That argument was made when the first recorded music came out (people won't buy sheet music, they'll just listen), when audio cassette recorders came out (people will just record from the radio, they won't buy LPs any more) and when MP3s arrived on the scene.
In all cases the industry adapted. The film industry will change and adapt to the new world.
We'll always desire entertainment and someone will always find a way to do it.
in fact, this is already happening with online entertainment such as some youtube channels (think stuff like https://www.youtube.com/user/geekandsundry , which started with 'the guild'). I believe TV and long form media will not be around for long, replaced by dedicated on-demand media that caters to very specific audiences, and there being thousands, or even tens of thousands of them.
TV talking heads, episodic/sitcom, and documentary material will indeed be hugely changed by this. You could get started making a decent quality 'internet TV' program like the one you linked to for only $1-2000; indeed I've toyed with the idea of doing a little cooking show because that's something I have pro experience with.
Serious longform drama...not so much. A simple 90 minute feature film that meets normal commercial expectations (ie doesn't look all weird an experimental, just tells a straight story like a detective mystery or something) requires about a month of photography and a year of post-production work and a budget in the low 6 figures, which means most people won't get paid. Of course you could try bootstapping it by making the thing in small chunks but that almost invariably ends up being at least twice as expensive.
There are ways around this, but you also have to ask yourself why most startups take cash from venture capitalists rather than relying on organic growth - doing it piecemeal is very very slow and many consumers will not have the patience for you to make incremental progress towards the goal.
