Blu-ray vs. HD DVD

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Jane Jiang

James Watson

In February, 2008, the battle for supremacy in high-definition DVD technology ended. Toshiba surrendered to Sony in the most expensive format war since VHS videocassette format trumped Sony's Betamax in the 1980s. Toshiba and other HD-DVD supporters like General Electric Company (GE) and Microsoft (MSFT) must now shift their focus to phasing out the HD-DVD format in the least painful way possible. This means reducing the price on the Toshiba's remaining HD-DVD players and providing customer support to HD-DVD customers.

In its late stages of the battle, and HD DVD and Blu-ray made their best efforts to gather disk and decoder/reader manufacturers, media companies, and retail outlets to their respective sides. Blu-ray had a string of victories, gaining endorsements from major rental companies Netflix and Blockbuster, and in January 2008 the production company Warner Brothers announced that it would support the Blu-ray format exclusively. Meanwhile, the top two DVD retailers in the United States, Wal-Mart and Best Buy, announced in February 2008 that they will showcase Blu-ray over HD DVD and phase out the latter in the long term. Toshiba's HD DVD continues to have the support of the other major Hollywood production companies, including Universal Pictures and Paramount Pictures, but this may change with the recent votes of support for Blu-ray by the key distributors.

Blu-ray technology, developed by Sony (SNE), got a slower start and is a slightly more expensive technology than HD DVD (Toshiba's competing product), but its proponents argue that Blu-Ray's larger storage capacity (25GB for a single layer disk and 50 GB for a dual layer, nearly twice the capacity of HD DVD) make up for the price difference. Blockbuster's announcement in summer 2006 that it would carry Blu-ray DVDs (adding a limited selection of HD-DVD after a year or so) was the first indicator of shifting favor away from HD DVD and towards Blu-ray as the main high definition technology. In January 2008, Warner Bros. announced it would release high def DVDs in Sony's Blu-ray format only, joining several other production companies and ensuring that in 2008 roughly 70% of new releases will be in Blu-ray. The two formats are incompatible, meaning that buyers of HD DVD players cannot play movies issued in Blu-ray, and vice versa.^[1]

Blu-Ray movies are prominently displayed in a New York store.

February 2008 seemed to deal the final blow to Toshiba's format. In the same week, Wal-Mart and Best Buy announced their intention to focus on Blu-ray, and after a weekend flush with Japanese media reports that Toshiba would pull the plug, the firm announced that it would review its HD DVD strategy with an end to operations sure to be the outcome. A variety of factors, from marketing to management strategy, played into Blu-ray's ascent and HD DVD's swift decline, but it appears that the approximately 1 million customers who have purchased HD DVD equipment as of February 2008 will soon possess outdated technology and have no recourse but switch to Blu-ray or pursue digital options if they hope to watch newly released movies from home.^[2]

Overview

Although several companies have introduced decoders (used in DVD players) that can read both Blu-ray and HD DVD, the two optical storage formats cannot coexist in equality forever. Many companies are deeply invested in one side or the other, and all of the major players take the position that customers will benefit from the compatibility and expanded content choices that a single format in the industry can offer. There are also a number of companies who will "win" no matter which format emerges dominant.

• NVIDIA's graphics hardware and technology is vital to both high-def formats.
• Moser Baer India Limited is a leading producer of DVD disks for both Blu-ray and HD DVD.
• MIPS Technologies and Seagate produce high-performance processor cores and hard drives that are required for all high-definition activity, regardless of whether the disk played is Blue-ray or HD DVD.
• Broadcom (BRCM) and Sigma Designs develop high-performace semiconductors for use in both HD DVD and Blu-ray players and recorders.

Blu-ray Winners

• Sony will benefit tremendously if Blu-ray wins out over HD DVD. One of the technology's biggest supporters and its initial developer, Sony will benefit from selling both Blu-ray optical drives/component parts and Blu-ray-formatted DVDs of its vast movie collection.
• Oerlikon, Nichia, and Sharp are examples of Blu-ray-applicable semiconductor/optics manufacturers who stand to gain.
• The Blu-ray camp also includes: Apple, Dell, Hitachi, HP, JVC, LG, Mitsubishi, Panasonic, Pioneer, Philips, Samsung, TDK and Thomson.
• DTS, previously the unequivocal loser in the DVD audio market, has now had its audio technology mandated as one of the Blu-Ray standards, giving it the chance to compete in the home entertainment market in a way that it never could before.

Blu-Ray Losers

• Dolby Laboratories' AC-3 technology is the exclusive standard for DVD audio formatting and playback; with the adoption of Blu-Ray, however, its HD audio formatting must compete equally with DTS, as both are now required to be on every Blu-Ray disc.

HD DVD Winners

• Lite-On IT (TPE: 8008) is a Taiwanese company that manufactures HD-DVD optical disk drives for Xbox.
• Microsoft has thrown its bulk behind HD DVD almost out of necessity (game console rival Sony and computing rival Apple are both Blu-ray supporters). Microsoft's gain from an HD DVD win is not so much in a direct earnings rise--the greatest value might be in the significant setback that HD DVD supremacy would be for Microsoft's major competitors.
• Toshiba and Intel are also in the HD DVD camp, having played important roles in the format's development. (Toshiba especially was a pioneer of HD DVD technology). Toshiba has been cutting prices and intensively marketing its HD DVD players in hopes of keeping consumers interested in the format.

Comparison

References

1. ↑ The New York Times, "Warner Backs Blu-ray, Tilting DVD Battle," 1/5/2008
2. ↑ Silicon Valley News, "Toshiba says it may end HD DVD business," 2/18/2008