I doubt AOLTW are thinking or even care if they're being "smart". Like M$, they have money, market share and a captive audience down whose throats they can shove anything they like.

People ask "How can they be so stupid. Consumers will never fall for that!?!??"
The EntertainmentIndustrialComplex isn't being stupid. They're just being themselves. It's been gloves off time for a couple years now in case you haven't noticed. They know that can't win if it's a matter of choice and they've got the ability to make sure you won't have one.
There is a reason they call us "consumers".

Personally, I hope the thing goes the way of DIVX, but there's a real chance Replay and TiVO are playing Netscape to AOLTWs IE here.