I was a dev lead at xbox when they first implemented "Games on Demand" or direct purchase and digital download of full games. My team implemented the feature on xbox.com back in 2009 I think.
As I recall it, the main reason we didn't do a wholesale switch over to digital distribution was because that would have upset the retailers who sell games. We relied on these same retailers to sell our xbox consoles. We were afraid that if we took a way the game revenue they would stop selling xboxes. We thought it would be best to make the transition gradual. So we took the first step back in 2009. This appears to be another step.
As I recall it, the main reason we didn't do a wholesale switch over to digital distribution was because that would have upset the retailers who sell games. We relied on these same retailers to sell our xbox consoles. We were afraid that if we took a way the game revenue they would stop selling xboxes. We thought it would be best to make the transition gradual. So we took the first step back in 2009. This appears to be another step.