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Physical: Lending physical media is a broken, exclusive model.

It is. But the alternative requires money from the user in many ways, the medium (eg pc), the power to run that medium and ongoing costs to the delivery service (eg internet access) not to mention the cost of a new digital copy each time you want a new item. Yes you're not stopping someone else from accessing the copy, but you have to buy a new copy to gain that access.
For someone that works in the IT world you seem to have no idea of the basic ideas of copyright, licensing, legaility, the business world that you work for.