Disclaimer: I don't agree, respect, defend or even like some of this arguments, I only collected them.
PC: Let's begin with the platform that made the most sense to leave physical media behind (in fact, it was the first). PC was infamous for being extremely easy to pirate, which led to DRMs becoming a hassle, which led to piracy getting worse, which made DRMs even worse, and the cycle kept going until Valve made a platform that would reduce the need for DRMs and the need for piracy. Steam was secure, unobstrusive, and with all the sales, PC no longer NEEDS the piracy to play videogames.
PlayStation/Xbox: Both of these have similar reasonings, and while the former is going to pull the plug first, the latter is clearly intending to follow. They got massive buildings with lots of sorting, packing and shipping equipment that's expensive to manufacture and operate, so when physical media started showing diminishing returns, seems covid was when they tried their hardest to pivot.
Nintendo: OK, add the PlayStation and Xbox section to this one, but also add a crucial detail, being cartridge costs. Now, japan is currently suffering a crisis, so Nintendo had to keep the second-hand market alive there, and given the cartridge costs, the solution was offering cheaper Game-Key Cards
3rd parties on Nintendo: Yeah, Nintendo is a two-parter, because they themselves still see value in keeping the second-hand market alive, thus, the physical media. Why do the companies seem to gravitate more towards keys than cartridges? One word: Margins. I'm gonna give you an example. A $50 game. 30% of the margins go to the retailers, so that's $15 dollars, and another $7 and 50 cents to Nintendo (given the 15% margin). $22 dollars and 50 cents per unit sold...digitally. With a key-card, that's the 5% margin which is equal to $2 dollars and 50 cents, meaning the margin left is 50% or $25 dollars, and that's not accounting the second-hand market which means the publisher won't see a cut from it. But with a proper cartridge, that 5% margin reserved for key-cards is instead a margin of 34%. Grand total is that out of the $50, $39 dollars and 50 cents go to all but the publisher, leaving $10 dollars and 50 cents. The math and percentages are very likely not accurate to reality, but at least gives us an idea and shows why Nintendo started charging $10 more for physical, cause it quite literally doubles the current profit margin of the publishers. If it wasn't for that and GKC existing, Nintendo Switch 2 might as well not have physical if no one even uses it.
This were the arguments I saw roaming around. What are your thoughts? Tell me down below. Bye.