I think physical copies are better.
1. When I have a digital copy, I actually feel like I own the game. I don't get that feeling with digital downloads. (This also applies to movies and music as well).
2. If you want to play a game with a friend at their home, you can just bring over the physical copy. Can't really do that with digital downloads.
3. When you own a physical copy, you own it forever. With digital downloads it's possible the game could be discontinued for licensing purposes and it could wind up being useless.
4. I also enjoy that feeling of excitement you get when first get a new game as you unwrap the shrink wrap and look at the contents inside (you can't get the feeling of unboxing something with digital downloads).
There is a simply solution and compromise to please both sides of this debate. When you buy a brand new physical copy of a game, you should get a code that also lets you download the digital version of the game for free. That way you have the best of both worlds. And once you redeem the code, you can't redeem it again. This would encourage people to buy new instead of used (that's one reason for digital downloads; to fight the used game market). Amazon does this when you buy a CD. When you buy a new CD on Amazon, you also get the digital version for free.
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