Blu-Ray is a niche format that will eventually become a standard format, because HDTV is a niche format that will eventually become a standard format.
DVD players didn't come down because the format war ended or because recordable players emerged; I don't think most people even knew about the format war, and no one uses recordable DVD anyway. They came down because cheap chinese players infiltrated the marketplace and forced the big manufacturer's to compete. Prices were still falling--my first player was a $280 Toshiba in 2001 and six months later it was already down to just over $200 because a lot of people adopted that year--but once Acer and obscure brands like that started putting out players that were $100, companies like Sony and Toshiba had to stay competetive so they began slashing the prices dramatically. With this, disk prices fell dramatically--I remember when $32.99 was the norm for a new DVD, regardless of whether it was a "Special Edition" or not, and this wasn't seen as expensive either because it was a newer and better format, but by 2004 or so when all the prices were in free-fall you would see $22.99 for new DVDs, and now its not uncommon to see new disks for $15. It really traced back to the surge of cheap, non-brand name asian players that caused an industry-wide price crash, which lead to cheaper disk prices as the format replaced VHS.
But thats not necessarily going to happen again. I think people just take the incredible success and disgustingly cheap prices of DVD for granted. In 1995 I was paying $20 for VHS tapes, and now people pay almost the same for a lot of Blu-Ray titles, yet they still complain; our family bought a top-quality VCR in 1987 that cost us almost $300, and you can buy Blu-Ray players for much less today. I don't really know what people are expecting. I think its actually cheapened the home video industry a bit that you can go to the store and get a $50 DVD player and own a recent Hollywood blockbuster on DVD for $6, its sort of made home video a bit disposable but I guess thats just the way its gone.
As for Blu-Ray--here's the thing. I don't think anyone ever expected it to replace DVD, so why are people disappointed that its sales are not as good as DVDs? DVD was a success that had never been seen in home video, and probably won't be ever again, at least in our lifetimes. DVD you could just hook up to your TV and be blown away by the quality, but Blu-Ray requires you to have a completely different television set, and jump between Blu-Ray and DVD isn't nearly as dramatic so there's not as much drive for "you gotta see THIS!!". So, of course Blu-Ray isn't going to be The New DVD. It could never be, because most people are incapable of watching HD content anyway. So it is, and will continue to be, a semi-niche format. A lot of people that have HD sets have a Blu-Ray player, but most people still don't have HD sets.
However, Blu-Ray isn't going to die. It will stick around for the time being. And what will happen--and HAS been happening--is that more and more people will buy HD televisions sets. HD will supplant standard-def TV within the next five years. Its hard to find standard-def TVs at some retailers now, and HD sets are continuing to fall steeply in price--when an LCD set thats the same size as my TV at home was priced at over a grande three years ago people stayed away, but not only are prices competitive with standard-def sets but it costs less to get an HD set now than it did to buy a standard-def set 10 years ago. And as more people get HD sets, they'll slowly pick up Blu-Ray. Along the way players will continue to fall in price. Your average consumer isn't going to go ga-ga over it the way they did with DVD, but theres still a massive quality difference, and as people get used to the detail of an HD image they'll start noticing that their DVDs look a lot softer and fuzzier by comparison, and they'll get interested in Blu Ray. I'd say Blu Ray will be the standard home video format by about 2016, if it can hang in there for the next two years or so. But its not losing money, and every year more people adopt, sales are strong and should continue to be, so theres not much chance of companies or retailers abandoning the format. Even if the format was failing places like Best Buy need a format to go along with the fancy HD Tvs they are hocking so they'd keep it on shelves.
I'd say the success of Blu Ray will have more to do with the infiltration of HD sets than anything. Your average person doesn't have much interest in Blu Ray, its true, but only because your average person doesn't have an HD set so why in the world would they be interested in something they cant get. Eventually, people without an interest in HD sets will be buying them anyway because when they walk into Best Buy thats all there will be, and they will be more affordable than the last TV they bought anyway, so they will shrug and say "okay, fine." And as Blu-Ray continues to grow, these people will eventually start adapting anyway, just like all the people today who would probably still be watching VHS if it wasn't for the fact that everything had gone DVD anyway so they just went with the flow.