Digital is causing its own problems and suffers from its own limitations. Even as digital expands, it creates dissatisfied customers who are only willing to spend premium price on a few games and/or only buy digital at cheap pricepoints. That's what already happened in the PC market and mobile market. Console is still catching up which I guess makes sense, since it was the slowest market to adopt digital.
yet despite the rise of always-connected games, there has been a rise of boutique publishers grabbing the most obscure indie games and printing them for $30 and selling out. Aside from the appeal to collectors and resellers, there's clearly a profitable enough customer base to make it worth it. The customers who are eager to buy physical aren't interested in converting over to digital.
I brought up vinyl because it's an outdated format that is returning after an objective market decline. Physical book sales are rising and have been rising for years, despite e readers and an overall decline in public interest in reading as a hobby.
Physical may certainly fade away someday. However, the various dogit products in 2023 still have glaring issues. Physical has tangible advantages like… well… tangibility, and customers are paying a premium to own copies of games even if they can buy a digital copy of the same game for cheaper.