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MikeB said:

Sounds like Microsoft is repeating popular fanboy rhetoric, making the company look foolish. (and IMO vice versa)

UMD was never meant to replace DVD, just think about it. It holds less data than DVD, thus lower quality. It's a nice format for PSP users who want to watch movies and play games on the road. But before the PSP was even released people were already watching DVDs on much larger laptop screens in better quality. In the end UMD movie sales increased the scale of UMD production, lowering production costs. So IMO well done Sony!

The Blu-Ray disc situation is totally different. The bulk of TVs sold in developed countries today are HDTVs, HDTV penetration is increasing rapidly. To get the most out of your HDTV and modern audio setups a better format is needed. Blu-Ray movies will not go away and year over year penetration will obviously continue to increase like it is of course doing today.

Blu-Ray disc adds desirable content, quality and functionality potential.

1) High quality content, taking advantage of 1080i/720p/1080p screens and audio setups.
2) Additional features and content.
3) Scratch resistant discs.

IMO Microsoft is shooting yet again in their own foot. Well, Bill Gates and other Microsoft execs when talking about technology advancements have nearly always been wrong in the past, so this fits well their track record.

I agree with most of this, but I have to wonder... how good is good enough for the average consumer?  And is everyone in the US replacing their TVs with HDTVs right now?  It's a normal upgrade path, so I would think this will be stretched out over the next 5 years.