The previous two parts of this series chronicled a couple of past standards wars. In part 3, I'll officially make my prediction in HD DVD vs Blu-Ray as well as some additional metrics and strategy. (Hint: I pick Blu-ray)
Let's review those in each camp. HD DVD is backed by Toshiba, Microsoft, Intel, RCA, NEC and Sanyo, among others. Blu-ray is supported by Sony, Panasonic, Pioneer, LG, Hitatchi, Samsung, and more. Movie studios that exclusively back Blu-Ray are Columbia, MGM, Disney, Lionsgate and 20th Century Fox. Two studios exclusively back HD DVD: Universal and Weinstien Company. And four studios are supporting both - Paramount, DreamWorks, Warner Bros., and New Line.
Shapiro and Varian claim one's ability to win a standards war depends on seven key strategic assets:
1. Control over an installed base 
2. Intellectual property rights
3. Ability to innovate
4. First-mover advantage
5. Manufacturing capabilities
6. Strength in complements
7. Brand name and reputation
We'll take a look at each of these and apply them to the HD DVD vs Blu-Ray format war. Having a favorable position in as many categories as possible should be enough to "tip" one format in front for good.
Control Over an Installed Base
The installed base technology in this case is DVD. Since DVD is an open standard, no one can claim an advantage here. In addition, unlike the VHS to DVD shift, the new Blu-Ray and HD DVD players will be compatible with DVDs no matter what format wins.
Thus far, there's not enough data to tell whether consumers are adopting Blu-Ray or HD DVD any faster than the other. We do know that there are 1.5 million PS3s with Blu-Rays in American households. We also know that HD DVD players are half the price of Blu-Ray players (and Xbox 360 HD DVD extenders are 1/5th the price), but adoption rates are unclear.
What may prove to be Sony's magic bullet here is its PS2 installed base. There are over 115 million PS2 consoles world wide. In fact, the PS2 continues to out sell the Xbox 360! What's important here is that the PS3 is backward compatible with PS2 games. For sentimental, practical reasons or otherwise, there will be a significant number of users who will enjoy keeping their game libraries around by sticking with Sony. In fact, I'm a bit surprised that Sony isn't making this a selling point.
Advantage: Sony
Intellectual Property Rights
The copyrights and patents are firmly divided between the two camps. There is no one idea or killer ap that one group can own or control.
Advantage: none
Ability to Innovate
The ability to extend your technology in the future may influence current day adoption. We can picture games, movies and lots of extra features crammed onto a single disk. HD DVDs can store up to only 3.3 hours of hi-def, 1080p content (barely enough to watch epics like The Godfather, and not enough to watch Giant - if either were able to be shot in hi-def). In contrast, Blu-ray disks max out at 5.5 hours. It also follows that as an optical storage medium, Blu-Ray discs hold up to 50GB of data, versus HD DVD's 30GB.
Advantage: Blu-Ray 
First Mover Advantage
In many industries, you can gain significant market share just by being first out the gate. In the hi-def case, HD-DVD players were first to market with Toshiba releasing the HD-A1 in April, 2006 ($800). And since September 2006, HD DVD extenders for the Xbox 360 have been available (in Japan) for $200. On the blu-ray side, Samsung's BD-P1000 hit the shelves in late June 2006.
Are two months enough of a head start? PC Magazine's Lance Ulanoff seems to think so. I disagree for a couple of reasons. First mover status is for the most part a good thing to have, but you are still at the mercy of consumer behavior. There are 24 million households with HDTVs, and shockingly, only half are watching HD content. Also, keep in mind that there are more than 111 millions TV households in the US. And now we learn that of the one quarter who have HDTVs, only half know how to use them. Thus there are two big reasons a two month first-mover advantage is essentially worthless - one can't claim any decisive victory until 1) at least half of US homes have an HDTV, and 2) Users feel compelled to watch HD content (they may merrily continue watching upconverted DVDs for years). The savvy customer who does understand their hardware is likely to wait it out, ignoring the first-mover altogether. Marketing strategy will have far more influence on the masses than the minuscule 2-month head start.
Advantage: none
Manufacturing Capability
Shapiro and Varian point out that the ability to be a low-cost producer has it's advantages. Either through superior economies of scale or manufacturing expertise, the ability to keep production costs low gives one competitive advantages (pricing and promotions flexibility, for example). It's well known the blue-violet laser diode is suffering yield and supply problems, and While the same laser diodes are needed in both HD DVD and Blu-ray players, Sony is the one who gets the bad rap because of their infamous supply, delay, and cost problems and the public's association of Blu-ray and the PS3.
On the home entertainment front, the HD DVD players on the market cost considerably less than Blu-ray (BestBuy is listing Samsung's Blu-ray BD-P1000 player at $800 and Toshiba's HD-A2 HD DVD player at $500).
Due to the PS3 fiasco and stark differences in ticket price, Blu-ray loses out on manufacturing.
Advantage: HD DVD
Strength in Compliments
Having products that compliment your format/technology can have strong influence on consumers' perception. Indeed, a coherent portfolio of complimentary products is consumer friendly (think iPod + iTunes + Macs).
Microsoft and Sony understand that movies won't be the prime motivator here, but games. It's very likely that the quality and attractiveness of the hi-def game titles from each camp may tip the scales in favor of one format. So look for Sony and Microsoft to crank up their own game development and at the same time jockey for exclusives from third-party publishers.
As for movies, there are five studios releasing hi-def movies exclusively in blu-ray, and just two doing the same on HD DVD. Four additional studios are producing titles in both formats. Sony owns Columbia Pictures and a has an ownership stake in MGM. Thus Blu-ray has the advantage in studio backing, and rest assured that Sony's entertainment units will never, never release titles in HD DVD. This includes titles like James Bond, and the Spiderman franchise - heavyweights to be sure.
Not to be overlooked will be Sony's ability to cross-sell PS3 games *and* movies on the same Blu-ray disc (eg Spiderman 3). The HD DVD camp will have a much tougher time matching Sony on this point.
Advantage: Blu-ray
Reputation and Brand Name
Varian and Shapiro point out that it's not enough to have the best product, but how convincing you are that your side will win. Customer's expectations pay a big role here; how you influence their expectations is pivotal. Sony took it on the chin with their PS3 supply problems. On the other hand, HD DVD backer Microsoft has been plagued by lukewarm receptions for Vista and the infamous Zune. It remains to be seen if consumers are making the connection, however (likely not).
Taking a broader look at the respective camps, Blu-ray has a stronger backing in the personal computer area with Dell, HP, and Apple being members of the Blu-ray Association. Because it makes the cost of PCs exorbitant, we're not seeing many PCs out there with hi-definition DVDs just yet. On the other hand, the glut of cheap Asian PC clone suppliers have no format loyalty and will levitate to whatever brings in more customers. Translation: they will go with the format that can produce the cheapest writable discs and read/write players. It's also not out of the question Dell, HP and Apple won't go with what the market landscape prefers.
As for branding, I think the name "HD DVD" is a tremendous advantage. It's a natural extension of "HDTV" and also the most intuitive for the consumer: obviously the name HD DVD stands for hi-definition DVDs! In comparison, the name Blu-ray is more ambiguous. When consumers think about hi-definition, they will gravitate to the "HD" buzzword right off the bat. Sony will lose here unless their camp can do a better job reminding consumers that their format is also "HD". They have their work cut out for them, but it's not impossible to overcome.
It's tough who gets the nod here - I'm going to give the advantage to Blu-ray based on the strong reputation of it's backers Samsung, LG, and Sony in the entertainment electronics space. And the fact that at least on paper, Dell, HP and Apple are supporters - brands that carry a lot of credibility.
Advantage: Blu-ray
Finally, we can add up the totals:
HD DVD: 1 (Manufacturing Capability)
Blu-Ray: 3 (Installed base, Strength in Compliments, Brand and Reputation)
With a tie in the other 3 categories. Blu-ray wins. It'll be interesting to watch when the actual tipping point occurs. Most likely when the PS3 price drops to sub iPhone range.
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