I highly doubt it's going to rival Blu-ray's selection. 80% of the movie studios are backing Blu-ray. In my opinion that is just wishful thinking.
First off, they're apples and oranges so you comparison isn't very good, IMO. One is a physical medium that you BUY (at ~$30 a pop no less) and the other is an on-demand RENTAL system. If they're not really competing (outside of Blockbuster Video at least), there's NO reason that the movie industry would/should want to not support Apple/iTunes as a distribution method. It just means MORE MONEY for them. Historically, on-demand pay-per-play is EXACTLY what the movie industry WANTS MORE THAN ANYTHING ON EARTH. It's the whole reason we got that stupid "Divx Dvd" system from Circuit City and friends because Hollywood LOVES the idea of charging you over and over and over again for watching the same movie. The public does not generally like that system, at least for physical media so they ended up dropping it.
Now if you look at the cable companies (who are also doing on-demand offerings now), they're getting all the big new movies on-demand. Maybe DVD comes out first, but the lag is getting pretty short even so. I'd imagine Apple will get similar treatment because ultimately that's what they're offering, on-demand movies.
I'm sure Blockbuster and other rental chains will HATE AppleTV as it directly affects their core business, but Hollywood doesn't care who is peddling their wares so long as they get their share.
That and Blu-ray obviously still looks better because it being a physical media and plenty of space for the Studios to work with, without being limited by the general public's internet connection. There are still more
Being a physical media has NOTHING to do with it. It all comes down to bitrates and that's it. There is no technical reason a downloadable HD movie couldn't be BETTER than Blu-ray (i.e. totally uncompressed, for example). Sure, it'd be a huge file, but that has more to do with bandwidth versus time and storage space than any inherent limitation in the method of transmission. They could in the future easily have an OPTION for compression (i.e. do you want to order high quality, medium quality or low quality HD based on your connection/time) and let the user decide what is acceptable based on time/storage capacity for their particular connection. I doubt they will do that, but it could be done.
1080i versus 1080P is negligible in the sense that any 1080i source made from film can be recombined back into 1080P through 3:2 pulldown the same way 480i sources can be easily converted into 480P with any halfway decent progressive DVD player and/or projector/tvs or external deinterlacers. The whole 1080P thing is overhyped given ALL LCD/Plasma/DLP sources can ONLY display 1080P on-screen (they all have to recombine either internally or before it gets the signal). The only question is whether they do it correctly/quality or not. Furthermore, most people wouldn't know the difference between 1080P and 720P because most people have TINY HDTV sets. By tiny, I mean under 60 inches. I've got a 720P Panasonic LCD projector with a 93 inch screen and it looks FANTASTIC. It's got one heck of a scaler in it also plus it's in near perfect calibration right out of the factory so even 480i tv looks better on it at 72" inches 4:3 mode than my old 57" CRT HDTV looked (46" 4:3) from just a few years ago.
Would I like a 1080P projector instead? Sure. Is it going to be night and day even at 93"? No, I don't think so. It would be noticeably sharper, but 720P on this screen/projector combo already looks like I'm looking out a window. Now if I'm going to use my laptop on it, the 1080P projector would come in handy for higher resolution/larger desktops.
people out there that prefer to have physical media over digital media. DVD sales prove this. Blu-ray players have dropped from $1200 to $350 in little
I buy DVDs because they're CHEAP. Why rent a new movie for $4-6 if I can BUY it for $5-12 on average? At the very least, I won't have to return it it to the rental store. More to the point, up until recently, on-demand and PPV movies have been abysmal quality. DVDs were better looking and CERTAINLY better sounding (5.1 DD or even 6.1 DTS blows away 2-channel stereo with dolby decoding) so OF COURSE I'm going to go for DVDs over on-demand offerings in those circumstances.
Recently, however, I moved where there is a DVD rental store less than 1/2 mile from my house. I find myself renting recent releases instead of going to the movie theater. Most movies I only watch once, maybe twice ever so why buy it if I can rent it for LESS than the cost of one matinee movie ticket and watch it in peace on my 93" screen with a high quality 6.1 sound setup with a good meal and beer at home instead of having kids kick my seat at the cineplex? But what makes it MORE interesting is that lately my cable company has started offering HDTV on-demand movies. They have a limited selection at the moment (obviously AppleTV would have a HUGE advantage here with 1000+ to start whereas my cable company only offers around 12 choices at any given time and they change over time).
So what I would have here is a situation where I can stay AT HOME (no trips to a rental store where they may or may not even carry blu-ray to rent; most places do NOT and WILL NOT any time soon carry them or any quantity/selection of them to rent) and watch very recent movies in high definition for under $6 a pop. How great is that? Or I can go buy a blu-ray player and spend $30 a pop to OWN a movie I will only watch once anyway.
Admittedly, there are SOME movies I'd prefer to own because I DO watch them several times a year, but that's about a dozen movies period over the history of movie-making (i.e. my favorites). If Playstation3 ever gets some interesting games out, I might buy one and get those few movies on blu-ray or something, but otherwise, I'm thinking AppleTV is where it's at for sheer convenience and savings. Because until I can buy a blu-ray movie for what I can buy a DVD for, there's no incentive for me to 'own' HD movies. I can use the savings in just renting them to do something more fun like go out to dinner afterwards.