Blu-ray Will Win HDTV DVD War

[Jeff®]

http://www.tvpredictions.com/bluraywins102306.htm


News Analysis
Blu-ray Will Win HDTV DVD War
Despite a slow start, the Sony-backed format will overcome Toshiba's HD-DVD.
By Phillip Swann
Washington, D.C. (October 23, 2006) -- Sony has launched a new HDTV DVD format called Blu-ray. Toshiba is backing a rival format called HD-DVD.

Who will win this format war?

I predict that it will be Sony. And here's five reasons why:

1. Studio Support
Seven of the eight major studios have announced support for Blu-ray (Universal is the lone hold out) and four of them are backing it exclusively (they won't release titles in the HD-DVD format). This will give Blu-ray a tremendous advantage in the number of available titles in the new HDTV DVD category.

2. Play Station 3
Sony next month will launch the Play Station 3 video game console. The device, which will play Blu-ray DVDs, is expected to sell millions over the next 12-18 months -- despite a price tag of $499 or $599 (depending upon the system's storage capability.)

While it's true that Microsoft will soon sell a HD-DVD adapter with its XBox 360 console, the high-def DVD player will require a separate purchase ($199).

But PS3 comes with Blu-ray regardless of whether you want it or not. Consequently, a large number of PS3 owners will likely give Blu-ray a try because they have nothing to lose.



3. Price
How can Blu-ray have a price advantage when a HD-DVD player costs $499 and a Blu-ray player now costs $999?

To date, both high-def formats have been a disaster. Remembering the Beta vs. VHS format war of the 1980s, consumers are hesitant to buy either Blu-ray or HD-DVD because they fear they will pick the wrong format.

Consequently, Toshiba is currently not benefiting significantly from the lower price tag.

However, in 2007, you can bet that Blu-ray players will drop in price, perhaps even equaling HD-DVD's retail cost. The price reduction will generate significant media buzz, giving Blu-ray an advantage as more consumers become interested in the new players.

4. Politics
In 2007, the four studios that currently back both HD-DVD and Blu-ray will begin to question the economics of releasing titles in both formats. At some point, they will feel internal pressure to pick a winner. And if Blu-ray starts to generate more sales due to the above three reasons, they will pick Blu-ray.

5. Peace Treaty
Also in 2007, Toshiba will see the handwriting on the wall and initiate peace talks with Sony. The companies in 2005 discussed making Blu-ray the only format, but talks broke off late in the year. No surprise there; it was wise for Toshiba to first test the market before making concessions.

So I predict that Blu-ray will emerge as the dominant format in the HDTV DVD war in 2007, which will eventually lead to a negotiated settlement between Sony and Toshiba.

And once Blu-ray is established as the single HDTV DVD format, consumers will drop their reluctance and begin buying the new players.