I was speaking purely about the quality of the source media in it's final commercial format.
My place of work, and the gym I go to people generally ask me technical questions about home theater stuff...
Quite frequently I get asked "which HDTV should I buy?" my first question is always "why do you want an HDTV?" to which 99% of the time I get "so I can watch my DVD in HD."
At that point it turns into a discussion about how DVDs are not HD and that there are no HD DVD formats out yet.
To the average Joe ignorant consumer there is little to no difference between DVDs today and the next gen DVD formats... most think that their DVDs right now are HD. Most are completely capable of seeing the difference between ED and HD video. (Heck ask any HDTV owner which channels look better) But unless they experience it first hand, and side by side with current formats they're going to keep on thinking that DVDs today are just dandy, even for their HD sets.
Toshiba and Sony should be educating people about the differences in all the new technologies rather than fighting for technical supporters... who cares how many companies they have behind them if they both have absolutely ZERO mind-share with the consumers.
DVD took years to reach the point it's at today, and the difference was easy to see, especially because it was a similar change from cassettes to CDs, people understood the differences between analog tapes and digital discs....
But I don't think the next gen formats are going to take off anytime soon. MS has nothing to worry about because I don't think there will be much market penetration before the NEXT next gen consoles anyway.
I expect the next gen DVD formats to take off only slightly better than the SACD and DVD-A formats, if only because there are more movie buffs than Audiophiles and Sony will be virtually distributing Blu-Ray players with their PS3s.