[quote name='gettinmoney662']I'm confused. How is downloading a game to your memory stick not having physical media? What is the difference between the game on your memory stick and the game on a UMD except the added convenience that you can back up the game to multiple sticks/hard drives in case you lose the first one or it gets corrupted?[/QUOTE]
Also beyond the collecting/reselling issue, keep this in mind (as a CAG

): You'll rarely see deals on downloadable PSP games -- there's no retailer competition, no physical inventory to unload. The whole reason that we get the kind of deals that this entire site is based around is that retailers have to compete with each other, and they have to clear out limited shelf space for new items. None of these issues are relevant in the world of downloadable games, where there is no physical stock and sales are made through a single online site. If distribution goes all digital and you have no choice but to buy through PSN, then forget about deals and welcome to the age of paying MSRP for nearly everything. Look at how rarely sales happen on PSN now, and how limited they are -- that will be all of the time, for everything.
Beyond that, there are other questions -- what's the DRM situation?
Will you be able to make back-ups? What happens, several years down the road, when the title that you've purchased is no longer available for re-download, and your media fails for some reason? Physical, pressed UMDs/DVDs/Blu-rays, etc. aren't going to have problems unless you handle them really badly. Volatile solutions, like memory sticks or hard drives, have more potential for issues.
All in all, it's just a really poor idea.