Sony have now revealed plans to release some films on Blu-ray what also includes a version encoded and shrunk to it fits on a memory stick, and more to the point is legal.
This is a very interesting experiment and its good to see that Sony is trying different ways of getting people using the PSP as more than a gaming device.
I hope that the compression brings the file size down enough that you can fit a couple of movies on a 1gb memory stick, although carrying 5 memory stick is certainly preferable to 5 UMD, and they can be reused.
I don't think Sony are going to abandon movies on the UMD format just yet but it's the first sign and with a PSP2 inevitable at some point possible in the next few years maybe it will be UMD free.
It is of course another reason to go the Blu-ray route rather than HD-DVD and another sign that HD-DVD really has no way back.