I don't see it like this.Well if the format war is with the DVD format they win but if it is between the competing High Def formats that is another matter.
Ultimately, Blu-ray was developed to replace DVD: fix the pesky CSS problem and eventually sell you all the movies again. Just like many bought DVDs of movies they had on VHS. The format war was an "accident" when the players couldn't unite behind one format for reasons like oversized egos, bad blood, greed, revenge, etc. I think this phase is essentially over: there is still no unity but the format war has been won by BD. Now the only remaining question is whether BD can fulfill its original mission. Uniting everybody, including Toshiba, Microsoft and the rest of the HD crew would help to lift the chance for this to happen, but even in this case I see them as slim at best.
This is an interesting development that would show Toshiba's intentions.Toshiba may have tipped their hand at CES by coming out with their super duper upconverting DVD player.
I believe Sony should make Toshiba an offer "they can't refuse". And maybe they did but it turned out to be not good enough. The short lived Sony offer (in Germany) to exchange a HD player for a BD player was a sign there is no peace between Tosh and Sony. I think cool heads will prevail, but it might take some time. I think Toshiba has enough arsenal (like this upconverting player) to f*ck up BDs "world domination" plans.
If Sony is determined to drive Toshiba & Co. out of the hidef optical business for good, I wouldn't bet a penny BD ever goes mainstream.
In the end the question is: Will online distribution kill BD when they have 20% of the market or 5%, IMHO.
Diogen.