Personally I prefer to have movies stored on physical media coming supplied in a nice box. Some people brought forth some good points with regard to internet access, even in countries with high internet penetration internet usage is far from 100%. Anothier issue is harddrive storage capacity, I think most people won't like the idea of having to delete movies from their harddrive to be able to download more movies. In full quality high definition movies may take up between 20 and 40 GB worth of storage.
Even if you would have the bandwidth and servers to stream all that content in realtime, negating the need to store content on your harddrive but instead have it stored on remote servers this would still be far from ideal from my perspective. Sometimes things go wrong at internet provider's end and if this would become a success it's not unthinkable servers may get overloaded during the weekend when overyone starts to stream huge amounts of data to their home system simultaneously.
I don't see this happening on a mass scale for many years to come, IMO the reason why Microsoft's mouth is currently pointing towards this direction has everything to do with them seeing HD-DVD is in a pretty bad position right now.
