R3 purchases are in fact, increasing according to the distributors though maybe not at the rate they'd want them to. I'm guessing but I doubt that the issue these days is really people choosing R1s over R3s -- it's convincing consumers to buy original R3 over pirated DVDs.
Personally, I think that R3 DVDs have come a long way since I started patronizing them in the late 90s. Those were the days when releases often had truncated features, and/or 2-disc releases became 1-disc versions. They were also expensive, with the average price hovering around P800.
Overall, there's been a definite improvement in the local R3 market, but the challenge is to bring consumer demand to the level of VCD purchases. Based on the last AstroPlus Sale where people hauling 10-20 DVDs was not an uncommon sight, I'd say that price is still the deciding factor.