You're still thinking inside the box a little. Gamecube used a variety of patented format cds and encryption keys stored in a small area of the cd for their copy protection. [1]

Or, you know, just turn off the always-online or check-in-each-24h requirement and just lock down the hardware from sideloading games onto it. Even without that, something tells me people would still buy games.

[1]: http://en.wikipedia.org/wiki/Nintendo_optical_disc#Nintendo_...