Defectors May Push Toshiba Out of HD-DVD Format (NewsFactor)

When the history of the nearly three-year, high-definition DVD format war is written, this may be the point when both sides realized the end is near.

According to a report today in the Hollywood Reporter, "reliable industry sources" say primary HD-DVD backer Toshiba will abandon the format "within the coming weeks," although officially no announcement has been made. The format war, according to the publication, has become a "format death watch."

ET TU, NETFLIX AND BEST BUY?

In the last week alone, bad news turned to worse for HD DVD in its battle against Blu-ray. On Monday, leading retailer Best Buy said it was "addressing consumer confusion" and that, beginning in early March, it will "prominently showcase Blu-ray" as the preferred format. It said, however, it will continue to carry HD-DVD products.

On the same day, online movie renter Netflix said that, "with the industry now having picked a winner," the company would stock high-definition DVDs exclusively in the Blu-ray format. It cited the decision by four of the six major studios to back Blu-ray as a key reason for its move. Previously, Netflix had been offering both formats.

The logjam with the studios began to break in January, when Warner Bros said that, in May, it will sell high-def movies only in Blu-ray. Warner joined Disney, Fox, Lionsgate and Sony in that decision. The remaining major HD-DVD backers include Universal, Paramount, DreamWorks Animation, and Microsoft, in addition to Toshiba.

Theres also another, less talked-about, factor that was reportedly instrumental in the VHS victory over Betamax -- the porn industry. The head of Digital Playground, which claims to distribute more than 80 percent of high-def adult video DVDs, has told reporters his company is phasing out HD DVD and moving entirely to Blu-ray.

DEFEAT DOES NOT MEAN SUCCESS

Michael Gartenberg, an analyst with industry research firm JupiterResearch, said the Warner announcement -- during the all-important Consumer Electronics Show in January -- was a "body blow" to HD DVD. It was always about content, he said, and the content is moving away from that format.

While the war has been raging, some alternatives for viewing better-quality movies have emerged. There are upscaling, regular DVD players, which offer a stepped-up picture and have become very inexpensive. There is also delivery of high-def over high-speed Internet connections. At Januarys Consumer Electronics Show in Las Vegas, Comcast demonstrated technology that permits a high-def movie to be downloaded in four minutes.

Gartenberg cautioned that "defeating HD DVD does not necessarily mean that Blu-ray succeeds." He added that the main competition for each format has always been upscaling DVDs and online delivery, and he noted that consumers are now able to watch a high-def movie over Apple TV "within two or three minutes of when it is purchased."

For Blu-ray to succeed, Gartenberg said, it "has to get the price of players down" to the levels were now seeing for discounted HD-DVD players. Those prices have been dropping rapidly, as low as $120 to $200 less than the cheapest Blu-ray player.

"If Blu-ray doesnt catch on in 2008," he predicted, "it may remain only a niche format."