This is the same argument I had with someone about mp3 files a decade ago.
He said mp3 music files would never catch on, because the quality was so much lower than CDs (which is true). Well, mp3 music did catch on, and if anything is the standard today.
There is a quality threashold beyond which most people dont’ care.
The reason blu-ray hasn’t caught on big time is most people (95% of people) don’t care enough about the extra picture quality to pay the extra.
For me, the streaming quality of Netflix is fine for everyday viewing. I’m not willing to pay the extra for a better quality picture.
It’s like music. There’s the best (CD quality) and there’s good enough (mp3 quality). For 95% of people good enough is all they’ll pay for, and it’s good enough.
There's a big difference between video and audio quality however. Video takes so much more bandwidth that the streaming companies will always try to go for the least possible quality. Audio now can be losslessly compressed and end up pretty tiny.
I know there's a giant market for streaming and I use it myself sometimes. As TV’s improve in quality the streaming just can't keep up with that and the difference between Blu-ray and streaming get more apparent. Also, when 3d starts coming on stronger there's no way streaming will double bandwidth for that either, they'll just not have it. There will be a market for both for a long time. I've never bought music much but I've always bought movies and I want the case and extras and all that. Both have advantages and I use both. Streaming for me is best for older stuff I might rent or that used to be on late night local TV shows (B movies).