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Blu-Ray will eventually replace DVD. Why? Backwards compatibility. This is the one thing that Blu-Ray has in the fight against DVD that DVD did not have in the fight against VHS.

As expenses drop, eventually CEs will only manufacture Blu-Ray players. People will buy them, because they will essentially be DVD players that happen to comes with Blu-Ray. It may happen slowly, but it will happen steadily, as DVD players die and must be replaced. Once Blu-Ray's penetration eclipses 80% or so, the studios will stop releasing movies on DVD, much like what happened to VHS releases once DVD gained 80% marketshare.