Warning: lots of conjecture and anecdotal evidence incoming!
This topic is something that I've been thinking about a fair amount lately. I'm at the point where I need to find yet another CD tower to add for more albums (and of course the style I chose from Ikea is one they discontinued so it's back to scouring Craigslist AGAIN). Years ago when I had the opportunity to get more at a really cheap price I didn't because I assumed at some point I would no longer be able to continue buying my game music physically and there would be no point. Yet somehow that still hasn't happened - in fact my last two trips to Japan have yielded MORE physical albums than the several years before that. I'm surprised by just how much is still being released on CDs!
Now having just been in Japan less than a month ago, here's what I've seen. While it is true that many, many stores lingering from the bubble economy from when I lived in Japan over a decade ago are now closed (I have an odd addiction to taking photos of closed down places that look like I would have loved shopping at back in the day), most of the major ones I used to shop at are still around and thriving. I have no difficulty finding all of the albums I'm looking for after running through Akiba a few times on a given trip. Tower Records is always SUPER packed and has a huge selection, along with many, many other places. SOME places there have shifted their focus from CDs to trading cards (shifting from one physical collectible to another is probably a whole other conversation), but many places seem to be going just as strong as before.
All that being said, my focus is always pretty much entirely on game music when I'm there. And not using it as a pejorative, but I do think that *nerds* are more likely to *collect* in general. Take a look at the recent surge of limited physical prints of video games that more or less got started by the surprisingly popularity of Limited Run Games. I think that the hardcore collector market is just enough to make it worth doing smaller runs of physical media still. This is totally a guess on my part, but I'm thinking that's why VGM in its physical collectible form hasn't died out yet, and won't at least for some time. I mean seriously, two of the albums I picked up this summer are physical releases for downloadable Switch games that barely anybody probably played to begin with, compared to mass market games (Blaster Master Zero and Kamiko).
Will our hobby collapse at some point and disappear? Maybe, but right now it seems we're in a much, much better place than ten-years-ago-me would have expected. As long as there is a small but dedicated enthusiast population buying stuff from their favorite movies/anime/games/whatever, CDs seem like a REALLY easy way to make some cash off of that crowd compared to more complicated-to-manufacture stuff like statues/figures/whatever else.