Streaming is neat and probably what everything will convert to eventually. I just got a subscription for Netflix, and while being able to stream movies or tv shows on demand is really cool, they just don't have a big enough streaming library. With these types of services I don't really see any one service becoming dominate anytime soon. For example, Fox doesn't seem to stream anything on netflix (can't find king of the hill, simpsons, american dad, house, etc) but all their stuff is on Hulu. Well that's fine, until Hulu starts charging access fees too; now you have to buy subscriptions to two different companies instead of just one. Maybe that's not a huge deal, but it's annoying and will turn people off; I'd rather pay twice as much to access everything in one place than have to constantly guess which service I need to view X, Y, or Z.
On top of this, you have ISPs who want to cap your bandwidth. Comcast says 250GB/mo. Sure that's plenty now, but in 2-3 years when highdef streaming becomes much more mainstream, 250GB might be nothing. Now you've got an awesome (unlimited, for netflix anyway) service you can't use to its full potential because the company you pay to help deliver it from that other company you pay to your house doesn't want to (not unlimited).
I think that the challenges in bringing streaming services to the web are great enough that physical media isn't really going to go away anytime soon. Sad really, it's a damn cool idea and works pretty well.