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issue: April 2008 APPLIANCE Magazine

Consumer Electronics
End of the Format War

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As APPLIANCE magazine wrote in the February issue (APPLIANCE Line, “Betamaxed,” p. 9), the 2008 Consumer Electronics Show was center stage for HD DVD’s finale. The format was underdog to the Blu-ray format in the next-generation DVD contest, but it was still considered a contender. That changed on Friday, January 4, three days before CES, when Warner Bros. Entertainment announced it was done with HD DVD and would release no more movies in the format. The general assumption in the industry: HD DVD was dead on the vine.

No one company felt the blow worse than Toshiba America Consumer Products, which came to CES with a new generation of HD DVD players. Toshiba said at a press conference that it still believed HD DVD was the better format.

Postshow, Toshiba flirted briefly with the idea of spurring interest by turning HD DVD into the discount high-def DVD format, and retail player prices dropped. On February 19, possibly with an eye to making a clean break with the March 31 end of its fiscal year, Toshiba pulled out of the business. Losses from the HD DVD pullout were expected to be about US$1.1 billion in the fiscal year.

The significant hardware maker still in the HD DVD business is Microsoft, which sells a player as an Xbox 360 accessory. Microsoft’s Bill Gates did not address the topic of HD DVD at his CES keynote address.

Consumers still have many of the players in their homes, and there are indications that the players actually sold briskly at discounted prices in the last few months. More importantly, some consumers have invested in substantial HD DVD libraries and are wondering how they’ll use them in years to come. The answer may come in the form of combination players, such as LG Electronics’ flagship Super Blu Player (pictured). Consumers can make the switch to Blu-ray and still play their HD DVD discs on the same device (which also up-scales standard DVD playback and plays CDs). The model BH200 is a second-generation combination player that even offers some of the Web-connected interactivity that many HD DVDs enable. 

Blu-ray Growth Spurt Expected

Blu-ray will quickly begin to reap the rewards of its victory in the format war. Strategy Analytics Connected Home Devices service expects Blu-ray will be in 29.4 million homes worldwide by year-end. According to a March 2008 report, “Blu-ray Devices: Forecasting Sales and Ownership,” Sony’s PlayStation3 (PS3) game console will continue to drive the Blu-ray market until 2009, when stand-alone Blu-ray players will become the dominant segment. The report says more than 132 million homes worldwide will own at least one Blu-ray device by 2012.

The report predicts global sales of Blu-ray devices will reach 18.8 million units in 2008, including 4 million stand-alone players, 13 million consoles, and nearly 2 million PCs. By 2012, annual sales of all Blu-ray devices will reach 57.4 million units. The largest market will be Europe, with 26.4 million, followed by the United States with 22.6 million, and Japan with 8.4 million.

“HD DVD’s withdrawal leaves the way open for Blu-ray to become a major revenue earner for technology vendors and content owners alike,” says David Mercer, principal analyst with the research firm. “The 265 million homes that will own an HDTV by 2012, and Hollywood’s need for a new growth engine, represent huge incentives for the industry to coordinate marketing activities and demonstrate unified support for the successor to DVD.”


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