The future seems clear: Digital media will eventually supplant physical. Note: eventually.
However, most analysts agree that it'll take quite some time before we see a complete transition, and many developers believe there will always be room for physical media. And we dearly hope he's right.
For instance, take Grasshopper Manufacture CCO Akira Yamaoka, who told Siliconera that packaged games won't disappear, even though popular digital platforms like Steam have "a lot of potential."
"I don't think that packaged games will die out, but Steam has a lot of potential since it works with different hardware."
He also commented on the PlayStation Vita and Nintendo 3DS, and wonders why Sony's portable isn't selling. Yamaoka says "it's a really good platform" and doesn't understand why it isn't selling better in Japan. He also said he doesn't "see too many 3DS owners oversees" and that's "disappointing." But for the time being, you can bet that Sony will continue to push the hell out of their new handheld, which isn't selling too badly in North America thus far.
As for packaged media, that just has to stay put. At least for a while.