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By the way, Steam does let you make a backup copy, and it goes out of its way to make sure you control where the file goes and even whether it'll fit on CDs or DVDs (it asks you this, in fact). You buy a digital copy, but you can make a physical backup whenever you like. It even lets you batch multiple game backups together into a single job.
I love Steam, I really do. It should be the default release mechanism for every major developer, IMO. Other offerings in that arena completely suck (EA Online, how I hate thee), act somewhat kludgy, and feel cumbersome to use by comparison.
I buy almost all my games through Steam now. I used to buy all physical copies (I used to see things the way you do now), and I've ended up with several very very old discs that somehow never got copied being eventually unreadable. Digital copies don't do that, and in fact, I've since gone through my collection of physical discs and ripped as many of the games as I could to .iso files. I then shelve the discs I rip (or throw them away), back up the iso in two or three places (one offsite), and I'm done. Running MagicDisc lets me add virtual drives I can then mount and install and play from.
Sadly, the DRM added to discs of modern games makes them not easily copyable, and some DRM software, such as SecuRom, or as in the now-infamous Sony debacle, are actual rootkits. These games aren't impossible to rip, but it's a process usually beyond the knowledge or simply the patience of the average user. While software companies claim this is being done to stop software piracy, they are robbing legitimate users of their right to a usable backup copy, their right to the security and stability of their own system, and their right to unimpeded access to the software they have purchased.
Can you tell I absolutely hate DRM software? Give me digital copies I can authenticate online and be done with it. Steam does it right.
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