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[SScorpio]

What I described is PlayStation and Nintendo stealing Steam's system and adding physical games to it.
E.g., "PlayStation moves to digital-only games via PSN with a 2hr money back policy. Same policy as Steam."

Because PlayStation as a brand is based on physical disc based games:
1. If you like the game you just check a box on PSN and they'll ship you the physical boxed game for a small fee.
2. Physical games would abandon steel books and custom boxes, rolling back to the PS2 standard with the higher quality box, high quality manuals, maps, etc.
3. Physical game discs do two things: install the full game and to tell the PlayStation what game you want to play as an alternative to picking a game from the home screen.

Other companies adopting Steam's 2hr return policy on games would be awesome.

But your physical ideas don't improve anything and are giant step backwards for preservation. You're arguing for consoles to get CD keys in the package along with an installer for the game. But the CD key can only be licensed to a single account and can't be transferred to a different account. For collectors to have pieces sitting on their shelves that they never play? Sure it's fine. For someone wanting to play a game that's no longer sold digital, well fuck them the physical version is useless as it could install the game, but they aren't licensed to play it.

PlayStation and Xbox's last two console generations do require installing the game to play. But there are still many cases where you could have your console completely offline and after the install from the disk, the game will just run like normal.

Your solution is the same thing all those weirdos who use physical NFC cards or some other method to launch a ROM on an emulator. If you must have a digital license to a game to play, the physical media is worthless. Even those crappy Switch 2 keycards are better in that multiple people can us them. But the servers and console need to be online to download the game in the first place.