It's not new, but anyone interested in the future of physical media should listen to this podcast episode that features an interview with Bill Olsen, who runs the cult-video label Code Red. It's sobering and depressing, but well worth listening to:
If you're mainly interested in movies, I'd get an Apple TV and go with iTunes, which, in my opinion, has the best picture quality - just a notch below blu-ray. It's basically an online video store, not a subscription service, so you rent/buy each title on an individual basis, and it has pretty...
I think there's a false assumption at play here - I don't think the general public ever collected. The average person might have had a handful of favourites, but most people were always primarily renters.
I think that explains a huge part of the appeal to those of us who grew up when movies where something ephemeral, and probably why those born after video became ubiquitous tend to be less enthused about owning.