There's an interesting discussion thread going on over at Kotaku.com - it's all started because Sony have been muttering about Playstation 4 (sheesh, we haven't even got the PS3 yet) - and apparently Phil Harrison said he'd be amazed if the PS4 had a physical disc drive.
The blog post itself suggests that doesn't bode well for Blu-ray. Well, Playstation isn't the be-all-and-end-all of Blu-ray, but it's quite a big factor.
What the commentary brings out is the issue of physical media vs downloads - and that goes far beyond Playstation or even gaming. It has the potential to affect all types of digital content.
Some of the main points coming out in the comments:
- Who'd want or be able to download 20 Gigs per game? Internet connections are going to have to get a lot faster with higher (or no) limits.
- "Whichever format wins the next-gen DVD war will likely be the last physical format. Downloads are the way everything's going"
- "I'm all for digital content, and the technology will definitely get there someday. But that doesn't necessarily mean that's the right thing to do." (getting rid of physical media)
- "I'd much rather buy a physical product, that has a case and a manual I can touch"
Has physical media had its day? What about the next-next-generation of holographic discs? People have to physically store content somewhere, and back it up too.
I don't think downloads and streaming are going to be the dominant format of content delivery any time soon.

I agree with the author: there will always be a demand for the back-up. The downloadable game as a commodity is too expensive (at this stage in time) to risk not being able to back it up. In which case the optical drive will still be essential.
Will be interested to see what this does to companies who make their money from Optical disk distribution such as Game and Blockbuster. Will their business models collapse or will the high street change forever? What does this do for Point of Sale and all the marketing money?