Well, I don't see much wrong with doing away with physical media, at least in part. Take my modded PS2 for example. In that time, almost every console game was entirely loaded from the optical disc. However, with FMCB and a hard drive, I can pop my disc in the drive, install the game, and put the disc away forever. What I'm left with is a game that's still quite playable, even more so than it was intended to be, because a hard drive will outperform an optical disc all day every day.
Also, do not forget that optical media does not last forever. Your discs can just die, regardless of how well you took care of them. It's a big problem for old PS1 games. What if my FF7 discs die? Now I have to find a second/third/fourth hand etc replacement that's just as old and vulnerable to sudden death as my first one. And the disc drive in the console can die, too. At least if my hard drive in my PS2 dies... even if all my discs also die on the same day, I can always find the ISOs online and get everything back.
Of course, Steam, PSN, etc can go poof one day... but it's unlikely to happen, at least overnight. And if it does, I would hope the powers that be would leave behind a way for us to play our games. Hell, even EA was removing the requirement for your disc to be in the drive with their final patches for earlier Battlefield games (1942, Vietnam, 2 and 2142 at least, that I know of). And if the service in question DOES totally tank, you can always find it again "another way" and you would be well within your rights to do so.
That was a little long winded, but the point is: just as something like PSN can die, so can a physical disc. And in the case of retro games, finding a good replacement can be a challenge. At least nothing ever truly dies on the internet.
