You're right that the CES CEA believing it (or at least putting it out in a press release certainly doesn't make it so. I also agree physical media will be around for a long time.
These Hollywood types and display and receiver manufacturers just haven't figured out that they're killing themselves via the complexities they're trying to foist onto the consumer. They're all trying to be the RCA's David Sarnoff who coined the aphorism that "RCA doesn't pay royalties; we collect them!" Modern HDTV biz-types still drool over the fact that in '53, RCA was collecting 77% of all royalties paid out in radio-TV, more or less guaranteeing their future financial success.
Hence, they've got all these proprietary what-nots, be it DRM (CCS, 5C, HDCP, AACS, broadcast flags, 960x540 output), connectors (component, DVI, then HDMI, then 1.2, now 1.3!), etc. They're all laden with a desire and concommitant expectation to hook their audience and follow-on manufacturers, so they'll pay the patent-holders royalties.
What they don't reasonably appreciate is that all this (mostly-unwanted and unnecessary) complication carries a natural aversion from most practitioners and consumers. Even professionals are often non-plussed when facing these daunting installation and setup tasks. Consumers don't know what to specify, and installers are often taking a flyer if they're not copying a combination of components someone else, e.g., a reviewer reading press releases (see above) tells them via some high-clay-content publication.
The customer ends up paying and often being unhappy with the price-performance ratio.
Bandwidth availability to download 20GB+ movies in a reasonable or convenient amount of time is not really feasible for most people, at least compared to the convenience and limited expense of reasonably-priced optical media, as DVD-Rs are presently. The recent Comcast "unlimited Internet bandwidth" sales versus feeling the need to constrain BitTorrent-type users highlights part of the problem.
From my limited experience, however, hard disk media appears to be the presently preferred media for users who are backing up their purchased video and audio within the home. Sliding DVDs in and out for every 5% change in information accessed (i.e., 4.7GB vs 950GB) just doesn't cut it by comparison.
It's going to be very interesting to see the price point at which removable Terabyte platters are going to be sold. If one can get a TB hard drive for $300, I'd say such TB optical RW drives ought to come initially in at $400 and $20 for the media, making them 4x the cost of DVD-R present DVD media. After a year, they should probably come down to $200 for such a drive and $5 for the media, at parity with current blank disks, as $/GB.
What I think would be hot would be shipping protected-against-erase non-DRM movies at 1080p/@24fps with 5.1 audio as 24-bit 96kHz with the remaining portion of the TB drive as -R or even -RW media. That would mean they could balance their expenses against the consumer cost of two products simultaneously--in both of which they'll almost surely be interested, that is, movie and personal storage space. Almost everyone would love to back up their entire audio collection onto the remaining 900GB of a future 1st-run movie. Studios could see copies sold at retail for $34.99, no sweat.
Just today I was going to buy an HD-DVD player, hoping to find one of those under-$100 Wal-Mart jobbies, which I wanted to be sure would do 1080p. It was a daunting exercise for me, though I'm the a heavy-duty industry junkie, trained an ISF/CEDIA installer and knew what I wanted. I could easily imagine others would make a mistake and order the wrong model or be unhappy several months after making such a purchase. You can be darned sure I would be unhappy if not livid, should such a player begin playing anything back at 960x540 onto my cool, Sharp 1080p LCD!
I then looked at Blu-Ray players, and had to imbibe all this talk of incompatibilities of the current 1.0 machines versus two coming levels, 1.1 and 2.0 which will be required to do this or that. It makes me angry to consider the $800 player is so incompatible with the future. That, plus it's been at the shop because it stutters horribly in certain playback situations. I would have to guess they all do if they're the same type, but who knows? The Geek Squad has been paid to figure it out. They darn well better, but if I can get a new machine out of it, I know I don't want my old, out-dated, stuttering 1.0 that's doomed to have more incompatibilties in just a few more months!
HDTVDave rumors that Fox and Warner were each paid half a billion bucks just to come over to their camp exclusively. Just who are we supposed to believe is going to pay that bill if they're ever going to get Blu-Ray into the black. All their customers, that's who. Well, count me out, hurling an epithet of a pox on both their houses!
Netflix, woo-hoo, though I have a local favorite video store that lets me rent anything for $1/rental, three days for each, if I pay in a $100 pre-paid block, in advance.
HF