in some form in the future!
I am mostly in Shmokes' boat, but things have to change for digital distribution to take off. First of all the prices have to come WAY down. The app store and itunes music are so successful because of the fact that the prices are so cheap, they cater to that impulse buy. Digital distribution is working for apps and smartphoen games because they are so cheap and easy to interface. Its working for books because, frankly, bookstores are dying out, and a lot of people are buying books online anyway, and so if you are buying a book online, it makes sense to just download it instead of waiting for it to ship. Books are also a little cheaper, when you consider a new hardback is like 25 bucks and you can get the nook/kindle version for like 15.
The challenge with games is the secondary market. Games don't just compete with new games, they compete with used games, and 2 months after a game comes out, you can usually find it used for way cheaper, and the further out it goes, the cheaper they get. I bought Tekken 6 off of ebay for 5 dollars. The problem with the digital distribution for consoles is that you are locked into all-new pricing, plus you can't "trade in" games. That being said there are ways that all of this could work.
When I pay for something, I like having something tangible showing that I made the purchase, I like to read the booklet it came with, and have a collection to show off
There will always be these types, personally I hate tangible goods, they create clutter. I would love it if I just had harddrives full of games, and I think the experience from music, and now movies shows that a lot of people don't really care as much about the physical object.
if a friend wants to borrow a game, I can let him
You can do this pretty easily. Barnes and Noble has a "lend me" feature on their e-books. The way it works is that you have the book on your system and can "lend it" to a limited number of people. If the console is a constantly connected system, you could set it up so that each download has two licenses and you could keep one and "lend out" the other for a limited number of times, or for x-amount of times. They could even sell these "lend me" licenses if they wanted to to basically compete with game rental places.
You wouldn't have to worry about your hard drive crashing, you could just recover your data and re-download it.
Mostly though, they would have to get cheaper, and the game devs could STILL make a profit if the games were 30 bucks if you consider that there would be no packaging, manufacturing, or distribution costs, plus instead of sharing a cut of the profits with a brick and mortar store, the devs could sell straight through a proprietary online store, like XBL and the console maker could just up their license fees a little bit.
The biggest problem is that the industry doesn't see things this way. The way they see it is that the public has been conditioned to pay 60 bucks plus for a game, and so that is what they price direct download games at. The way you make money on digital distributions is by possibly upping your margins, but mainly from upping your volume. I think the industry just looks at it as a way to up margins, when really the money is to be made by upping volume.
Basically, it needs to be cheaper, and it needs to have some means of license transfers to "share" games.