Warner Brothers just picked Blu-Ray over HD-DVD for their HD movie distribution. They claim they were picking the winner, but while Blu-Ray has a lead, it wasn't a clear winner. The real reason for Warner's decision was probably money from Sony.
Here's where Sony screwed themselves: they must have lost so many format wars (Beta, MiniDisc, MemoryStick) that they were willing to win at all costs. They delayed PS3 in part over Blu-ray, releasing only on their own format, and probably buying titles for their format. They saw what VHS did for the industry, and were looking at the war as an investment.
The mistake was putting all their eggs in one basket (they aren't currently a successful company from an investing perspective). It was a risk, but the alternative was becoming a minor player.
Meanwhile, writers go on strike. Without content for their new format, the only reason to buy a Blu-ray player is a few years' worth of movies--no new TV shows, no no movies. I don't expect the strike to last more than a year, but there also won't new films for a year after that. That's a long time for Microsoft and the cable companies to get on-demand in homes.