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The simplest and easiest explanation for the situation is this:

If nothing else before it did so, the adoption of the MP3 format as the evolution to the CD format proves that most people care about convenience, and are only marginally concerned with increased audio/visual quality.

Blu Ray only offers increased audio/visual quality.

Digital downloads can offer improved audio/visual quality and increased convenience.

 

 

Of course, as others have noted (I think Xenophon13 gave a very clear explanation), we may be farther from mass adoption of digital distribution than some here seem to think, and 5+ years is more than enough time to establish a new format like Blu Ray, so we'll see how it plays out.

Still, for those of us keeping up with these sorts of things, it is a bit disturbing to see the next evolution already taking shape even as Blu Ray is just beginning to establish itself. It would be like Blu Ray already having been invented and on the fringes when DVD was just starting out. 



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