For digital downloads to work, someone will have to release the video equivalent of the iPod. AppleTV is almost there, but it isn't quite the revolutionary product that Apple wants it to be.
But as Mark said, MP3's and digital audio downloads are now the norm. Remember when the iPod and iTunes music store were first released? Did you think that you would pay $9.99 to digitally download an album when you could go to the store and get a physical CD for a few bucks more? I didn't. But now I hardly ever buy CD's. Unless it's an all time favorite band of mine, all my purchases are made online and downloaded. And even when a CD is purchased, it's immediately loaded into iTunes and then thrown into a box with the rest of my CD's. Once videos can be as easily ripped into a digital archive by the mass market, then you'll see a shift towards digital downloads and away from Blu-Ray/DVD.
But as Mark said, MP3's and digital audio downloads are now the norm. Remember when the iPod and iTunes music store were first released? Did you think that you would pay $9.99 to digitally download an album when you could go to the store and get a physical CD for a few bucks more? I didn't. But now I hardly ever buy CD's. Unless it's an all time favorite band of mine, all my purchases are made online and downloaded. And even when a CD is purchased, it's immediately loaded into iTunes and then thrown into a box with the rest of my CD's. Once videos can be as easily ripped into a digital archive by the mass market, then you'll see a shift towards digital downloads and away from Blu-Ray/DVD.