The majority of all physical disk are really just download licenses. They don’t actually amount to anything more than a game key you buy on a card.

I'm sure most people aren't oblivious to that fact, but doesn't detract from the fact that people still want to own physical media and feel ownership over that.

Unless disk technology has changed significantly since blue-ray (I don’t keep up with it), even the largest disk only hold about 25gb of data.

25GB is for a single layer blu-ray. Blu-ray discs can have 4 layers, so we're looking at 100gb. I don't know about XBox but I suspect they're the same in that they're able to read quad-layer blu-ray discs. Even the PS4 was capable of dual-later, 50gb blu-rays. PS5 can take and utilise that space even more with Kraken compression to get even more on a disc.

Games would cost even more than ever if they had to fit the entire games worth of data in the box.

They already do, this is why games like Final Fantasy VII Rebirth are coming on 2-discs. I'm not sure what your understanding is of game storage is.

We’re in a golden age of indie video game development and its entirely driven by digital downloads.

Nothing will get around that, and people will continue embrace indie titles where they can, physical medium or not.

So instead of worrying about physical releases, what we should be focusing on is DRM-free media. You can get DRM-free games on GOG.com, for example. It’s always better to buy your game there instead of on Steam for this reason. DRM-free is essentially the ownership you’re looking for.

There is no reason we can't focus on both. No amount of digital, DRM-free media is going give that same sense of ownership for people who want physical media. This is the same as why, even though DRM-free alternatives are available, physical media in the audio space took off again after such a lull during the mp3 and streaming boom. But on the same note, just like the audio space, some other people will always want the convenience of digital.