We did, in fact, consider Steam as a distribution platform. That was before my time at the company so I can't really tell you anything intelligent about Steam or our relationship with them, but I can talk a bit about the decision not to go with a purely digital distribution.
There are a lot of advantages, for the developer, in a purely digital distribution model. We get to keep more of each sale, and the initial investment, and risk, is a bit lower.
The down side is that you're strictly limiting your audience. While there are a lot of people, and I'm one of them, who buy all, or nearly all, of their games through digital download, there are more people who don't use it at all. Additionally, it's basically impossible to give a digital download as a gift. You can't exactly wrap it and put it under the tree.
When Pirates of the Burning Sea was initially conceived (again, well before my time at the company), it was planned as a much more limited scale game. The target audience was smaller and the scope of the game was smaller. At that time, a purely digital distribution model made more sense. We were basically targeting a fairly hardcore PC gaming market, one that we could reasonably expect to have access to, and be willing to use, digital downloads.
As the game went forward we expanded the scope of the game several times. We added the economy, we added avatar combat, we revised the ship combat model repeatedly. Based on these changes, we felt that Pirates of the Burning Sea could appeal to a wider market. Based on that we wanted a deal that put boxes on store shelves, and SOE was able to provide us with a really great contract to do just that.
Personally I think Digital Distribution is the way of the future, especially for PC games.