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I think the two can definitely co-exist. For many, it's a matter of personal preference. Some people will always prefer paper books (for whatever reasons), while many of us prefer the convenience of eBooks and will never go back. But I think it's clear that the market for eBooks will continue to increase, especially as the technology improves and eBook readers get better and better for lower cost.
We also have to remember that there are many places on Earth that have never seen a smartphone or computer, let alone an eBook reader, and that $259 is a month's (or more) pay in some parts of the world. Computers and wireless access seem ubiquitous in many parts of the world, but are not everywhere. Paper books don't require computers or credit cards or electricity or wireless access.
Additionally, some people will always prefer to give paper books as gifts. There is something different about unwrapping a paperback under the tree, as opposed to getting an Amazon gift card or a card that says "A book has been wirelessly delivered to your e-reader."
Finally, the format wars and hassles and restrictions and DRM currently plaguing the eBook industry will turn many people off until they are straightened out. Hopefully, publishers and retailers will soon settle on a single format that can be transferred to multiple devices, and will either remove DRM or will allow sharing and gifting and re-selling that people can still do with paper books.
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