Edit.

Where did you get the '45% of internet users are still on dial-up in the US' fact from?

You'll probably find the figure is closer to 10%-15%

http://www.marketingcharts....

And that data is over 3 years old.

Yep, it works fine with Dragon Age 2 but says "Your connection appears to have slowed." when I try to play Crysis 2 or Bulletstorm, all EA games. You would think a 100MBit connection would be enough to handle it, apparently not.

Whoops my bad... I forgot we were comparing consoles to web browsers and not PCs (installs) vs web browsers

Steam works for PC players because of the convenience. I don't know a single person who has ever chosen to go with Steam (or any other platform) simply because they don't care about getting a physical product. Not to mention the fact that there are plenty of digital games available on the PSN and Marketplace, so stating that console gamers prefer physical copies of their game is rubbish.

I'll admit that when digital distribution started taking off I was a bit skeptical. I didn't like the idea of not having a physical copy of my game. My main reason for that was that I didn't want to wait to download and install my game. I wanted to be able to bring it home, install it, and play. For PC that's not an issue anymore for new releases, since Steam and just about every other digital platform allows preloading several days before release. The only reason I buy a physical copy of anything anymore for PC games is simply for the extra stuff that comes with it, and that's primarily for collector's editions such as Skyrim. I don't need a box to display, seeing how the only place my wife will agree to putting boxes is in our office/game room, and we've already got enough stuff in here as it is. I don't need game manuals to read, especially since more companies are doing away with them. I hate having to put in a disc to play a game, so that's a huge turn off. Even for my consoles, if I can get it digitally, I'll do it.

I think the main reason so few console gamers go digital (aside from availability, which there isn't a lot of) is because of hard drive space. On my PC I have the advantage of having several terabytes of space, where I only have a couple hundred gigs on my consoles. Once manufacturers get over that hurdle (and get away from the goddamn DVD9 format) then we might see more availability for digital distribution on consoles.

Streaming services, however, do not make any sense to me, unless it works as an install on your PC or console, allowing you to access it only so long as you pay your subscription. GameFly has a beta for their PC game service which does just that, and as far as I'm concerned, it works. The selection is crap right now, but it's a great way of doing it. Streaming through a browser just sucks up too much bandwidth, and as it's been mentioned in other comments, with ISPs introducing bandwidth caps, it just eats too much into my available usage.