Elizabeth makes some good points and one of them is resale value.
I'm sticking with CDs because I would rather have thousands of dollars invested in CDs than thousands of dollars invested in nothing.
A lot of folks might argue they only like one song on a CD and why buy the whole album, but the rest of the CD gives exposure to music you might not have overwise heard. I have bought most of my CDs and records for one song and eventually liked more songs with time.
What this usually boils down to is cost and it is cheaper to download one song than buy the entire album.