[My explanation after the jump]
No doubt some will buy into HD DVD because it's cheaper, but most will see it as a generic version. Those consumer who go to Best Buy and buy the cheapest TV, the cheapest AV receiver will flock to HD DVD. Those who have the money to buy the $6000 rear projection will buy Blu-ray. The sales person will help them make that purchase, because unlike HD DVD there is enough margin in the product to motivate retailers to sell the item. Sure they will put HD DVD on the front of weekly ad with the rest of the inexpensive products, but when you get in the store they will be well versed in the merits of Blu-ray.
Blu-ray will be perceived as better because it costs more, we all know this. I mean seriously is a Rolex really worth all that money? Is the Sony XBR really that much better than the non-XBR? People perceive expensive item as being better and if they compare their favorite brand player to the Toshiba there is no way that they would choose HD DVD based on the way the player looks. It looks generic and I know it's what is inside that counts, but we know how that goes. People will see HD DVD as an incremental inexpensive alternative to the next generation HD movie format. People will recognize that all their favorite CE companies and favorite movies are available on Blu-ray and see the value, after all content is king.
HD DVD was out 2 months before Blu-ray, what day was Beta released? How about VHS? Anyone? Of course, no one knows and no one cares, what people care about is the here and now. Part of the reason HD DVD has the lead now and was able to come to market sooner was the lack of support. It is much easier to quality control one player and three studios than eight players and approximately seven studios. Sure, HD DVD has the lead now, but who really believes they can keep it never the less stop Blu-ray once all the companies pledging support actually fulfill that promise. More on promises later.
A dual layer Blu-ray has more capacity that HD DVD and three layer HD DVDs are not even in the spec. Blu-ray might be behind HD DVD today because of their reluctance to use more advanced CODECs, but in the long run they will support all the same CODECs and the extra space and throughput is going to make the difference. By the time Disney's first titles are released or Warner's second wave, VC1 vs MPEG2 will be a non-issue. HD DVD is currently the best that it can get, it is maxing out it's capacity as well as it 30Mbs throughput, this is why there are no 1.85:1 movies with TureHD and enhanced features(IME). Even if Blu-ray were to fail as a packaged media format (anything can happen), it would live on as a data storage format. In the world of data storage there is never enough and this simply makes Blu-ray better.
HD DVD Fanboys everywhere are emailing me death threats and yelling blasphemy because I choose to ignore the fact that HD DVD is better TODAY and that every picture quality comparison has been in HD DVD favors, or that most Blu-ray titles don't get a good review. We all like to think that everyone is like us, we like to think that everyone will choose picture or sound quality above all else, but it just isn't true. To a certain degree picture and sound quality are important to everyone, but some can't tell the difference between HBO HD and DVDs and they sure won't be able to see the difference between HD DVD and Blu-ray. All the Blu-ray movies I have seen look better than HBO HD. No, I haven't watched every single Blu-ray title and no, I am not going to go rent that one movie that everyone knows looks bad. Blu-ray movies look great, do they look as good as they could? Maybe not, will they get better? Sure, and you know what, his war isn't going to be won in the first three or even six months. At this point it is all speculation and only time will tell, but I for one am putting my money on Blu-ray.
Never say never
As much as I am convinced that Blu-ray will win, much of this is based on promises. Promises made by the BDA (notice I don't say Sony) and promises made by all the supporting companies. Although it's early to start calling them out, if Blu-ray doesn't ever release 50GB discs or if the CE companies and studios switch sides we have a whole new ball game. Of course this is what every HD DVD fanboy is predicting, at this point it is all a dream that the studios will switch because HD DVD out sells Blu-ray. In the meantime go over to Amazon and write a bad review of the BD-P1000 or join the rest of 'em bashing Blu-ray at the AVSForum and convince yourself that you can make a difference. I believe Blu-ray can and will deliver the ultimate HD picture and sound quality and don't care if HD DVD is a little better right now.