Eh, I would argue that the expansion of broadband internet and the increased expectation of instant gratification by consumers made it a perfect time for Steam's expansion. The death of physical media is a side effect of the ability to near instantly download anything you want.

Physical media died when games expanded beyond their capacity. Optical discs are physically fragile, they have a limited shelf life, they have to be reproduced by specialized equipment (not considering piracy here), they have to be physically transported to the customer, some regions are financially unviable (imagine the Helldivers 2 situation but with every game), and production has to end at some point. Having to set up a physical supplier also severely limits the ability of indie or solo developers to have any kind of success or even presence.

Those are issues we've had to look past because we didn't have anything better at the time.

The gaming industry is not immune to the Dreadnought effect. Magnetic tape has made punch cards obsolete. The optical disc and flash storage have made the magnetic tape obsolete. Now, digital distribution has made physical media obsolete, and people clamoring for its return are nostalgic for a world that doesn't exist anymore.

I liked physical discs when they were relevant, but I don't relish the idea of having to pray that Clair Obscur DVD #8 is not damaged when I have to transition to a new area.

By offering a far better experience for the vast majority of people. Like how DVDs killed VHS, where some people who couldn't afford to upgrade were left behind.