There was planned to be a web-based or online version of DS, as announced at the launch of 4.0, but I certainly don't recall any indication whatsoever that there was ever an intent for it to be on-line only.

I remember - I don't remember who pointed out the Comcast/TWC issue, but I remember a number of us that were yelling about leaving the content on DAZ's servers (I don't know about you, but TWC internet is the suckz - and I hear that Comcast is worse, if such a thing is actually possible) - and having to have an internet connection to make the product function (some things never change). For some reason, there wasn't a lot of trust in the PC forum for DAZ from long-time customers.  I personally thought the concept was elegant and it would certainly lock the customers into a very small walled garden that would be controlled by DAZ (all hookerware, all the time), but the communication between the servers and the end user would be it's downfall - internet service being what it is in the US.
Here is the very first sentence talking about the JSON spec:

JSON (JavaScript Object Notation) is a lightweight data-interchange format. 

This is the start of Wikipedia's entry on JSON:

JSON or JavaScript Object Notation, is an open standard format that uses human-readable text to transmit data objects consisting of attribute–value pairs. It is used primarily to transmit data between a server and web application, as an alternative to XML.

Sorry I can't quote from a JSON manual,  but I am a REXX kinda guy myself ;p).  No doubt a result of my time working at IBM (and luvin' my OS/2 boxen)

JSON doesn't make any sense if it isn't web-based and pushing content from a server to an application.  That is the primary purpose for the existence of JSON. 

AFA DS 4.0 release, a number of things flamed out pretty spectacularly - like thinking people would pay for it.  (Sorry, but if I didn't say it - someone else would have.)

Primarily used for doesn't mean exclusively used for. The things that may make JSON attractive for on-line provision also make it attractive as a local storage medium for something like content which generates a lot of assets. I know when Randall first let the news of DIM slip there was concern that it would mark a move to some kind of walled garden, but that misreading was the nearest I recall anyone getting to say there would be an end to local content (and as someone with a capped data allowance I would certainly have noticed and screamed loudly had anything of the kind been mentioned).