First, while I don't think there's much of a physical future for magazines and newspapers, I do think there will always be a market for physical books. (I think magazines will go entirely digital over the next decade, with existing name brands already finding some success—the New Yorker has made a cool $1 million with their iPad app.)
The market for physical and used books five and ten years from now will certainly be smaller than it is today, and my expectation is that most physical media will eventually be found only in libraries. Independent and used book stores will, I believe, remain in business, but I think by the end of this decade almost all new books—almost certainly all new fiction—will be produced and consumed electronically.
Categories such as coffee table/art books and children's books will probably take longer to make this transition.
Second, I expect a continuation of a phenomenon which I predicted last November: the resurgence of the independent book store. Will indies control as much of the market as they did before the chains took up residence in the 1980s? I don't think so. But I do think there is a demand for physical books and that there are dollars to be had, and many areas that have lost Borders locations may well turn to independents to supply their books.
Also, as I've mentioned before, the independent book store is the go-to location for author readings, book signings, community events, open mic nights, and in-person browsing. Try as they might, online vendors can't replicate these advantages.
Finally, while I'm not sure how Amazon and Barnes & Noble are going to develop as competitors, I think that each will have to offer a spate of unique—perhaps proprietary—perks and technological advantages in order for them to coexist. Right now Barnes & Noble's primary advantage is its physical retail space, but I don't know how long that will continue to be the case. The further we trek into digital territory, the more important the Nook and e-book sales will be to B&N, and the less appealing it will be for the company to maintain its warehouse, shipping, and storefront infrastructures.
What do you think, mes auteurs?