Luke, Do not underestimate the power of Instant gratification
In general I agree with my fellow AH geeks - I love the quality of physical BD, but we are nothing but a tiny minority - a VAST majority thinks Netflix current SD streaming is good enough for casual viewing and lets face it - it's almost a DVD quality which was a gold standard not that long a ago and was a huge step up from VHS quality.
Yeah, physical media is bound to die. For most people 720 and stereo audio they are happy with. 1080i and 5.1 people are thrilled.
And not just because of the increase in download speed, but also because it takes care of manufacturing, shipping, stocking stores, and a whole other host of costs.
I think if they come out with a 4K streaming with Master Audio or something they'll charge more than the 4-5 bucks they do now and make even more profit.
But, look, they still make record pressings. There may be some residual physical media after 99% is streaming or download, it will just eventually be very expensive and sold in boutique fashion like vinyl tends to be now:
I.e. for records:
Amon Tobin Box Set:
Amon Tobin Box Set & ISAM Live 2012 | Amon Tobin
Trent Renzor Girl with the Dragon Tattoo:
The Girl with the Dragon Tattoo | Store
Also, I still think there will be some drive to have physical media for movies due to movie producers wanting people to see it in all it's glory. But I think it will be expensive.