It would of course make sense for Nintendo to provide smaller sizes.
But I guess Nintendo also has a big incentive to make the publishers happy in this regard. Because after all, Nintendo is still in fierce competiton with Sony and Microsoft, and I am pretty sure they do not want to have a smaller presence in bricks and mortar stores compared to them. And I guess they also sell a lot of consoles in these stores, so they have a strong incentive to maintain the physical edition, from the perspective of brand visibility alone.
But I guess Nintendo also has a big incentive to make the publishers happy in this regard. Because after all, Nintendo is still in fierce competiton with Sony and Microsoft, and I am pretty sure they do not want to have a smaller presence in bricks and mortar stores compared to them. And I guess they also sell a lot of consoles in these stores, so they have a strong incentive to maintain the physical edition, from the perspective of brand visibility alone.
(still thinking about Ubisoft on this one, not an indie developer...and in between indies there are indies indies and indies who like marketing themselves as indie but are just a couple of tiers below a main AAA studio
)