There's one other factor. Luddites.

A LOT of our customers are guys in their 50s to 80s who either don't have a clue how to access the Internet, don't have Internet service at their homes (library use only), or are afraid to make any sort of online purchase, either for fear of being tracked, or for fear of their credit card info being stolen / their being rebilled and not being able to cancel / etc. A lot of these guys only got a DVD player a year or two ago, and we still have a few who are annoyed we no longer offer VHS versions of our product.

Until those people either die or become computer literate and have access, there will continue to be at least some market for physical product. And of course, as others have said, there's also that segment that just wants a physical product.