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Downloads can't and won't replace BluRay, not for another seven or eight years, i.e. for the foreseeable life of the PS3. Moving gigabytes of data through a network is an enormous challenge - there is no mass market of ultra-high-broadband connections capable of piping that data. Burning a BluRay disc will be cheaper than buying stacks and stacks of hard-drives, so there's a place for disc media.

This isn't to say downloads aren't an important market, just that disc media (for large files) and downloads (for smaller ones) will coexist just fine.