Consumer spending on DVDs is expected to fall 4 to 5 percent during 2008, according to Pali Research. The decline in 2007 was 2 percent. All the causes are still not sorted out.

Pali Research’s Richard Greenfield reported the numbers in a story by Reuters on Monday. The decline in DVD sales won’t be offset by an expected tripling of Blu-ray title sales. That’s because the percentage of Blu-ray titles is still too small to make up for the loss.

Reuters also reported that Wal-Mart has made a decision to clean up its aisles by eliminating the bins of discounted DVDs. Internet downloads may have already started to put a dent in physical media.

Confusing the issue could also be the state of the U.S. economy as consumers cut back on non-essentials.

There isn’t much time left for Hollywood to recover from the prolonged HD disc war that pitted Blu-ray against HD DVD and confused and frustrated customers. Now that the war is over, Blu-ray customers are confronted by Blu-ray titles that can range up to US$30, and that’s not going to make customers who are accustomed to U$S5.99 DVDs in the discount racks at Wal-Mart and Target and $3 rentals from Apple very happy.

According to Sony Electronics President Stan Glasgow, it may take ten years for Internet downloads to eliminate physical media. The question for Hollywood in 2008 is whether they want to see ten years of declining disc sales or whether they want to see Blu-ray tiles, at attractive prices, maintain an equal footing in the market for the foreseeable future.