With mass storage technology growing in size and speed and dropping in price, I think an internal Hard Drive will be standard on all new console from here on out.

1. You need it for downloadable content. If your direct distrabution theories become true, you will need the hard drive to store the games you buy.

2. Consoles becoming multimedia centers. Microsoft is already toying with the idea of giving the x360, Tivo-like abilities. I think this may become a future trend as well. Not only can you download games to play on your consoles, but rent/buy movies & television shows as well.

3. Offline playability. I think if you had to be connected to the companies' "Online Communities" to play games, there will be a huge backlash from customers. Just because many homes in the US have high speed internet connections, doesn't mean that folks in places like Eastern Europe and Asia will as well. You could still hard code "fingerprints" into each download so that they only play on the system they were purchased for without needing to be online to verify.

Taking the security measures a step further, here's my IDEA of what would be great in a next-gen console, but probably won't happen:

The console comes with a appropriately sized HD. (say 2 Terabytes or so.) It also has the ability to link up with either flash drives or network with a PC to transfer files, so you can make backups and such. Finally, the security system for the downloads would be something like this:

When you purchase a game online, the game file (let's call it a .GAM file.) is customized before you download it. A key is created based on your account info, your hardware's serial numbers, and a random key that is generated. The game will always work on your system, whether you are online or not. You can now take this .GAM file and burn it onto a BDR, (Recordable BluRay Disc) to make a hardcopy backup. If you reinstall it on your system later, it just works, plain and simple. Now let's say that you give that disc to a friend. (They can install that game on thier system, but since the security numbers don't match up, it becomes a time restricted demo. (Say 24 hours.) After that time, the game will no longer play, even if you uninstall and reinstall it. (This is because, after it fails the key check, it creates an encyrpted and hidden file on your system that says that you have already demoed this game. It doesn't matter if you try someone elses copy, it still will not work. (Each game will have an ID tag assigned to it.) Now, let's say you want to buy the game, because you really enjoyed the demo. When you go to purchase the game online, it will check for one of these "Already Demoed" files, and delete it, if it exists on your system. Repeat process.

I'm not saying that this will eliminate piracy by any means. Every time they make a better security system, someone creates a better crack. That's just how technology works. But this will make it a hell of alot harder to do. Because everytime you play a game, it will 1st look to see if the game's ID matches your system's ID, then loads. If it doesn't match, it will next look for the "Demoed" file, and see if you still have time left. If not no go, all you get is a link to buy the game.

That's the thing. You COULD still rent them, and you COULD still loan them to friends. I'm just suggesting either a time limit, or a set number of plays before the game locks.

Used stores on the other hand would have issues. But, then again, the console makers and software devolpers HATE them anyways. Why? Because, they don't get any profit off of used game sales.