CES: Warner's Blu-ray Disc move has industry buzzing

Could the high-def format war finally be over?

The decision by Warner Bros. to drop HD DVD in favor of Blu-ray Disc for high-definition movies has set the electronics industry abuzz. Announced on the eve of the Consumer Electronics Show (CES), the move put a single question in the minds of thousands of industry insiders heading to the event in Las Vegas: Could the high-definition format war be over?

Since both formats launched, they have been locked in a battle that has pitted some of the industry's biggest consumer electronics companies against one another. Backing Blu-ray Disc are Sony, Panasonic and Samsung; HD DVD's main supporters include Toshiba, Microsoft and Intel.

The battle also divided Hollywood and left consumers with a difficult choice: With their favorite movies likely split between the two formats, there was a risk that the player they bought would eventually become irrelevant. As a result, consumers have kept away from both formats, leading to sluggish sales.

2008 International CES

View more stories from 2008 International CES Warner's decision will give Blu-ray Disc an advantage in terms of content. With its move, five of the big seven Hollywood studios now back Blu-ray Disc with only two, Paramount and Universal, backing HD DVD.

The Warner announcement certainly put the HD DVD Promotion Group's CES plans in disarray. Within hours of the announcement, the group canceled a scheduled Sunday evening news conference and subsequent media interviews at CES.

"They're definitely regrouping and considering their options at the moment; this could be extremely important," said Tom Coughlin, a storage analyst at Coughlin Associates. "This could be the beginning of a major pivotal turning point in the high-def format war. ... If we could define the format which is going to win, [it] would be extremely important for the industry, because this would free up consumers to start making decisions on the purchase of their systems."

Better sales would help consumer electronics manufacturers boost production and that could, in turn, lead to lower prices, said Coughlin. Those lower prices would then lead to better sales, which would help the entire industry, he said.

Warner touched on the format battle's impact on the consumer electronics industry in a statement announcing its move. "A two-format landscape has led to consumer confusion and indifference toward high definition, which has kept the technology from reaching mass adoption and becoming the important revenue stream that it can be for the industry," said Kevin Tsujihara, president of Warner's home entertainment group.

Whether or not the fight is over remains to be seen.

Toshiba said in a statement that it was "quite surprised" that Warner made the announcement "despite the fact that there are various contracts in place between our companies concerning the support of HD DVD. We will assess the potential impact of this announcement with the other HD DVD partner companies and evaluate potential next steps. We remain firm in our belief that HD DVD is the format best suited to the wants and needs of the consumer."

For some, the Warner decision marks the end of the format battle.

"I think the war is over. HD DVD has lost. It really is game over for Toshiba and the other vendors," said Robin Harris, an analyst at Data Mobility Group LLC. "The basic issue is not technology. It's about distribution, it's about marketing, it's about content, and Blu-ray has been winning the content war for sometime. I don't know why [Toshiba] keeps pouring money into it. It's time to stop."

Harris credited Sony's inclusion of Blu-ray Disc in the PlayStation 3 with being one of the instrumental moves in winning the fight for Blu-ray.

"I think Sony's brilliant move, and one of the few they have made in this effort, is putting Blu-ray into PS3," he said. "Even though PS3 hasn't sold so well in the console wars, in terms of being a platform for Blu-ray distribution, it's been a success for them, and I think that's what really put Blu-ray over the top."

The praise comes as Sony has started to see PS3 sales pick up, after a year of sluggishness. Ironically, the company has been often criticized by analysts and the media for including Blu-ray in the device, because it contributed to a price that put many consumers off from buying the high-def gaming console.

Copyright © 2008 IDG Communications, Inc.

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