As a devoted supporter of packaged media, I have not been that excited about the online digital distribution of films simply because A) I like having library-like shelves of discs, B) I don't have the storage capacity to handle the number of titles I own and wouldn't want to lose everything if say my hard drive crashed or (like it was last month) have my computer stolen and C) haven't been that impressed with the quality.
While I still believe in A and B, I have changed my opinion on C and am really starting to come around. Lately, online streaming services such as Netflix (through their Instant Watching service) and Hulu have been offering a fantastic selection of titles that have DVD or near DVD quality.
Generally, I prefer to watch films on a movie screen or an elaborate home entertainment system, but right now my situation has me relying heavily on my computer for entertainment options. I do subscribe to Netflix, and love getting discs in the mail, but have found that for some films, watching online has been a great and convenient option. Hulu as well has allowed me to keep up with all my TV shows as my schedule is such that I almost always miss the initial airing (and am at the moment, DVR deprived. How do I survive you ask? Barely, I answer.).
The only differences between Hulu and Netflix is that Netflix has a much larger selection of films to choose from while Hulu has a larger selection of television shows, and some are even posted the day after they are broadcast. As well Hulu places ads within their films and shows allowing for free viewing while Netflix does not have ads, but you have to be a subscriber to their service to be able to use it. The Hulu ads themselves aren't that intrusive as there is only 1 per "break" (and a countdown clock lets you know how much longer you have to endure it before getting back to your program). Generally, the ads are placed at the normal commercial stopping points, although at times with the older shows – lately I have been watching THE TIME TUNNEL – sometimes the cuts are awkwardly in the middle of scenes since commercial breaks were fewer and father between.
Of course, the inherent problem with Internet streaming comes with how reliable your Internet connection is. If your connection is lost or low, you may find yourself with frequent pauses and even sometimes it stops altogether. This of course isn't the fault of either Netflix or Hulu, but it is at times very frustrating especially if you are caught up in a film or program and it just suddenly freezes.
I still don't believe that digital distribution will eliminate packaged media altogether. I do think though, that the rental business is going to be the most affected especially now that Netflix's Instant Watching is available through a box system, some Blu-Ray players and the X-Box 360 Marketplace. iTunes as well is getting closer to becoming a big player in the game thanks of course to Apple TV, but also because they are now offering HD programming that can be easily purchased via their system.
While I will still purchase DVDs and Blu-Rays in large quantities, I definitely will be paying more attention to the digital streaming offerings as the thought of being able to watch a TV show or movie while being stuck at an airport or on a train is very appealing.