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Sun 17 Feb 2008 01:07 PM

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HD DVD gets Betamaxed

Toshiba looks likely to call it quits in the high definition DVD format war, after failing to spot Sony's stealth tactic

It looks like the high definition DVD format war is finally over, with Sony's Blu-ray coming out as the winner. Toshiba, creator of the rival HD DVD format is believed to be about to admit defeat, after a decisive few weeks in a fight that had looked far from over at the end of last year.

The rival formats had been jockeying for position throughout the year, with their respective promotional groups claiming market leadership in different sectors and different regions at any given time. Toshiba made a round of price cuts to its players in the second half of the year, but it wasn't taken as a sign that the format was in trouble - in fact, with Blu Ray players priced way above HD DVD devices, it seemed like a good move for market share.

All that changed in January however, when Warner Brothers, the largest entertainment studio in the world announced that it would drop the format. After that, media organizations, retailers and hardware manufacturers couldn't seem to drop HD DVD quickly enough, with Netflix and Best Buy following suit, and finally US mega-retailer Wal Mart joining in on Friday.

Competing formats had proven to be expensive for everyone, with studios having to produce both formats, and retailers losing shelf space. With high definition DVD sales representing a tiny percentage of overall DVD sales, providing shelf space for two competing, niche formats just wasn't economical.

Of course, it would have been better if the interested parties had been able to come up with a single format in the first place, but as competition is inevitable, the industry and consumers have had to sit and wait. There isn't even a great deal to chose between the two formats - Blu Ray is 20GB larger, which for my money is an important difference, but it also has regional locking activated, which annoys a lot of DVD fans (HD DVD has capacity for regional locking, but it was not activated).

The loss looks like a clear case of underestimating the importance of convergence, (or more accurately overestimating the commitment of one of their convergent partners in the format). Any new format or device for home entertainment is going to be pitched at the high-end enthusiasts first, but that section of the market is tiny - in Europe to date, around 50,000 standalone HD DVD players have been sold, and only 34,000 standalone Blu Ray players.

What Toshiba needed was mass, to make the vendors follow the numbers, which is where Sony stole the advantage. By including a Blu Ray DVD player as standard in the Play Station 3 console, Sony was able to sneak Blu Ray into many more homes than Toshiba could. Around 3.2 million PS3s have been sold in Europe so far, and almost 1.2 million were sold in the US during the Christmas period alone.

In response, all Toshiba had was Microsoft's ‘commitment' to the format, which came down to an optional, and expensive, add-on HD DVD drive for its Xbox console. Microsoft didn't really have the same amount of skin in the game as traditional partners who produce just DVD players. It can sell Xbox with any HD drive as well as selling content through download, and the choice of Blu Ray or HD DVD isn't important to hte PC business.

All told, Console fans opted for their preferred platform Xbox or PS3, a much more emotive choice than choosing between two media formats, and didn't seem keen on an optional add-on for a undecided format, These console buyers may not have been the high-end cinephiles, but they still represented a big slice of potential Blu Ray disc buyers, and for retailers and studios already fed up with having to cater to two formats, it was a significant difference.

So now Toshiba and its partners face a loss of hundreds of millions of dollars to cease production, while landfill sites around the world will likely be stuffed full of unsold HD DVD players and discs, along with Betamax video tape and Laserdisc. If the next generation of media is purely downloaded content, as many are predicting, at least it won't be quite as wasteful as this latest format war.

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