A couple months back, I picked up the HD-DVD add-on for the Xbox 360. After Mike brought his over and we watched Batman Begins in some lovely high-def, I was sold. The difference between 480 lines of resolution (DVD) and 720 (HD on my set, as it doesn't do 1080p) is not as tremendous as, say, VHS vs DVD, but it's definitely more noticeable the larger the screen you watch on.
Eventually, a moment of weakness came over me when Best Buy was throwing in Heroes on HD DVD for free with the drive (plus the already-included copy of King Kong and mail-in rebate for five free movies). Kudos to Toshiba for putting so much money into getting the format adopted on a larger scale; I'm all for free movies!
But then the sadness started to set in. 20th Century Fox and all the Sony-owned studios are Blu-ray exclusive. Nobody seems to be winning in this format war, so that means no Die Hard, Ghostbusters, Spider-Man, Fifth Element, or Star Wars on HD DVD (though Ghostbusters has yet to see release, and it'll probably be years before George Lucas commits to a high-def Star Wars).
As much as I dislike Sony, these are all classics I wouldn't want to miss. Luckily, they're starting to push back harder against the likes of HD DVD. Walmart ran a special the weekend after Thanksgiving where they threw in any 10 Blu-ray movies for free with the 80GB Playstation 3, plus the five via mail-in. The prices on Blu-ray hardware are still a fair bit higher than with HD DVD players, but $300 worth of free movies instantly is nothing to sneeze at.
I recount this tale because I've been reading a lot of articles, blog posts, etc. about which format people expect to win or whether the entire war is for naught because the future holds a total move away from physical media, instead replacing it with digital downloads. I'm personally taking an alternative side that, surprisingly, I don't see too many other people taking.
I don't have a crystal ball, but I don't see physical media going away any time soon. There are just too many barriers and unknowns to make downloading movies the standard. For one thing, consider that the average high-definition film is about 30GB. I live literally only a few miles away from Virginia Tech but am stuck with a cable internet provider that caps monthly traffic to 20GB. This goes into another rant entirely, but how many other people are stuck in even worse situations for internet access? Downloading a 30GB movie might have been a viable option when I lived in Northern Virginia, but not everyone can get the download speeds of a service like FIOS. But, almost anyone can drive 20 minutes in one direction or another and hit a store that sells DVD/HD DVD/Blu-ray movies.
Additionally, optical media are more stable. I have DVD's that I bought in 1998 which are still going strong and, I'm sure, will last many more years. How many computer hard drives last for three years, let alone a decade? Not many. If I download my movie from an online service, I just have to hope that the service is still in business when my hard drive eventually dies and I have to re-download it. Downloading the video and then burning it to an optical disc would be a viable option, but at that point why not just buy the movie in its nice, fancy packaging?
Speaking of packaging, another reason physical media won't go away is that people like to own physical objects. How many years ago were e-books introduced, and how many people no longer buy printed books because of them? Case in point.
On that matter of which format will eventually succeed, I am making my prediction right now of a permanent (until the next new home video format is introduced, anyway) co-existence. Past format wars where one format is popularly considered to have won have generally been between formats which are of different physical sizes and cannot be easily integrated into one piece of hardware. Think about VHS vs Betamax, VHS vs Laserdisc, CD vs Minidisc. The hardware needed to play one format is almost entirely different from the other, making co-existence difficult.
Now consider the more recent writable DVD format war. Who won: DVD-R or DVD+R? Neither. And it's been several years since I last saw a DVD burner which didn't work with both formats. Put out two formats with similar enough hardware, and suddenly the question of who will win is moot. Early adopters go with one format or the other (or both) and drive manufacturers will get both media into the mainstream by building drives that can do either one.
HD DVD vs Blu-ray is not too different, and LG has already put out two models of HD DVD/Blu-ray hybrid players (though not yet down into the same price range as getting two discounted players separately). I don't think it'll be much longer before we see the number of hybrid players increase and, as production costs get lower on the hybrids, the number of single-format players on the market start to drop.
Of course, I could just be dreaming as I try to justify siding with both formats now, but I really don't think either one will be going away any time soon.