> MP3

Nothing wrong with it. The resulting audio difference between it and other formats is minuscule and often barely noticeable by the human ears.
The difference between any recording and live music in a good room is very striking.

> going digital

I'd rather the music I bought sound the same as the day I bought it 20 years down to road, thanks.

> smaller files

What?

> cheaper, smaller hard drives.

Since when are hard drives getting smaller?