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issue: February 2008 APPLIANCE Magazine

Appliance Line

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Tim Somheil, Editor

The tide has turned against HD DVD. Is it losing to an inferior format? Does it matter?

Tim Somheil, Editor

There was a sense of anticipation in the audience of journalists and bloggers at the Toshiba press conference just prior to the Consumer Electronics Show (CES) in early January.

It was Sunday, the day before CES officially opened in Las Vegas, but already there was big news in the CE world. Two days earlier, movie studio Warner Brothers announced it would pull support for the HD DVD disc format.

HD DVD and its rival high-definition DVD format, Blu-ray, have battled for dominance since the first players went on sale in 2006. Both formats offer the ability to store immense amounts of data and thus allow them to accommodate HD movies.

There were signs throughout 2007 indicating Blu-ray was pulling ahead—notably, many retailers were backing Blu-ray. Target sold a Blu-ray player but not HD DVD, and devoted more shelf space to Blu-ray discs. Blockbuster sold Blu-ray discs in 1700 stores, but only carried HD DVD discs in 250 of those stores.

When Warner said it would stop releasing movies on HD DVD, it was seen as the turning point in the format war. At CES, most industry watchers declared Blu-ray the winner. HD DVD’s days, they claimed, are numbered. They’re probably right.

Toshiba, the biggest corporate HD DVD backer, did the best it could at CES, considering Warner pulled the rug out from under it just 48 hours previously. Toshiba Digital A/V Group’s vice president of marketing Jodi Sally said, “As you can imagine, this is a tough day for me.”

Toshiba had some intriguing points to make about HD DVD: The company stood by its contention that the format offers superior playback. It also has the advantage of a standardized networking platform. Finally, sales were strong—Toshiba’s fourth-quarter 2007 sales of HD DVD players was its best ever, and its third-generation HD DVD players were being unveiled at CES.

But there was little said about those new players at the press conference, which ended abruptly without a question and answer session. Clearly, Toshiba didn’t then have answers to the obvious questions of its HD DVD strategy.

Bill Gates didn’t have answers either. His annual CES keynote address is traditionally a live commercial for all things Microsoft. This year, he decided to leave out HD DVD, ignoring the topic in his presentation, despite that his company helped develop the format and sells an HD DVD player as an Xbox 360 accessory. I imagine Gates finds the prospect of selling an Xbox Blu-ray player pretty distasteful—and it looks like he may have to do just that.

Post-CES, Toshiba announced new HD DVD marketing initiatives, including slashing the suggested retail price on its entry-level HD-A3 in half, from $299.99 to $149.99. The street price is already below $130. That’s a compelling price to a consumer interested in purchasing an HD disc player for the first time.

The prices of HD DVD discs are dropping as well, mitigating the real expense of ownership—buying the movies that go in the player. But all these price cuts look like acts of desperation.

You have to feel a little sympathetic for the people at Toshiba. It must have been tough to keep smiling through four long days of CES while being badgered with the same uncomfortable questions time
after time.

On the other hand, the HD DVD camp knew the risks going in—as did the Blu-ray backers. There was never a chance the market would support both formats. Even before the first players hit the market in 2006, the industry knew it was only a matter of time before one of the formats emerged as dominant.

It would have benefited the industry as a whole if the format war had been avoided, and only three years ago negotiations between the camps looked promising. But individual corporations resisted compromise. There was too much to gain if their format became the standard.

Of course, these CE giants will not own up to putting potential profits ahead of consumers. They’ll claim they were serving the customer by sticking to their guns, intent on providing the consumer a superior product. Both sides can present reams of technical specifications to prove their format is, in fact, superior.

It seems highly unlikely that HD DVD will reverse Blu-ray’s momentum. HD DVD may linger for a few years, and maybe even hold its own as a secondary format for specialty applications.

It’s easy to compare the HD DVD format war to the video tape format wars 25 years ago. VHS beat out Betamax, despite claims that Betamax was superior technology. That format war gave rise to the slang term Betamaxed, defined on dozens of Web sites as: “When a technology is overtaken in the market by inferior but better-marketed competition.”

I don’t know if today’s HD DVD is better than today’s Blu-ray—and I don’t care. When VHS became the dominant videotape format, it freed up the combatants to put their resources behind elevating that format. Even former Betamax proponents helped to vastly improve VHS technology.

The same is true now. With the focus finally on a single format, that format cannot help but become far superior to anything on the market today.

If only the industry hadn’t wasted three years getting to this point.


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