Blu-ray is to DVD what DVD was to VHS. The new format will supplant the old one simply because content will gradually shift towards the new format, over a period of years. The entertainment industry will see to that. It's all well and good to say that consumers won't want to repurchase their favorite movies in the Blu-ray format, but if the previous transitions are any indication, a great many will. How many of us are still playing our VHS tape collections? As for downloads, I don't see it as being set to replace any hard format, for at least as long as it remains rental only.
Or, it could be that Blu-ray is to DVD what
Laserdisc was to VHS. That is, Blu-ray could become a sort of specialty item for videophiles and people with high-end HT setups, while the mass market moves directly to downloads for the majority of its movie-watching. I think the failure of
Laserdisc to capture the mass market (outside of Japan) in the way that DVD and VHS did ought to be intensively studied by the people marketing Blu-ray right now, because in my view they are making many of the same mistakes, chief among them being keeping prices too high.
Blu-ray has won an important skirmish against HD-DVD, but has it won the overall war? The answer is clearly "not yet," but the $64,000 question is whether consumers will accept the digital download model for rentals and/or purchase. This will of course depend on many factors including the evolution of broadband in North America and Europe (Asia is already pretty well set), as well as the online providers' ability to get the studios behind download--it's all about content, content, content. From my limited but very positive experience so far with iTMS rentals, I think there is real potential in download. But, this
will be a paradigm shift for consumers, who have been conditioned for the past several decades to rent or buy physical media. Nevertheless, the impressive success of iTMS for music purchases over a relatively short time frame gives some hope.
So now for my $0.02: I think for the mid-term (5-10 years out), Blu-ray will coexist as a specialty item alongside downloads, as DVD steadily phases out. Long-term (10+ years), I cannot accept that distributing digital entertainment on physical media will make any sense at all. Eventually, when we're all hooked to the net via 100+ mbps connections as some of our Asian friends enjoy today, the vision expressed in the Qwest commercial a few years ago--"every movie ever made, in every language, available 24 hours a day" and with better-than-Blu-ray quality--will be everyday reality.