I disagree, it will work. Yes, regular consumers want the cd nowadays and that's what most publishers do. But the profits from that aren't that great. If you buy directly from the developer they get a whole lot more of the cake.
When Steam was announced I thought "no way in hell am I buying a digital copy of Half Life 2". I've had the dvd in my drive maybe three or four times since I bought it on launch. I don't care about my disc or case. The only thing that's valuable to me is the cd key. Â
Now of course buying a disc is much more practical for most people without broadband. That's why you have to do regular distrubution as well as digital. They would make a lot more money on the latter.