Toshiba Pulls the Plug on the HD DVD Format: Who Benefits?

• Posted: Wednesday, February 20, 2008
• |
• Author: pradhana
• |
• Filed under: New Format

How will Toshiba's decision to terminate HD-DVD impact the format's supporters? And what does it signify for its bitter rival, Blu-ray?


Blu-ray was introduced by Sony in 2006 and this disc format has been rapidly gaining market share recently. "Blu-ray delivers a storage premium over HD DVD discs with two-thirds more data capacity," says ABI Research analyst Serene Fong. But, Blu-ray technology requires newer manufacturing techniques and factories which raise the initial start-up costs for manufacturers.

“The HD DVD camp took a more pragmatic approach, as HD DVD allowed manufacturers to make use of existing assembly lines to produce DVDs en mass. This led to the prevailing view that HD DVD discs were cheaper to manufacture because of the similarities to previous video technology. And this is one of the main reasons why multimedia player manufacturers have been procrastinating on Blu-ray integration," she added.

The Blu-ray camp now has the support of major Hollywood studios including Warner Bros, Twentieth Century Fox, and Walt Disney, and that of major consumer electronic manufacturers including Panasonic, Samsung, Pioneer, LG Electronics, Sharp, Dell, HP and Apple Computer. The allegiance of movie studios plays a determining role in driving growth.

When Warner Bros., Hollywood's largest distributor of DVDs, and major retailers such as Wal-Mart, Netflix, Target and Blockbuster decided to switch allegiance early this year, it indeed raised the alarm for the HD DVD consortium. Fong explains, "People buy high definition DVD players to watch movies, and without the support of the studios, there was no way HD DVD could survive for long."

"But," adds principal analyst Steve Wilson, "the real winners now are the studios. With standard DVD sales on the decline and a stalemate in the new high definition standard, it was very difficult for studios to drive a new product into the market. Challenges still remain - player cost, disc manufacturing cost, high definition disc pricing, player adoption - but at least the uncertainty about market direction is now eliminated."

Consumers, for the most part, had no particular favorite between the two standards. With the adoption of Blu-ray, neither bettors on HD DVD nor Blu-ray are winners. None of the existing Blu-ray players on the market are upgradable to BD Live/Profile 2, a feature supported in all HD DVD players from the first release.

In addition, consumers shouldn't expect to see Blu-ray player pricing dropping to HD DVD price levels anytime soon. None of the Blu-ray vendors, except Sony, have shown any propensity to drive player adoption through lower prices. They are more likely to let the studios wrap the box with Blu-ray discs as an incentive. Taiwanese vendors entering the market will help bring down prices, but it will be another 12-18 months before the Blu-ray format reaches the maturity and value of that offered by HD DVD. Consumers are the losers in the short term. /PR

• Permalink
• RSS 2.0
• 
• 
• 
• 
•