@ejamer
Developers favor smaller storage space? If that was true, then Rockstar (along with many other developers) wouldn't have complained about the Xbox 360's measly 9 GB DVD format, and we wouldn't have a need for Blu-Ray. Even Nintendo saw the need for 25 GB discs in the Wii U.
I'll field this one.
They favor Cheaper storage space.
On Carts that means the smallest cart they can go with which will be the cheapest for them.
On DVD that means keeping the game to 8GB.
Interestingly enough Digitally its an analog graph because your charged for the bandwidth your used. (If I sold 100 copies of a 100MB game I would make more than if I sold 100 copies of a 1GB game digitally)
Etc. Etc.
Once Space isn't a factor it becomes whats easiest.
If 8GB is still feasible, then there wouldn't be a need to use bigger discs. HD content comes with larger file sizes, and if you want to cram all that data on a disc without compressing it, you need a larger disc capacity. 8GB isn't enough for most HD games, because everything needs to be compressed in order to fit on that disc.
The same goes for HD movies.
Sony saw the problem beforehand, and that's why they had the PS3 adopt Blu-Ray for it's games. Nintendo is thinking ahead, and is also using a larger capacity disc for Wii U games. And the developers likely asked them to do this.
Microsoft is still stuck using outdated DVD, which means every game made for the Xbox 360 will have to be highly compressed to fit all those HD visuals on the disc. With Blu-Ray, you don't have that problem, which is why the entertainment industry created it in the first place.