Looks like it may be the case. If so, it'll be a good thing; Blu-Ray is technologically the better of the two competing formats, by a significant margin. The main attraction of HD-DVD is a smaller initial capital outlay for the equipment to press the discs.
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Get your facts straight
First off Blu-Ray holds 50gb of info whereas HD-DVD holds 30gb. That's far more than 1 extra hour of footage. If it was only an hour difference, then I would agree it wouldn't be worth the price difference. But there are more features to Blu-Ray than just capacity. Blu-ray, unlike HD-DVD, requires a hard coating on its discs because it's 0.5m closer to the surface. The polymer coating it uses, called Durabis, was developed by TDK and is extremely resilient and fingerprint resistant.
Most videophiles blogs I've read has stated the picture is identical but the sound quality is better on HD-DVD. But again, I agree that it's all subjective to each reviewer.
As far as the porn industry is concerned, it is backing Blu-Ray. Here is a quote from one of the top porn directors. “PlayStation 3 is going to be the Trojan horse that will get a lot of numbers into the home theater systems -- the living rooms,” said Joone, who is also a movie director. “Technology-wise, we’ve (porn industry) chosen Blu-ray, which doesn’t mean we won’t support both formats ... but as far as having really cool technology and a lot of storage for future-proof, Blu-ray is a good format.”
When it comes to price points, HD-DVD has broken the price point of $250. Whereas Blu-Ray has hit the $500 price point. However your information is incorrect about retailers. Wal-Mart does sell Blu-Ray players/discs and will continue. Another major retailer Costco has recently started selling Blu-Ray players and discs.
Blockbuster Video has decided to support Blu-Ray over HD-DVD by deciding to support Blu-ray in all of its 1,450 stores.
While it is true that (not including console sales,) HD-DVD players are outselling Blu-Ray 150k vs. 100k. Blu-Ray movie sales on Amazon.com are outselling at 2 to 1 vs HD-DVD. So I would contest that gamers are watching movies on their consoles. Unlike PS2, the PS3 offers software updates every month which improves the overall playability of it's games and Blu-Ray viewing.
Personally I hate my PS3 for playing Blu-Ray movies and plan to buy a Blu-Ray standalone player whenever they're reasonably priced. If the price of Blu-Ray was equal to or in the vicinity of HD-DVD, I don't think there would be a format war.
With the current trends of Blu-Ray rental availability, movie sales, and the amount of total players (including consoles), I believe that Blu-Ray will eventually win out. Yes, the price of HD-DVD players are literally half the cost. However unlike the 1980's where all you needed was a regular TV, the number of people who own a high def TV are a much smaller group. Due to it being more of a niche market, people are less driven by the price of new technology and more savvy to wanting the better of the formats.
Sources:
http://www.engadget.com/2005/09/19/blu-ray-vs-hd-dvd-state-of-the-s-union-s-division/
http://gizmodo.com/gadgets/hd-dvd-on-the-way-out%3F/blockbusters-blu+ray-endorsement-having-major-impact-on-hd-dvd-player-sales-270313.php
http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=111087
http://www.tvpredictions.com/blusales020207.htm