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One theory is HDM (Blu-ray + HD-DVD) is not selling well compared to DVD or being adopted as fast. Over the past week I've been crunching the numbers in various posts and though it would be best to put them all in one place.

Here are the keypoints for those of you who don't want have to sort through the extra long post:

DVD sold 1.2 million hardware after 2 years on the market; HDM sold 3-4 million in 18 months
Many current HDM titles sell at a much higher ratio to players than current DVD players (194 million total)
DVD released in 1997 at a price cheaper than Blu-ray launched (inflation adjusted)
Less than 2 years later DVD was still much cheaper than current Blu-ray players
DVD media cost equivalent to Blu-ray media (after inflation)
DVD had 4x the amount of software (2000) at 18 months of Blu-ray (500)
DVD sold 2 million software in its first year, HDM sold approx 3-5 million
Average income was much higher in 1998 than now
VHS had half the households (80+ million) when DVD launched than DVD did (160+ million) when HDM launched. Laserdisc was inconsequential.
In 1998, 18% of the population even knew what DVD was.
DVD now is on the decline and losing millions of hardware/software sales every year since 2005. Studios need something to replace it.

So overall, HDM has had more competition, higher prices, less software, and purchasers with less disposable income and it still has sold faster than DVD.
Blu-ray alone is also ahead of DVD.


The Numbers
Total DVD hardware sales (in millions)
1997 - .305
1998 - .946
1999 - 3.55

Software (in millions)
1997 - 2

DVD Player Price (2006 inflation adjustment)
Launch: $550 ($687)
2 year: $300 ($364)

1998 DVD media Price: $25 ($31)
#of available titles at 18 months: 2000

HDM hardware (in millions)
HD-DVD - .75
Blu-ray - 3 (total PS3 +SA)
Blu-ray - 2 (active players adjusted to match software ratio)

Software
HD-DVD - 2
Blu-ray - 3



Average Family Income:
1998 $71,000 ($86,750)
2004 $60,500 ($69,500)
(We were in a boom in the late 90's and are now in a recession)

In Oct 1998, there were 2,000,000 laserdisc households. There were 80-90 million VHS households. Neither of those numbers are any where near the amount HDM had to compete against DVD with when it launched.

The February 14, 1998, issue of Billboard reported the results of a national survey on DVD. The survey results were released at a conference held January 30-February 1, so the survey was conducted in late 1997 or early 1998. Of the 1,807 U.S. households surveyed, 81% said they are "not very familiar" or "not familiar" with DVD. Only 18% of those interviewed knew something about the format.


Sources
http://www.dvdinformation.com/industryData/index.cfm

DVD sales numbers
http://www.westegg.com/inflation/
Inflation Calculator
http://www.videobusiness.com/article/CA6429390.html
"the players launched at a lower $550 average price in 1997."
http://mediacoder.sourceforge.net/wiki/index.php/DVD
"By the spring of 1999 the price of a DVD player had dropped below $300 US"
http://query.nytimes.com/gst/fullpage.html?res=9C03E1DC1F3BF931A25753C1A96E9582 60&sec=&spon=&pagewanted=1
(October 1998) "Until recently DVD's have been available only for sale, at a price of about $25. "
"About 150 movies are available in [DIVX], compared to more than 2,000 for regular DVD"
http://www.usc.edu/schools/sppd/lusk/casden/research/data_folder/us_faincsize.pdf
Average Family Income 1998
http://en.wikipedia.org/wiki/Household_income_in_the_United_States
"Overall the mean household income in the United States according to the US Census Bureau 2004 Economic Survey was $60,528"
http://www.dlib.indiana.edu/~brancoli/videostatus.html
VHS numbers
http://www.variety.com/article/VR1117976168.html?categoryid=20&cs=1
DVD sales are dying

Feel free to add equivalent numbers for Blu-ray and HD-DVD.

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The problem is he's comparing numbers for DVD in 1997 being 9 months, with the numbers for HDM for 18 months (a little longer for HD DVD).  DVD exploded geometically in the first few years.  HDM is showing no signs whatsoever of doing that.

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These numbers also are counting all PS3 sales as BluRay players. While this is technically true, many users do not use it for that fact and I believe it has been proven that many people who own PS3's aren't even aware of this function. Just because a household has a PS3 does not mean they are interested in BDs at all...

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At the time, the reports from a lot of people were that they could barely tell the difference.  At that time, VHS was good enough.