I don't buy movies at all. I never have. I rent them. Rentals are about $1 each at Netflix. Rarely am I interested in seeing a movie more than once. If I am, I can rent it many, many times for less than the purchase price. I'm not poor. I can afford to buy all the movies if I want to. I just don't want to. I'm not a movie hobbyist. I just watch them for entertainment. I think I might be fairly typical of the mainstream home movie watcher.
I don't pay the price even for SD DVD's. I certainly won't pay the prices for HD DVD's, even though I own players in both HD formats.
The CD business is putting itself out of business. Selling a product that costs about 25 cents to produce for $13 or $14 so that everyone can have amazing amounts of royalties and profits was the cause of the growth of internet music downloads. But does the industry see this or care? Apparently not. The CD stores of yesteryear are gone and the CD departments at big box stores are a shadow of their former selves. The industry is content to milk it as it sinks into the depths. I can't even find the CD's that interest me in the stores.
The DVD business is probably headed in the same direction eventually. I'm willing to bet that faster internet speeds will make DVD downloads the preferred way to get content in the future.
Personally, I don't think it has anything to do with formats. At the prices they charge for recorded movies, they aren't going to address the mainstream. Or, at least they aren't going to address me if I represent the mainstream. They are going to settle for hard-core movie enthusiasts and movie rental companies. If it were my industry, I would sell DVD's for $5 or $6. They might actually sell enough to improve the overall profits at the studios.