Check out the enlightened comments by Howard Stringer, CEO of Sony Corp, in this article on sony-ps3.ca:
"When speaking of PS3's Blu-ray capability [Stringer] went on to ask, "When you bring into new technology, do you go for a cheaper transitional [product], or do you take a chance on future-proof, higher technology which will keep you going for many, many years?"
I remember this from the '80s. VHS was the quicker-to-market, bulkier, cheaper, lower quality version of the new videotape phase. Betamax was smaller, slicker, higher-quality and ... LATE. And which was dominant through my formative teenage years?
This is not to say that the Xbox and Microsoft's backing of the HD DVD horse is the lower quality option, but rather that Stringer, who is a CEO and therefore assumed to be a smart cookie, used a bad example.
Microsoft's extended Xbox install base will cause HD DVD add-on units to sell faster and sooner than PS3's with built-in Blu-Ray players. This is simple economics. Consumers already blew their $500 wad last Christmas on the Xbox, and now have recharged their disposable income. Why put down $700-800 on a new console with limited games when you could get a HD DVD add on for your Xbox at a fraction of that cost?
At most, HD DVD will thrive and Blu-Ray will join laserdisc in the basement of amusing but inconsequential video formats. At least there will be a gap as wide as the Pacific Ocean, with the US being predominately HD DVD and Japan going with Blu-Ray.
Either way, American gamers win.
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