So you claim that mere smaller size equals innovation?
Effectively that innovation has happened already, and yielded first the DVD and now BluRay, 2 new media formats that have far higher data density while employing, for that backwards compatibility, the same form factor as the CD.
Consumers want it because it enables them continued use of their existing hardware (which is why minidisc and others failed), manufacturers ditto.
For once both agree that a constant form factor is a good thing and consumers aren't pushed into forced upgrade cycles for everything they've purchased over the years time and time again.