Physical media is slowly becoming niche. Sure, BD offers better quality, but the number of people that care that much is very low. Those are the collectors, true fans, who are willing to spend more and who care about the difference. But they are not the majority. They are actually a miniscule minority. A niche market.
Most average folks watch films as a brief entertainment. They'll go to movies, rent from Netflix, or just watch any film on TV at a convenient time. Most people have a regular 32-40 inch TV, without extra components. Most people still have DVD players, and a PS3 or next gen acting as a BD player. But they don't care about expensive BD films, when they can pick up a 1-2 Euro film on DVD at a convenience store. And even then they pass because they don't need to own a film.
And they don't care that their $8-10 monthly fee doesn't give them ownership. They actually don't want ownership once the service (film) is consumed.
Gamers are a slightly different breed, and the two categories are not comparable. That's why BluRay will actually have its last stand in the gaming industry, and disc based games will stick around much after disc based films perish. Unfortunatelly, the volume of discs will not be enough to generate any profit to disc makers.
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