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I believe that once blu-ray reaches a certain market penetration and once the players will be relatively cheap, dvd and its players will begin to be phased out. I believe this because the margins on newer formats are immense.

Also retailers will prefer selling a 200$ blu-ray player on which the consumer is more prone to take an extended warranty (huge profit) to a 69$ dvd player which is so cheap people don't bother taking out the warranty on.

If this happens, the royalties for the Blu-ray association will make any current loses worth it.