This morning, we posted a rumor regarding Microsoft’s next console. The follow-up to the Xbox will not, supposedly, include a disc drive for physical media.

This, gamers, is not good news.

My argument for why this is a problem comes down to one point. This isn’t about the new consoles’ inability to play movies on disc, it isn’t about backwards compatibility and it isn’t about becoming a media center. This is about the problematic nature of digital marketplaces when it comes to gaming.

If Microsoft, Sony and Nintendo were like Valve is with Steam, I’d be excited about the switch to digital distribution. Steam hosts a variety of games. They support those games with a DLC catalog that makes sense. They offer discounts on older titles over time. Steam, best of all, hosts sales all year long that takes the prices of games, both old and new, and slashes them dramatically.

Microsoft, the first company to, according to the aforementioned rumor, drop physical games in the future, has not been so gracious with their digital content. Look to the Xbox LIVE Arcade and the Games on Demand service for proof.

Games on Demand is where I’ll make my point. There’s only one place you can buy digital downloads for the Xbox 360: the Xbox marketplace. If you want to buy a digital copy of Alan Wake for the Xbox 360, you’ll need to do it from your console or from Guess what… that digital copy will cost you $29.99. You can buy physical copies of the game, brand new, on places like Amazon for $19.99.

Want more examples? Here we go.

Halo Wars currently sells for $29.99 on the Xbox marketplace. You can find it both used and new for around $15 in online stores.

The poorly received Kung Fu Panda 2 sells for $39.99 on the Xbox marketplace. Find it used for $16.

Transformers: War for Cybertron is listed at $39.99 on the Xbox marketplace. You’ll be able to find a retail version, still sealed, for around $25 elsewhere.

Digital distribution should be cheaper than physical distribution. There’s no printing, shipping, manufacturing or stocking to deal with. Everything is digital, and the prices should reflect that fact. Instead? Microsoft consistently offers digital content at much larger costs than the physical equivalent.

The big problem here is that the loss of physical gaming software will give Microsoft complete ownership of pricing. They won’t have to compete with places like GameStop or Amazon to sell their games. Consumers will only be able to buy games from one place, and that place can do whatever it wants to pricing. Unfortunately, Microsoft has only given me reason to believe they’ll drive prices way up rather than down.

As a consumer, if the next round of consoles doesn’t offer physical gaming media, I’ll switch to the PC platform and Steam exclusively.