The "downloads are going to kill Blu-ray" stories will never end, no matter how looney they are.
I buy and rent movies on Blu-ray. Although I have a new Dish Network receiver and a nice 120Hz 1080p TV, I'm not wasting $7 on a mere 24 hour rental that doesn't have nearly the image or sound quality of Blu-ray. I get a better deal on 5-day and 7-day BD rentals from 2 video stores not very far from where I live.
As to Blu-ray movie pricing, you can get the $5 difference or even less compared to the new release on DVD if you're willing to shop around. Honestly, if anyone is silly enough to pay $35 or $40 for a movie on Blu-ray they only have themselves to blame.
Lots of new releases on Blu-ray can be had for under $25. Catalog titles are available for under $20. Some movies on BD sell for under $15, there's just not very many of them since Blu-ray is still a relatively new format and doesn't have tens of thousands of titles like DVD.
It's also worth mentioning that many of the stores who charge full MSRP for movies on Blu-ray also charge pretty high prices for DVDs as well -$25 or even more than that. It's rare that I see "Matrix" style pricing (under $15) anymore for any new movie released onto DVD. Some of the folks telling all the doom and gloom stories about Blu-ray try to imply that any DVD is bargain bin priced right off the bat.