It looks like the major studios have agreed in principal to not use implement HDCP into HD players till at least 2010 or 2012, but by then there will be so many HD players on the market it would probably be suicide to implement it.

Behind the scenes it was agreed that till, at least, 2010, if not even till 2012, signals from Blu-ray or HD DVD players should be transferred to televisions or displays in full resolution, even if certain components do not support HDCP or HDMI

This would also answer why the X Box 360/PS3 “lite” can get away with a hi def signal and not include HDMI/HDCP.

Neither Microsoft Xbox 360, nor Sony’s entry-level PlayStation 3 consoles support HDMI output. In fact, Sony’s Phil Harrison recently said in an interview that even with analogue outputs it will be possible to view Blu-ray discs using the PlayStation 3 that costs $499

I assume he meant at 1080i through the component video.

One thing that they are not mentioning here is that when you remove HDMI from these units we will not be able to take advantage of the newer audio formats (DTS-HD, DD+, etc..)

I think this is where the “bleeding” part of being on the bleeding edge gets you.

X-bit labs - Hardware news - Blu-Ray, HD DVD Will Playback without HDMI, HDCP – Report.