This is also what pushed me to get a PS3 later in its lifetime : getting a game console, CD player and DVD + Blu-Ray player all in one box was pretty convenient.
This is also what pushed a lot of people to get the PS3 earlier in its lifetime!
Sure, it wasn't cheap at launch and it marked a leap in console prices compared to previous generations, but it was around the same price as a standalone Blu-ray player as those were just coming to market.
So at that point, why not get the more capable console?
To be fair on a technical scale, Blu-ray was the superior format so losing HD-DVD wasn't the biggest loss. I appreciate what Toshiba was trying to do but it also felt like they were trying to cut-off the competition with a lower quality but cheaper product.