I am starting to like HD-DVD's better now I think with the use of flash drives connecting to TV's, but then again this would force a user to download the movies to I bet?
In Blu-ray Coup,
Sony Has Opening
But Hurdles, Too
Sony Corp.'s Blu-ray technology for high-definition DVDs has given the Japanese electronics giant an opportunity it hasn't had in 25 years: the chance to win a high-stakes format war and reap the benefits across its sprawling empire. However, its victory comes at a high cost and may be fleeting.
Sony on Friday scored a key win by luring Time Warner Inc.'s Warner Bros. to its Blu-ray technology, putting itself in a position to triumph over Toshiba Corp.'s HD DVD after a years-long fight to become the standard for the next generation of DVDs.
However, Sony's push for Blu-ray -- which analysts estimate as an investment of hundreds of millions of dollars -- has cost the company in areas such as the key videogame market.
Many analysts believe that Sony's insistence on putting Blu-ray on its PlayStation 3 players gave it just enough extra consumers to help tilt next-generation DVD sales toward Blu-ray. Paul Erickson, analyst at the NPD Group's DisplaySearch research firm, calls it the "X factor" that "saved their Blu-ray fortunes." If Toshiba had underwritten the cost of putting HD DVD onto the rival Xbox 360 from Microsoft Corp., the reasoning goes, the battle might have swung another way.
But complications related to the Blu-ray technology played a part in repeated delays of the PlayStation 3 release, giving Microsoft's Xbox a full year in stores before the PlayStation 3 came out in November 2006. The PlayStation also had a heftier price tag than the Xbox. In the U.S., the Xbox 360 has outsold the PlayStation 3 more than 3-to-1 from the time the consoles have been on the market through November.
Even with major studios on board, Sony must still win over consumers to Blu-ray. Consumers were arguably better off with HD DVD technology, which generally cost less to produce, contributing to HD DVD players selling for as little as $99 over the holidays. Meanwhile, Blu-ray players cost about $300 and up -- and movie titles issued in Blu-ray are often sold for twice the cost of a regular DVD.
Both HD DVD and Blu-ray offer similarly crisp resolution and have extra features, such as interactivity, that aren't available on regular DVDs.
Then there is the Internet. Sony is counting on sluggish development and slow consumer acceptance of technology that will allow for quick and easy downloads of movies at home, sending them directly to the TV set. If that snowballs faster than expected, Sony may never recoup the costs of its Blu-ray investments.
In any case, most home-entertainment chiefs see next-generation DVD as a temporary format that will last only as long as it takes for a superior technology to catch on. Most agree that while online movie distribution is still too clunky for the casual movie consumer, one day in the not too distant future it will dominate.
For now, Blu-ray gives Sony the rare chance to capitalize on being the creator of a market-dominating tech product -- a status it has rarely known in recent years. In the 1980s, its Betamax videotape format lost to VHS. It failed in an effort to get significant chunks of its technology into the highly lucrative DVD format. More recently, it was outflanked by Apple Inc.'s iPod in the drive to create personal digital music players.
The Warner Bros. move to exclusively issue high-definition movies in Blu-ray tips the balance toward Blu-ray, leaving HD DVD with just a 25% share of the video market, compared with nearly half previously, according to Adams Media Research.
Now Sony can earn money on patents in Blu-ray technology as other companies license it to include it in items ranging from DVDs to computers.
Moreover, Sony's vast reach across so many technology and content areas will likely help keep Blu-ray in the ascendant for some years, helping keep at bay rival technologies that might arise. Sony's purchase of CBS Records in 1988 and Columbia Pictures in 1989 was an effort to gain greater influence over the content businesses its technology served, in part to avoid another fiasco like its Betamax venture.
[Howard Stringer]
But the outcome of the high-definition DVD battle remained uncertain until the final days before the annual Consumer Electronics Show, kicking off now in Las Vegas, where both sides like to make big announcements concerning their formats. Toshiba was still working hard last week to court Warner and News Corp.'s Twentieth Century Fox to use HD DVD exclusively. Warner was considering it, people familiar with the matter say, but when it realized Fox wouldn't leave Blu-ray, decided to go with Blu-ray exclusively as well, to bring an end to the format war.
A Blu-ray win is important for Sony Chief Executive Howard Stringer, who made it part of his mission to beef up the content and software offerings in a notoriously hardware-centric company when he took the helm 2½ years ago. As Sony nears completion of a three-year turnaround plan, Mr. Stringer also told reporters in Tokyo last month that driving innovation would be his next goal.
Over the last couple of years, Mr. Stringer, a former movie executive, was involved in many discussions with studios Sony was courting, people familiar with the matter say.
Toshiba, which conceded Friday that the Warner Bros. move is a "setback," is expected to continue making its case for HD DVD, at least for awhile. Paramount Pictures, a unit of Viacom Inc., plans to continue to support the HD DVD format, a spokeswoman said yesterday. The other remaining Hollywood supporter, General Electric Co.'s Universal Pictures, declined to comment.
For Toshiba, its declining fortunes in DVD are a big blow to plans to expand its consumer-electronics business. It had long counted on HD DVD technology as a driving force behind the unit's future growth. Like many other consumer-electronics companies, its plan was to sell interconnected fully-digital electronics products, and HD DVD technology was meant to play a central role.
Now, Toshiba will have to focus more on other areas that can help broaden its consumer-electronic presence, such as technologies that copy movies directly onto USB flash drives. Those are tiny sticks that consumers can just plug into their computers, or in the future, directly into their TVs.
"You're going to see that hard drives and reusable flash are much more economical and green" compared to DVDs, says Warren Lieberfarb, a consultant to Toshiba and former head of home entertainment at Warner Bros. "You don't need packaging." He sees portable drives as an interim technology that will last the five or 10 years it takes for online movie distribution to rise to the fore.
And while Microsoft's decision to leave HD DVD out of its Xbox may have cost the format some crucial support, Microsoft's bet appears to have paid off for its games business.
The technical specifications for HD DVD weren't ready at the time Microsoft was gearing up to start manufacturing the Xbox 360 in 2005. The Redmond, Wash., company was determined to beat Sony to market with its game console by introducing the Xbox 360 in time for the 2005 holiday shopping; waiting for HD DVD to be ready would have eaten away at the company's head start on Sony.
Microsoft never seriously considered integrating a high definition disc format onto its player, says Albert Penello, director of global platform marketing for Xbox. The company didn't want to force gamers to "pay for something they may never use," he says.
