The real story here isn't physical discs disappearing in favor of digital downloads.
The real story here is the fact that BluRay, in spite it technically having greater video quality and higher disc capacity, has never truly taken over DVDs in the home video market. In fact, while BluRay has become semi-prolific in American homes, I'd be willing to bet more people still own just a DVD player over either both, or only BluRay. DVD sales are still fairly healthy, and DVDs copies of just about every single home video release that comes out still exist. I think Sony was really expecting BR to take over DVDs the way DVDs took over VHS. The difference being, it's still pretty much the same medium, and unlike the tape to disc jump, the benefits of BR for most casual/regular owners, are basically just garnish.
So maybe they bet too heavily on the BR format. No surprise there, I seem to remember them betting pretty heavy on UMDs as well. DVDs still stick around, because for a lot of people, they're more than enough. *shrugs*
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