Oh, it's gonna happen, but when...
An interesting thing happened that isn't talked about much, but in the lat 90s, audio CDs were a base level format. Both in terms of being a storage media and in terms of quality. Just as technology was taking us into higher resolution with more channel audio, technology was taking us into lower resolution, but less expensive and easier to distribute.
One the one hand people were saying CDs weren't good enough, we need SuperAudio CDs or DVD-A or DTS CDs. On the other hand people were saying 128Kps MP3s were good enough!
It will be interesting to see what happens with iTunes...if it becomes a new standard. I wouldn't be surprised at all if there later became a new and improved quality download that you could upgrade to. This is what the industry does, but this time, we're all going to ask why they weren't encoded that way in the first place since the technology already existed.
So now we have movies doing the same thing. Some are saying DVD is not good enough, we need HD-DVD...and certainly we can all see the difference, but at what point will the acceptable quality level of video stabalize such that the acceptable bandwidth/download time meets it?
In other words if there are enough people with bandwidth accepting a reasonable download time of a DiVX would these people also accept the poor quality?
Bandwidth is increasing...not just broadband acceptance but the speed of broadband. As this increases the variables of quality vs download time also improve as a trade-off of each other.
However, quality requirements are also increasing. I can't imagine paying to for something that wasn't at least DVD quality, and I'd prefer HD quality. At $20 bucks I would go to the store and buy a HD copy versus downloading a sub-DVD quality for a little less.
So while it is about bandwidth, it's also very much about the flux of quality standards.
The rest of the technology of course is already pretty much there. I say this in almost every post, but here it is again...APPLE SHOULD BUY TIVO. It's great that Tivo works with Apple's overall strategy, but it's becoming increasingly clear that Tivo (or whatever brand) will be the entertainment hub, not the PC/Mac.
Tivo's Market Cap is now 3X what it was just last Sept, but at under $400 million, it still very much makes sense.
So my prediction on when movies will happen? I believe quality standards for video will increase. If I'm wrong about that and quality standards decrease, then it could happen within 2 years...but I strongly believe quality standards will increase so we're looking at 5-10 years before it can be offered as a competitive channel to other forms of home movie rentals/sales.