@ redspear
I think many people will prefer to own their favourite blockbuster game or movie on disc, I think streaming/downloading can co-exist with disc formats (like PlayTV actually uses the PS3).
With regard to competing, streaming will get faster and cheaper, but will every potential consumer be online with a good enough connection and interested in this? I think not.
If pricing is a major concern, it should compete with DVD first as reaching that level of streaming quality is more easily achieved and a cheap mass market solution at this point. Full quality 7.1 lossless audio with 1080p Blu-Ray visual quality is much harder to achieve, HDTV TV broadcastings aren't even on par (1080i with lossy 5.1 audio).