Been convinced of this ever since I watched HD-video over Apple-TV, sent to my viewing room over the internet.
Blu-ray will be a niche format, a very small niche. Like Laserdisk to VHS -- and we'll be getting 720p (available now) and 1080p (also available, but not as ubiquitous) over the web. But most people, including myself, do quite excellently with upscaled DVD - though I will confess that I really enjoy 720P/1080i on my screen.
If the studios had put out some quality classics on Blu-ray when it was launched, instead of Doom this and Underworld that, then I would have bought it right away. The new Godfather cycle, and Bladerunner, etc -- instead, they gave net-distributed HD-content a chance to get established, while they were busy with Slasher MLXCCIV.
It's just so convenient with net download. I began watching a new television series the other day - pressed a button, a minute later it was ready to watch, in 1080i, with 5-channel sound. And while the sound on a Blu-ray disk is better, if they bother to process it in high-resolution (that doesn't always happen), the sound I get from the download is more than acceptable.