The publishers don’t have to provide physical media, just the ability to install it at any arbitrary point later. So an install file is fine (even if it’s 100GB) and backing that up can be up to the consumer.
In terms of your argument with older devices this exists even with physical media. Who still has reel to reel or laserdisc? The publishers don’t have to make it future proof, just make themselves only necessary at the purchase step.
While I cannot image C64 games in the cloud, I also cannot imagine modern games on a DVD.
Even with physical access to a device, there are hurdles. Who still owns a C64? A 386 with floppy drive?
It is tricky.