People keep saying digital distribution is going to kill blu-ray, but that's not going to happen - at least not any time soon (like, in the next decade!)
The big problem with digital video players is they rely entirely on your internet connection. If you don't have a fast internet connection, your video is going to look awful - way worse than VHS. You really need, at least, a 3mbps connection - and that's just for DVD quality. For "HD" quality you need close to 6mbps, or higher. I put "HD" in quotes because this isn't quite true HD. Yes, it's at 720p or even 1080p, but it uses a compression algorithm so the video quality isn't going to be any where near as good as even a real blu-ray at 720p.
If watching DVD quality video is all you want to do, then maybe - that's MAYBE - digital distribution is the way to go. But with so many internet providers unable to do anything better than 1.5mbps, not to mention other high speed providers (like Comcast) slapping fees on users who go over their 300GB/month cap, it's just not going to be feasible any time soon.
By the way, Netflix's streaming is only at 480p, and is compressed. It's not HD at all. Same with Amazon. While there are some HD streaming services out there, they cost almost as much per movie as if you just bought the blu-ray disc in the first place - and they still don't come close to blu-ray's quality.
Just get a $150 blu-ray player (yes, they exist!), and update your Netflix subscription to send you blu-ray discs. If you want the best of both worlds, I think Sony has a new blu-ray player coming out that also lets you stream from Netflix or some other sources, for about $300.
Trust me, blu-ray isn't going anywhere, until you start seeing things like ubiquitous, affordable, >30mbps internet connections to every house in the nation, and we're a good decade away from that. At which point, I fully expect some new format to come out (3D?) which will still make digital distribution an impossibility.