Cost.
The two cheapest storage options for games are internal (Console based) hard drives (Steam, XBox 360 hard drive module, PS3) or CDs.
For removable media (Stuff not actually part of the console in question), here's a rough price guide.
Blu-Ray Dual Layer (50GB) - $3.60 retail
Hard Drive (250GB, smallest desktop hard drive available on Newegg) - $54.00 retail
'Cartridge' (USB Stick for standardization) (64GB, closest to Blu-Ray disk available) - $35.00 retail
Obviously, game developers could get all of these options at severely reduced prices. But at even 10% of retail cost, the hard drive is still more expensive then Blu-Ray retail, and the 'cartridge' (I'm assuming that a modern cartridge wouldn't be nearly as intricate as old school system's. If they were, this would only drive the cost up more) only beats it out by 10 cents.