I just saw the website for "Observe & Report" and they are offering the film directly from the studio as a download.

Is this something new? I haven't seen the studios selling their films over the net before.

I guess this is a sign of what the future holds for distribution.

Have a look: http://observe-and-report.warnerbros.com/dvd/index.html

Well, Warner already offers download versions of most of their films through their website so this is simply an extension of that.

I think the "future" will be diversification. Downloads, physical media, streaming, whatever floats your boat. The genie is out of the bottle and consumers want their media the way they want it. That won't be changing anytime soon. I think what we won't see anymore are the days of a single media distribution method. Not to start a format war here, but that's the primary reason why I don't expect Blu to ever hit the same numbers as SD. Not because it isn't as good, but because the buying public will become fragmented on their delivery method of choice.

It is downloadable, its full of copy protection. You cannot burn them to a DVD

This is mad wisdom, yo, and well reasoned. Cable TV, music and the Internet has certainly proved that niche marketing is more-or-less yesterday's news. Of course profit margins come into play, so those who favor physical media might have to jump quickly to get in on smaller runs. Or something.