Some of you guys downtalking BR at all costs seem to live in their own small bubble, or to be in utter denial.
1) streaming content is nice and everything. But when will everyone who want to see a movie have a steadily reliable 30-40 Mps connection (that's the bandwidth of a BR during playback)? And you have to have this connection _wherever_ and anytime you want to see the content. Want to see a movie while commuting on a portable reader? Want to entertain kids with their favourite Pixar movie during a car travel? Want to bring a few movies at a friend's in the middle of nowhere? Is streaming the answer in these cases? I think you need a physical digital medium.
Plus you talk as if USA or NA is the whole world. There's no Netflix in the rest of the world, and in most countries there's not the net infrastructure required for a reliable distribution. Things will get much better in say a 5 years timespan, but why should I buy _today_ a DVD if I can have so much better content with $5 more?
2) given that _today_ we need a better medium, BR is an obvious upgrade because it is back-compatible with the bulk of DVD content out there. And having 10-100x space on a disc is also great for games and software, as new PCs and laptops are more and more coming with BR drives instead of DVDs.
3) going back to the original topic (consoles): don't delude yourself by saying that DVD is "good enough" for games. There are several games on xbox360 _right now_ that span several discs. And while changing the occasional disc in Lost Odissey might not be that bad (how many of them? 4?), what about less linear, free roaming games where disc changing is not as easily interspersed with gameplay.
Case: Id's "Rage". John Carmack already said that their greatest trouble with the 360 version is the storage medium. They will have to go with lesser res megatextures in the 360 version to fit the game in 2 DVDs... and only the licensing costs are keeping them from using the 3 DVDs they need to match the PS3 and PC versions.
And the bigger, the more complex, the less linear games become, the worse this will be an issue. Compound by the fact that xbox360 doesn't even have an HD as a base spec.
In the 3 years from today to next gen xbox, I think that they will have to bite the bullet: there will be multiplatform games that will have HD and/or BR as a requirement for the xbox360 version. Then, with the next gen, an HD will be in the specs and a better optical storage will be needed because, again, in 3 years from now there's no way that the greatest part of the userbase can see downloading 50-100 Gb as viable or convenient. MS could go with their own optical format, but in 3 years BR will have a significant share of the movie market, especially for newfangled blockbusters, thus it just makes sense for their drive to be able to read BR _in addition_ to any digital distribution.
For the next-next-gen (6-10 years from now) the bandwidth availability will have probably improved enough to seriously think about ditching discs in some cases... then we can talk again :)
Edit: typo