...Sony sabotaged unification efforts at every turn, just as they have always done.
There were no angels in that negotiation room...
From what I read/heard:
Sony started working on a replacement format for DVDs shortly after they lost to Toshiba in the 11-th hour unification talks.
And by 2003 they had a blue-laser version of DVD ready. MPEG-2 transport streams and PCM/DD/DTS only.
CNN.com - Sony sells first blue-laser DVD recorder - Mar. 4, 2003
(It has been EOL-ed - end of life - since).
When the nextgen DVD talks started in DVD Forum, Toshiba had the chairman position (rotating).
At first, DVD Forum was playing with the idea of something similar to WMV-HD on regular DVD:
red laser, same disk, AACS instead of CSS, VC-1 (called VC-9 at that time) compression, etc.
I think Sony never even offered its blue laser DVD to DVD Forum (I could be wrong) as the next standard. They believed they are way ahead everybody else in this race (they had 23GB blue laser disks working) and were determined to get revenge for the DVD loss. They started building coalition with studios/CE manufacturers.
DVD Forum changed its mind and switched to blue laser, too (9GB vs. 50GB sounded to big of a gap). But they kept the physical structure the same as DVD (same material, coat 0.6 mm thick, etc.). This limited the HD to 15GB per layer. And they announced competition for the nextgen DVD video format.
The competition was expected between 2 formats: MPEG-2 and AVC (High Profile wasn't invented yet). Two weeks before the showdown Microsoft was told by a studio that such a competition would take place. They were not a member of the DVD Forum and couldn't participate. At the last moment a company called DemoGrafix (or something like that) - a member of DVD Forum - agreed to present MS' VC-9 in this competition.
Two hectic weeks around the clock encoding paid off: VC-9 won.
Studios suspected Microsoft was cheating and announced another shoutout with much stricter rules. MPEG-2 24 Mbps barely won over 7.7 Mbps VC-9. Soon after, AVC got High Profile and as of now is consider as good or better than VC-1.
DVD Forum standardized all three codecs. Sony fought hard against it in BDA but in the end did the same with Blu-ray (allegedly, under pressure from Disney).
Microsoft, Sony and others founded AACS and this system was standardized on both formats to replace CSS.
Disney and Microsoft developed iHD (HDi now) that was accepted as the interactive layer on HD DVD. It was offered for standardization to Blu-ray, competing against BD-J (after Flash dropped out from the competition). A specially assempled BDA technical committee recommended to choose iHD.
This was probably the day that can be blamed for all the ugliness of this format war.
Sun was allowed to make a presentation to defend BD-J. After that presentation the technical committee recomendation was overruled and BD-J set as a standard for BD. Disney requested to have them both but lost the vote.
Two events took place just before this decision was made:
-One slide in Sun presentation rhetorically asked: Do you want Windows to run your player?
-Microsoft was offered to join BDA as the only way to get iHD standardized. Microsoft refused.
BD+ was chosen as additional content protection layer on BD.
MS' hopes to build hidef playback into Vista were ruined (license Java again?) and they choose the side opposite to Blu-ray.
And the rest is history.
Diogen.