February 19, 2008 is Confirm the Obvious Day. Pervez Musharraf finally had to concede that nobody in Pakistan likes him. Castro acknowledged the fact that he hasn’t been running the country for over a year. And Toshiba fessed up that they’ve lost the high-definition movie war.

We’re technology agnostic at PopSci. The more people creating innovative stuff, the better. But it’s been clear for a while—perhaps since the beginning—that HD DVD could not win the war against Blu-ray. Technology wasn’t the issue. It was the Machiavellian rules of business deals. Blu-ray always had the killer alliance—and as we watched partner after partner drop support of HD-DVD in the last few months, the deal was all but sealed.

Aside from Toshiba, Blu-ray had backing from all the consumer electronics heavyweights including Sony (of course), Panasonic, Pioneer, Samsung, LG, Sharp and new CE player Apple. HD-DVD was always a Toshiba affair, with intermittent and half-hearted support from a handful of companies such as RCA (which quickly pulled out) and Samsung and LG, which made dual-format players. Even Microsoft, Toshiba’s biggest ally on HD DVD didn’t see fit to offer the drives in its Xbox 360 game console. They sold it as an add-on drive, which they could at any time replace with a Blu-ray add-on.

Technology-wise, HD-DVD did everything right. Yes, its capacity is a bit smaller than Blu-ray (30 vs. 50 gigabytes for a two-sided disc). But the media is cheaper and easier to manufacture. And the early embrace of the slim MPEG-4 encoding technology allowed Toshiba to squeeze as much video onto its discs as the Blu-ray camp did with the older, bulkier MPEG-2 technology that it launched with. HD-DVD was also first to introduce interactive features and Web-based components like video downloads.

Not to mention it was first to market. The Toshiba HD-XA1, launched on March 31, 2006, was the Sputnik of the high-def disc race. Blu-ray’s belated response, Samsung’s BD-P1000, which followed on June 25th, best resembled the first American Vanguard rockets that exploded on the launch pad. The player had serious image-quality problems (now the subject of a lawsuit) that pretty much negated the very reason to buy a high-def player.

In fact, most of the first Blu-ray discs were best suited for the trash can. The production houses rushed them out with such poor quality control, they often looked little better than the cheap, ubiquitous DVDs they aimed to replace. Meanwhile Microsoft Studios babysat the HD-DVD camp, turning out flawless films that truly conveyed the meaning of high definition.

But Blu-ray finally got its act together. The quality of both discs and players improved dramatically, and prices crept down to a level that normal people could contemplate. $300 isn’t pocket change; but it’s cheaper than an iPhone, an extravagant purchase that plenty of people have justified. (And it’s far cheaper than a 40-inch high-def television.)

In fact, everything was looking rosy for Blu-ray until alliance member Apple fired a shot across its bow with the new Apple TV movie download service. Why bother with buying discs or waiting for Netflix mailings when you can watch downloads instantly? I’ve been playing with Apple TV, and the high-def movies are beautiful. Maybe not as good as Blu-ray is today, but better than when it debuted.

But the selection is very limited—less than 100 titles are offered now, vs. nearly 500 on Blu-ray. And for now, at least, Blu-ray is the economical way to go. Apple TV costs nearly as much as an entry-level high-def player, and the movie rentals are far pricier than what you get form Netflix: Up to $5 for a film that disappears if you don’t finish watching it in 24 hours vs. as long as you want for a Netflix movie. And as many you can watch for as little as $14 per month. (Not to mention, Netflix lets you stream thousands of DVD-quality movies to you computer, without limits.)

Of course, this can all change. Apple aims to rapidly expand its movie offerings, and it may push the studios for better pricing and usage terms. (A service called Vudu has similar offerings to Apple TV’s.) So now, we are in the best of both worlds. In the old high-def disc battle, competition between two similar formats kept most people on the sidelines. Now, we have two very different models—disc and download—which will each appeal to different groups of consumers (Internet oriented vs. old-time CE). But as they each try to win market share from each other and mainstream consumers, competition could sweeten the deals for all of us.

Stay tuned to for a rundown of the latest disc-less movie download services to take aim at Blu-ray’s place at the top.