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Yes, at the moment the future doesn't look very bright for HD DVD. What a pity, because I believe HD DVD performs better for movie playback. HD DVD offers nice features like "interactive in movie experience" Blu-ray titles currently lack because the required features (like two separate video decoders for PIP) are not mandatory for Blu-ray players, so the studios can't rely on it.Well according to that Blu-Ray is winning already. And just look at those figures for Japan! And that doesn't include Paystation 3 sales - That's a real shocker!
The japanese market seems to be lost (which isn't really such a big surprise, XBOX360 market share in Japan is about nil), and Sony's strategy to plant a "Blu-ray trojan horse" in many households might indeed work as planned.
If the BDA can convince Universal to switch neutral, HD DVD would vanish, at least in the US. But I believe this won't happen anytime soon, as Microsoft and Universal are working "too close" together to let that happen (Zune).
Europe might be a different story, Blu ray is almost not present there (PS3 hasn't been released yet), and big players like Studio Canal, who have a huge back catalog, are supporting HD DVD exclusive.
I am sure Microsoft isn't very pleased with the current development, so they could try to plant a "HD DVD trojan horse", too. They already have developed a cheap reference design based on Windows CE together with Broadcom, so they have created the basis for "cheap HD DVD standalone players flooding the market". In the mass market, price *does* matter. And availability. There are only a few manufacturers able to make Blu-ray discs, where HD DVDs can be made by almost everybody. If the demand for discs really goes up fast, it would be quite embarrassing if nobody can produce the required numbers for Disney, Fox & Sony Pictures.
So, what could Microsoft do? They could:
1.) Release a new XBOX360 version with an internal HD DVD drive for a "price you can't resist" (much cheaper than the PS3). If they are dead serious, they would subsidize such a unit like Sony does with the PS3, so they could sell it for USD300,- or less.
2.) They missed the opportunity to ship Windows Vista with a full blown HD DVD software player application. But they could try to correct this mistake by offering a free download/update/service pack, at least for Vista Home Premium or Vista Ultimate users. They would plant a "HD DVD trojan horse" with every Vista PC, and the folks at Dell, HP & Co. would probably be happy to add a HD DVD ROM drive to the machines.
If they play their cards right, they might still be able to turn the steering wheel. I have the feeling that Microsoft will not give up so easily. Let's wait and see.
For data storage, both formats are currently too small anyway. Who wants a 25GB backup medium, with hardisks >500GB?