They don't.

All one needs to do is look at Nintendo and see that. The digital downloads for the 3DS alone sometimes outweigh the physical copies' sales, but to be fair, Ninty cuts back on copies for certain games so that players will be forced to buy digital (see: Fire Emblem Awakening and Luigi's Mansion: DM).

Even this gen, digital sales have been pretty good. But there's no way any of these Orwellian, backwards policies would have worked right now. At least, not worked AND managed to knock the prices down as well. Each and every game would need millions and millions of sales, even the niche ones. It just wouldn't work.