HD DVD on the Way Out?

Last week, the ongoing next-generation DVD format war took a portentous turn when Warner Bros. announced that it was pulling support for HD DVD in order to exclusively support Blu-ray. The news was quickly followed up by a rumor--since denied--that Paramount, too, was dropping HD DVD. But the HD DVD camp cancelled a long-planned press event at the International Consumer Electronics Show (CES) in Las Vegas, leading many to predict that the format wars were essentially over, with HD DVD the loser.

Those rumors were bolstered this week when primary HD DVD backer Toshiba announced stunning price reductions on all its HD DVD hardware players. Its low-end player, the HD-A3, dropped from $300 to $150 overnight, and the mid-line HD-A30 also dropped 50 percent, from $400 to $200. The high-end HD-A35 player dropped from $500 to $300. Blu-ray players, already more expensive than the HD DVD competition, start at a little under $300.

Toshiba's aggressive price cuts were no doubt intended to drive consumer interest in the format. But it might have had the opposite effect: Analysts feel the move was one of desperation, signaling to consumers that HD DVD is a losing effort.

To be fair, however, neither HD DVD nor Blu-ray is doing particularly well in the market. Only one million standalone next-generation DVD players were purchased in the United States through the end of 2007, and most of those (about 580,000 units) were HD DVD, not Blu-ray. (However, Sony sold 3.4 million Blu-ray equipped PlayStation 3 video game consoles as well, skewing the results wildly in Blu-ray's favor.) Content is a problem too: Although just 400 movies are available in HD DVD and Blu-ray, there are hundreds of thousands of standard DVD movies to choose from.

The biggest concern here, really, is industry support. Right now, five major movie studios--Columbia, Disney, Fox, Sony, and Warner Bros.--support Blu-ray. But only two major studios--Paramount and Universal--support HD DVD. On the rental front, Blockbuster and Netflix offer both formats, but Blockbuster reports that 70 percent of HD rentals are in the Blu-ray format. And one other factor could help drive industry support toward Blu-ray: Consumers who own Blu-ray devices tend to purchase twice as many HD discs per player as do HD DVD users.

At this point, there's no clear winner, and many companies, including Apple and Microsoft, seem to be emphasizing digital downloads over HD disc formats. Furthermore, on-demand HD rentals from cable companies will help ensure that these formats are never as pervasive as DVD. If you're looking for a real winner in this battle, it might be time to look beyond physical media.

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