I legitimately doubt any backroom dealings were involved - it probably came down to simple economics. I mean, by Sony's figures (and they'll spin them to make the product look better than it has been looking, so I tend to be skeptical about them anyway), two thirds of PS3 buyers in the US don't even have HDTV. Thus, they are NOT going to be buying Blu-Ray discs (unless they are imbeciles - which I guess is possible, why else drop $500 on something that won't even look its best unless you have HDTV). Not only that, but every report I've read in Variety and other trade papers that focus on home video sales seem to suggest that HD-DVD buyers are buying more discs per player than Blu-Ray owners. So - you've got one format that has a patent owned by a competing media company (SEC) that isn't selling in Europe, is sluggish in the US (and most of the US buyers can't even take advantage of the HD capabilities anyway - this isn't like the PS2 being a cheap way for tons of people to get a DVD player - you need a certain amount of pre-existing hardware first to actually make it worth while - and we still live in an age where people buy RF adaptors) and the Japanese market is actually not a big profit center for home video (at least when compared to the US, Europe and Australia -- tariffs, the insanely huge Asian bootleg market and just different consumer trends make it less important than one might think, even if Japan does have a population that embraces technology with a greater fervor than the rest of the world) and you have another format that all the big studios (except for Sony and what, Disney - and Disney is notorious for being gun-shy about technology anyway - let's not forget their foray into DVD - 1999 barebones discs for $40 MSRP - it took them until 2001 to actually get on the ball for the Disney/Touchstone label (Miramax/Dimension/Pixar and a few other Buena Vista properties were better but the Disney brand didn't fully embrace DVD until the first quarter of '01) are producing for - and that owners are actually using as a DVD player (instead of maybe owning a player just because they own a game machine - which is a big difference) -- if the sales figures aren't supporting an existing Blu-Ray lineup, I hardly think that means that Sumner Redstone made some backroom deal. Paramount has a very shrewd board of directors and it is important for them to increase profits. One way to do that is to eliminate an area that isn't paying off.
It does suck for consumers who bought into Blu-Ray thinking they could watching everything by every studio (except for Universal - now there might have been a backroom deal there -- I'm not 100% clear on what GE's investment in HD-DVD is - if anything, but I imagine they are getting a cut of something) - but this is hardly the first or last time something like this has/will happen.
Blockbuster is the group that will end up looking the most stupid (and it is funny that Blockbuster was owned by Viacom - the parent company of Paramount and Dreamworks - until 2004) - they are already losing assloads of money and they announced in late June that they are closing down 300 stores or something - publicly aligning with one format (which was stupid - Blockbuster is no longer a big player in terms of deciding what consumers will choose for a format -- the elimination of "new release rental only" windows that came along with DVD totally changed consumer buying/renting habits. Without having to wait months or even years for a "home video" window to by a product at an affordable price (as opposed to the $70 - $100 a pop price under the rental agreement windows with VHS - which was a key way Blockbuster was able to get so huge in the '80s) customers are much more likely to buy something rather than rent it - especially if Blockbuster or whoever is sold out) puts them in a situation where they might not be able to get a HD-DVD contract, depending on what terms were set with their exclusivity arrangement with Sony/Blu-Ray (if Sony is giving them more profit points - they are in trouble).
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