I think Microsoft is going to own the next generation DVD format. And I don’t say that as a Microsoft booster. I think it’s just the route that is going to make the most sense.
When I bought the new Terminator 2 DVD, the second DVD came with the full movie at 1080P (that’s P, not I) which is essentially super-duper High Definition TV. It was all in a collection of .WMV files and it all fit on a single DVD.
Moreover, with a computer with a DVD drive, I could watch this DVD on any screen – regular TV or the various other HDTV standards. It would just scale to whather and do so pretty seamlessly.
What I predict is that you’ll see new DVDs come with support for WMV files. Think about it, one DVD holding a 1080P (1080 lines of resolution) movie. Right now, most DVDs get filled up with a single 480P movie because they are so poorly compressed.
So Microsoft will end up owning the next generation format. This is a market Apple could have owned.