Despite the growth of broadband, the infrastructure still isn't there for 100% digital distribution. A lot of people are knocking on bandwidth limits as it is just by being an avid user of things like Netflix.
Until internet infrastructure improves enough and ISP's evolve their policies to adapt (Which is the biggest technical hurdle but not the only problem or thing that needs to change for us to move to 100% digital distribution), retail distribution will still dominate the console landscape. And with the server infrastructure that will be needed just to support a big game launch or two during the course of a year and a few other days like around Christmas, I'm not sure they will ever go all digital. Imagine all the expense and equipment needed for just a handful of day's that probably wouldn't even be working at 10% capacity for 350 days of every year.
My concern at least for the next generation or two is with the removal of our control and freedom over our own disc. A future where I can't insert any disc into any console and fully enjoy the offline experience since there are things like unlock codes to open up access to a single player game and so on stinks just as much as an all download future.
If anything, it's even worse. You'd have physical media with none of the traditional benefits of physical media (Beyond the joy geek's get with lining their bookcases with DVD cases
) and also none of the advantages that the digital route offers (Not having to change discs, faster loading times, less wear and tear on your console, no clutter, etc.).
That's much more my concern for the next 10 years or so than any worry about publisher's ceasing to ship console game's on optical disc to retailers. Digital got its start in the last generation, has become a popular secondary form of distribution this generation, and will likely be on a even footing the next with competitive pricing and same day digital releases for virtually all software.
Then I'd expect at least another generation where retail distribution is an important secondary form of distribution before it disappears completely.