As for Blu-Rays etc, if demand falls enough then supply contracts and the price may rise, and you might have to pay more for a physical copy, but thats how it goes if you want something niche.

Supply doesn't stay indefinitely viable no matter how low demand gets. Can you still buy new movies or TV shows on VHS? Why would movies still come out on DVD and Blu-ray once demand has fallen so low that its no longer worth the cost of production? DVD/Blu-ray is already a minority market share and its only shrinking further.

What if I only want to pay $5 to see something once? A company is banned from offering that to me, and I have to pay $15 to own it permanently?

Why would they do either of those things when they can charge more for a temporary download than they can for a permanent DVD/Blu-ray?

The very premise of this OP is that you can't permanently buy any digital media from amazon, there is simply "time limited rental" and "until we say so rental".

Every season of Friends on Amazon video would cost you $150 to rent until Amazon decides to stop giving you access. Every Season forever on Blu-ray is less than half the cost, $71

This is not because blu-rays are cheaper to make. It's because the (rapidly growing) digital download market is far less competitive than the (rapidly shrinking) physical media market, so they can charge more for a product that costs less to make and still grow as a business.

It is a text-book example of an inefficient, low competition market that does not drive down price to marginal cost of production and instead engages in rent-seeking.

So, in effect you would ban renting of digital content?

No I would change IP law so you couldn't bundle self-destructing/obfuscating DRM with media downloads, same way we don't allow car manufacturers to have the cars onboard computer brick itself after a year so you have to buy a new car every year.

Calling something a rental doesn't make it so and doesn't mean the law should treat it as one.

If you want to call a digital download a "rental" you can do, but you're not actually renting anything or giving anything back, they're just selling you the product and then remotely breaking it so you have to pay for it again. companies shouldn't have the right to remotely break products post-purchase just so they can get you to buy it again.

This has never been accepted with any physical product. Just because digital media gives them the ability to do it in a way that current laws are not fit to deal with doesn't mean it should be legal.