I like physical mediums too, and I hated downloading anything when I had dial up, and I'm not particularly fond of steam. I also like physical manuals and maps and things like that. However, a downloaded game is the same game as a game from disc.
Furthermore, distribution for console games can be expensive. There are a lot of other costs associated with it besides the creation of the medium. Which is ironic, because Nintendo started the expensive distribution scheme.
I think that it's important that a console cater to smaller development companies and indie development because that's where most of the inovation is. For the most part, big companies don't want to take a risk.
Furthermore, games have needed more methods of distribution all along. The more, the merrier, I say.