According to campaignhd.com, Warner was set to go HD-DVD exclusive and so was Fox. However, they were paid a heaping pile of cash from BDA to go Blu-Ray. Here's the quote from the mysterious report of the payoff:
"According to a trusted source that was close to the negotiations, Warner and FOX were working on a deal to go Exclusive to HD DVD as recent as last week. Our source tells us that Warner was only willing to go to HD DVD if FOX would go with them. Their thinking was if they just went to HD DVD by themselves, it would not end the format war. Early this week FOX was paid an undisclosed amount to remain exclusive to Blu-ray. With the FOX deal falling through, Warner had no choice but to accept the BDA's $500 Million offer to go Blu-ray exclusive. We do wonder if FOX was just playing the HD DVD side, while having no intentions of ever switching."