It's a brave new world, and great things may come of this. I found myself wondering if this will prove detrimental to literary agents in the long run.
I don't understand. What are you suggesting will "prove detrimental to literary agents in the long run"?
Will authors simply forego the agent and submit directly?
So long as most good publishers refuse to work with unagented authors, that's not going to happen.
So long as the contracts which are offered to unagented writers continue to be boilerplate contracts which are skewed hugely in the publisher's favour, that's not going to happen.
So long as there are foreign and subsidiary rights to negotiate, that's not going to happen.
Will agents still act as emissaries to the publishing world, guiding authors through contracts and marketing?
Agents don't guide authors through marketing.
I'm also curious if authors can start demanding more royalties, since digital is a much cheaper format.
Digital isn't a "much cheaper format". Editing costs the same no matter what format you're working with. The only thing that's cheaper with digital publishing is the lack of printing and shipping; but the costs saved there are often spent again on formatting, updating, and server maintenance.
I don't know enough of the inner workings of the industry to answer, or if the current climate has them asking the same questions.
I'm not convinced by the article. I note several statements which don't really hold water. I wouldn't worry about it if I were you.