I think it is still being fought, the industry has calling it blue ray vs hd-dvd, but that leaves out digital. Which, IMO, will take the win in the end.
Physical discs are likely to end up suffering the same fate as CD's. They might still be around, but digital copies will make up the majority of what people actually use.
The missing piece is a iPod like piece of hardware. A box that connects to your tv with a hd connection, with huge storage and the ability to handle all the current formats (and update for new ones)
A box could hold 1000's of movies, tv shows, etc. And do so without having to change discs, keep everything sorted, searches, filters, parental controls, etc.
But a good box and a easy to use online store that connects directly too it would likely kill discs IMO, technologically there is nothing stopping it, just licensing issues. Which means piracy leads to a 'better' product then legal means, and that didn't work out well for the music industry, in the end the industry will have to open up to it.
I had the same thoughts, utilizing iPhone & iPod technology personally I have enjoyed the experience. So it seems this would be more than likely to formulate itself.