Digital Trends: Optical HD Battle Is Over, HD-DVD Wins

Contrary to my previous beliefs, HD DVD may have won the war thanks to problems with Sony’s Playstation 3.

Nearly a year and a half ago I wrote a column saying that Blu-Ray wins or nothing does. This showcases the reality of doing predictions because while the analysis held up, events did not pan out as anticipated and by any current measure HD DVD will end this year with a decisive win.

the basis for the prediction, which did accurately point out that Sony’s win here might actually cost them more than a loss, was the PS3 and the forecast volumes for that product. Back in August of 2005 we did know that HD DVD, which used DVD production technology, would be easier to bring to market but it simply did not seem reasonable that Sony would put their PlayStation franchise at risk for anything but a technology they were absolutely certain they could bring to market on time.

That turned out to be incorrect. the problems with Blu-Ray have created extreme cost and execution problems for Sony and now their premier division (instead of being the profit center for Sony) is predicting they will take a $1.5B loss next year largely resulting from this decision. To put this in perspective, just think what would happen if Apple’s iPod group, instead of generating massive profit, suddenly dropped into massive loss. now you can see why the Sony PlayStation division just changed out their top executives.

Why HD DVD is Winning

When you talk to either the HD DVD or the Blu-Ray camp you get the sense that neither actually watches movies much. both cite features as the reason why folks will pick one or the other. Yes there is a lame shooting game in League of Extraordinary Gentlemen (Blu-Ray) and there are a ton of things you can do interactively in HD DVD (including changing car colors in one scene in the Fast and Furious III: Tokyo Drift). but the movie market moves on quality of movie, price of player, and price and availability of media.

at launch HD DVD players were about half the price of Blu-Ray players and the movie price for HD DVD is generally running about $5 less. in addition, many of the new HD DVD movies also have regular DVD side which means that buyers, most of which will have both HD DVD and DVD decks, will get better value with HD DVD than with Blu-Ray – that’s the theory anyways.

All that being said, the killing blow may have been done by Microsoft who decided to bring to market a $200 HD DVD option for their Xbox 360 which has been in market a year longer than Sony and is projected to have a near 20x installed base advantage by year end (10M Xbox 360 to 600K PS3). Note that both projections are aggressive but Sony was supposed to originally ship 2M PS3s into the market during the 4th quarter and actual numbers (given they had under 200K at launch) may be closer to 400K. and with a recall possible there is a chance they might not even make that. Add to this that the Xbox 360 HD DVD drive is for movies only, so each one counts for movie viewing while PS3s may not be used to watch movies and you have a situation where the active movie player advantage by year-end should be between 4x and 6x better for HD DVD over Blu-Ray.

Finally, HP who had been a big Blu-Ray supporter and dominates the Media Center PC market, introduced a $100 HD DVD upgrade for their PCs (Sony’s Blu-Ray VIAO solution was just dropped to $749). the impact of this last move is still too early to measure but there is no comparably priced (not even close) solution using Blu-Ray.

if you go to Amazon and look you can see HD DVDs are solidly ahead and this is before the impact of either the Microsoft or the HP moves, many of which won’t be opened until Christmas or haven’t yet been shipped (HP).

now Sony will stick with a technology for years after the market has decided on another path and they do have some very strong supporters which include Dell, Apple, and Disney. Dell traditionally has been the PC bellwether company, Apple has the most loyal customer base, and Disney is the only Studio that people ask for by name. So these folks, particularly Sony, could drag this on for years. but if that is the case not only will many in the industry not make money, Sony will probably lose the most because they are still the ones doing the heavy lifting (In addition, after the battery problems, neither Dell nor Apple is as close to Sony as they had been).

right now it appears impossible for Blu-Ray to gain a substantial lead on HD DVD, even after massive investment, they likely could only close the gap. if the HD market depends on the emergence of one as a standard and Blu-Ray no longer has a chance to be that standard, how long will it be before the Blu-Ray supporters follow HP and switch sides?

Do You want One Standard?

now you can evidently help drive this if you are so inclined. there is a petition that has been set up for you to voice your support if you believe that there should be only one and HD DVD is that one. You can find the petition here . Evidently they had collected 2,300 signatures at the time of this writing.

the petition was put together by HD NOW where the folks have collected a rather interesting list of supporting material which goes far farther than I have on supporting the conclusion that we’ve prematurely crossed over to the point where HD DVD has won the High Definition DVD competition.

Blu-Ray has substantial storage capacity advantages for data and could survive as a high capacity personal computer storage medium. while expensive, one non-Sony vendor’s upcoming Blu-Ray laptop solution costs around $800 on top of a $3000 notebook but it gives that product an unmatched removable media capability. but this is a vastly better storage solution for a high-end PC it isn’t a high volume high definition movie watching solution.

So BluRay could indeed survive but probably not for movies only for PS3 games and high-end optical backup. the real question is does the PS3 survive or whether there will ever be a PS4. Some are saying that the PS3 is in deep trouble and some are saying the PS4 will never arrive with massive game defections from PS3 to Xbox.

Wrapping Up

the market wants one solution for High Definition video and we are already starting to see high definition downloads through services like Xbox live. Apple’s iTV is expected to go even further when it launches early next year. it may actually be too late for either of these platforms to move; if folks move aggressively to downloads for high definition content and if High Definition pay per view cable offerings continue to improve, even if I’m correct and HD DVD has won, it may have actually prevailed too late in the process to survive for long.

be that as it may, with a 4x to 6x advantage by year end, you’d have to conclude that HD DVD has reached a point where it can’t lose and Blu-Ray is only now in a position to ensure both platforms lose. That last option still appears most likely if the market doesn’t move aggressively to one HD platform.

Digital Trends: Optical HD Battle Is Over, HD-DVD Wins

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