The ever-growing size of data that games consume
This is one thing that is also holding back games; the Xbox 360 is only capable of accepting an 8.5GB dual-layer DVD. The PlayStation 3 is far superior in this department with the capability of Blu-ray and its 50GB discs.
But, the same argument of scaling games across multiple platforms rises its head in this argument also. You can't make a game with super-high detail, textures, audio and huge levels with the game taking up, let's say, 35GB on disc. How would you put this game on an 8.5GB dual-layer disc for the Xbox 360? Multiple discs? This isn't something gamers wish to do. A quarter the way through the latest AAA title, "please insert disc 2", I don't think so.
Obviously Microsoft would be getting on their knees to ask Sony for access to Blu-ray drives for their next-gen consoles, but this would be admitting defeat. The HD-DVD technology was crushed by Blu-ray and with next-gen consoles having graphics that would far exceed the imaginations of current console games, this is going to be the biggest hurdle.
This is where a cloud-based Steam-like service would be a saving grace. And speaking of thatů
Cloud-based gaming would require the assistance and cooperation of ISPs; gaming-orientated ISPs should work together with developers and studios to host the game on their servers and make any connection from a gaming device (iOS/Android/next-gen consoles/Steam) recognise the connection and all data transferred as FREE. This would allow parents to not worry about data caps or expensive internet bills and it would also take the strain off of traditional methods of distributing games to customers.
Free data would allow people to not worry about their cap, purchase the game cheap and get virtually maximum speed, because it's a local connection versus say an international connection. It also lets the ISP have less strain on their international links and keep the data within local networks, being cheaper, faster and most of all, very cost-effective. It's win-win for all involved - this is key, keeping everyone happy.
Advertising could be used like Steam currently offers, the download bar/icon could have an advertisement from whichever ISP is hosting it. They (the ISP) could then on-sell the banner and split it with other marketing/advertisements that wish to have access to potentially 10's of millions of customers.
A company selling gaming hardware like Razer, Logitech or Microsoft could potentially contact these ISPs and sell localised hardware. Delving deeper into this, local IT retailers and suppliers could offer discounts to locally-based gamers, creating a tight-knit community of dedicated gamers who would a) love their new Steam-like environment, b) even though it's cloud-based and on the internet, it would feel "at home" because of the local advertisement, and c) benefit from local advertisement because the local businesses are trying to cut good deals for them.