It depends on how long this generation lasts. DL will not be viable for 5-6 years(judging from current American landlines projections)
That being said, Microsoft will have to come up with a proprietary format, or pay sony for blu-ray. Microsoft is going to try and stretch this gen as long as possible because quiet frankly, as blu-ray adoption goes up(and it will sky rocket as the crisis slowly weeds out) dvds are going to be a thing of the past like vhs within 3 years. Blu-ray drives will be standard on PCs and the average PC game (which is already running up to like 15gb) will be 50gb. the PS3 will, of course, use 100gb blu-ray discs, or possibly 400gb (which is already cheap enough for mass production).
1 TB blu-ray discs are also available, though still too expensive for commercial use.
Blu-Ray is the last hard media that will be used, that is 100% sure. and DVD is going out.
Blu-ray is awesome because of how incredibly powerful it is. The Blu-Ray scales exponentially with write speed, so faster drives (albeit, currently expensive) are monstrous for speeds and make dvd drives look like little babies.
What I predict will happen is this. For the PS4, Sony will use a smaller cell, since the cell is already way more powerful than most PC processors, but its at least good enough. A new video card, and a faster BR drive. the PS4 will be so cheap for Sony to make, and will retail starting out at around 249.99. Its amazing, Sony only needs to live through this gen and they are set for at least 2 more gens due to high their tech is. Pop in another nvidia graphics card and the programming is virtually the same.
The Cell can grow, become more powerful while maintaining the same program and engine usage. Sony are actually in a fantastic position for the next gen. Cell v2.0 will be even cheaper than the cell we're using now, and so will hard drive space, as well as blu-ray drives.
TL;DR, blu-ray. It's here to stay.