I've been following the coming war between DVD formats for a while. On one side are Sony and Dell with some other allies with the Blu-Ray format; on the other side are Microsoft and Toshiba with the HD-DVD format. In an Eweek article today titled HD-DVD & Blu-Ray: Dead Formats Walking, David Morgenstern aptly points out that a new format of DVD may be a moot point considering the coming adoption of home media networks in which content is stored on the network.
I think David's right that the new DVD formats may end up scrapped, and I'll even speculate that Microsoft never cared all that much about HD-DVD: what they really cared about was the massive damage they could do to Sony's Blu-Ray format, a massive part of Playstation 3's appeal, if they could create confusion in the marketplace. And damn have they succeeded: Where Blu-Ray might have once been the feature that put Playstation 3 in every living room (if it became the established video standard for the next 10-15 years), it's now being eyed with the same skeptical eye that doomed technologies such as 3DO and Sega CD. This gives Microsoft the opening it needs to sell loads of XBOX 360s with the marketing tagline that they are Media Center extenders. And as more music and video are sold via file download in Windows Media Player/Center (they're going to merge), Microsoft will reap the benefits of a broadband economy, while Sony attempts to sell discs.
If Sony is to have a chance, I think it needs to try to make the Playstation 3 the home computer (it's got a Cell processor, why not?). At that point, they could claim you don't even need a computer, just a PS3. Now THAT'S a value proposition.