Blu-Ray or HD-DVD? Is the War Over? Update: Yes

bluray vs hddvdIt would appear the Blu-Ray and HD-DVD format war is entering the final stage. I give it about a 90% chance that Blu-Ray will be victorious in the biggest format war since Beta-Max and VHS in the early 80’s. In early January of 2008, Warner Bros, owned by Time Warner announced they would exclusively support the Blue-Ray technology. However, they will continue to produce new releases until the end of May in the HD-DVD format.

The announcement was made by Barry Meyer, Chairman & CEO, Warner Bros. and Kevin Tsujihara, President, Warner Bros. Home Entertainment Group and is a huge blow to the HD-DVD format.

“Warner Bros.’ move to exclusively release in the Blu-ray disc format is a strategic decision focused on the long term and the most direct way to give consumers what they want,” said Meyer. “The window of opportunity for high-definition DVD could be missed if format confusion continues to linger. We believe that exclusively distributing in Blu-ray will further the potential for mass market success and ultimately benefit retailers, producers, and most importantly, consumers.”

So why is Warner Bros. switching to Blu-Ray the apparent death blow to HD-DVD? Because they are the largest studio in the $42 billion dollar home entertainment market that now joins Walt Disney Co., Sony Pictures, Twentieth Century Fox, and Metro-Goldwyn-Mayer (MGM) as exclusively supporting the Blu-Ray technology. This makes up the vast majority of the studio market.

As more studios switch to the Blu-Ray technology, it becomes more difficult for the remaining studios which support the HD-DVD format to remain committed for a couple of reasons.

More consumers will start purchasing the Blu-Ray players due to the fact more movie titles will be available. In time, Blu-Ray will acquire a larger percentage of the consumer sales market and as word gets out that Blu-Ray is the “way to go”, more people will choose Blu-Ray instead of HD-DVD players. This will have a cascading affect.

As manufacturers see consumers purchasing more Blu-Ray players than HD-DVD players, they will commit their resources to making better Blu-Ray players. In doing so, competition will drive prices down on the Blu-Ray players thus allowing more people to purchase the players which will facilitate consumer confidence even more.

As more Blu-Ray titles are released due to a larger number of studios supporting the format, market share will continue to pull ahead of the HD-DVD camp. As a result, the remaining studios which support the HD-DVD format will generate less profit from their new releases due to a smaller market share of consumers who own HD-DVD players. In turn, HD-DVD sales will decline. At that point, the logical business solution for the HD-DVD supporting studios will be to support the format that will make them more money; in this case, Blu-Ray. It doesn’t make sense to support both formats.

And thus with Warner Bros switching to Blu-Ray, the snowball is in motion. Slowly, but surely, the Blu-Ray technology is building an irreversible momentum that HD-DVD will have a hard time stopping. As more time passes, the momentum will only increase. If they are to continue the fight, the HD-DVD camp had better do something sooner than later.

There were rumors that since Warner Bros decided to exclusively support Blu-Ray, Paramount would follow suit. This isn’t true as of yet. Paramount has reiterated they are committed to the HD-DVD format for now as is Universal Pictures and Dreamworks.

“Paramount’s current plan is to continue to support the HD DVD format,” says Brenda Ciccone, a spokeswoman for Paramount

Time will tell if they stick to their guns.

Update: Toshiba has announced that effective immediately, all HD-DVD player prices will be cut by 40% to 50%. Is this enough to sway public opinion and sell more units despite the fact there are fewer studios supporting HD-DVD? Or is Toshiba dumping inventory before the HD-DVD format completely goes away?

Update: Netflix has indicated they will only stock Blu-Ray DVD’s as of February 11th, 2008. This is another nail in the coffin for the HD-DVD format. By the end of the year, all HD-DVD’s will be removed from Netflix’s inventory.

Update: As of February 15th, 2008 Wal-Mart has decided to dump the HD-DVD format and exclusively support Blu-ray. This is perhaps the crippling blow to HD-DVD.

Update: The biggest format war since VHS vs Betamax is over. Japan’s Toshiba Corp (6502.T) surrendered in the high-definition home movie war on Tuesday, giving up on its HD DVD format after losing the support of key studios and retailers to the Blu-ray technology backed by Sony Corp.

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