I think the flash drive idea is novel and would probably be accepted by a certain percentage of the population who have tvs that accept flash drives or are tech savvy enough to figure out how to run the computer into the tv. I don't have a tv like that, so I wouldn't mind having a DVD that I could play at home and in my laptop while I'm away from home. If I only had a flash drive w/ content, no biggie, I just have to watch on the 'puter. I don't mind, but others might.
I recall some bands trying to release albums via SD cards or flash drives, I can't recall which. I don't know that it was a huge success, probably due to the presence of things like Amazon.com and Itunes downloads. I no longer buy my wife a CD when she wants a new artist's stuff; I buy her an Itunes card. She likes the fact that it's a bit cheaper downloading versus buying and ripping, but I prefer a hard copy for backup. I can also control the bitrate of the music I put on my MP3 player if I buy a physical CD.
Some of the software I've purchased lately has been offered via download, w/ a seperate encryption key given thru a different email. I was also given the option to purchase a physical backup DVD (I did) and if one chose, they could also purchase the rights to re-download the software in the event of catastrophic loss of a hard drive. (you must still use the orginal passkey that you got, tho.) I thought that was a nice touch, as it really sucks losing software or stuff you paid for because of a bad hard drive or failed migration to another computer.
Another thing I've seen, and I don't know just how well it works, is the marketing of a "digital copy" that is included w/ the purchase of the DVD or blueray. Apparently some new encryption makes it so it cannot be ripped to an Ipod or other personal media player. The Digital copy is the movie in a different file format that's located on the disk, and it's usually a smaller file size, lacks tons of subtitles, has some sort of digital rights management, and fits on Ipods better. Sounds like a PITA, but the consumer gets to watch the movie at home and on the go, while the company retains some sort of anti-piracy control (which we all know is a losing battle. I wish the antipiracy ads were something more like "Look, F*cker! You're messing w/ my livelihood, and if I find you we'll use you as a warpost for the next knife seminar".)
Maybe until the DVD is *really* dead, the dvd w/ digital copy would be an option?