Motley Fool Article: blu-ray takes the lead

[Jack Torrance]

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Blu-ray Takes the Lead
By Dan Bloom
March 15, 2007
Electronics giant Sony (NYSE: SNE) had a rough 2006. Laptop batteries that it had supplied to Dell (Nasdaq: DELL), Apple (Nasdaq: AAPL), and Toshiba had to be recalled. Its PlayStation 3 debut was held up by manufacturing issues. Finally, its new high-definition disc format, called Blu-ray, suffered against the launch of the rival HD-DVD format, backed by Toshiba.

But things may be changing for the better for Sony on at least one front this year: Its Blu-ray format appears to be taking the lead over HD-DVD. According to an article in Home Media Magazine, which references research done by Understanding & Solutions, for each HD-DVD movie sold, consumers are springing for three Blu-ray titles. High-definition movie sales have done a 180-degree turn since the PS3 launch: Before the PS3 came out, HD-DVD movies outsold their Blu-ray counterparts by about three to one.

Sony was criticized for building the Blu-ray player into its PS3, rather than following Microsoft's (Nasdaq: MSFT) strategy of offering a player (HD-DVD, in this case) as an add-on to its Xbox 360. After all, not everyone who wants to play games on the PS3 cares about high-def movies. Nevertheless, Sony probably figured that forcing the Blu-ray player down gamers' throats would ensure that there were lots of Blu-ray players in the world's living rooms, which would help get its Blu-ray format off the ground at some point. It appears to be doing just that.

Will the Blu-ray lead continue? The cards seem to be stacking firmly in its favor. Although a stand-alone Blu-ray disc player is still more expensive than an HD-DVD player, prices for the Blu-ray players will certainly fall during the next year. Furthermore, Blu-ray has the support of most movie studios, and it's getting an extra kick in the pants from Amazon (Nasdaq: AMZN), which is running a sale on some Blu-ray titles. I've always shuddered at the thought of paying $25-$30 for a movie, high-definition or not, but Amazon has priced some Blu-ray titles at less than $15.

I certainly wouldn't mind if Toshiba just let HD-DVD melt away. Living-room consumer electronics are already complicated enough -- you should see the tangle of wires connected to the back of my receiver. The existence of two high-def formats just adds to the complication.