Blu-ray is not dead, not by a long shot. The problem with streaming media is it's limited to how many bits you can push down the pipe. Take the newest Apple TV for example, it now can stream at 1080p but still suffers horrible audio. Most blu-rays discs these days can handle either 5.1 or 7.1 audio, but iTunes movie audio is limited to 2-channel.
Another problem is buffering, like with Netflix. Netflix often pauses the video to buffer in the middle of whatever you're watching. And let's not even mention how had the video quality of Crackle, a service by Sony that delivers TV shows and movies over the Internet. Unlike iTunes and Netflix, Crackle has advertisement breaks, but the video quality is awful.
So next time some loud mouth tells you how much optical media is "outdated" and now new blu-rays discs are dead on arrival, remind that person that they are an idiot. Then link them to this article ;-)
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