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Next-gen DVD format war ends in stalemate, says iSuppli analyst

Posted: 27 Jun 2006 ?? ?Print Version ?Bookmark and Share

Keywords:DVD? format war? HD DVD? Blu-ray? Chris Crotty?

The conventional wisdom holds that, much like the Betamax-VHS war of the early 1980s, one format will emerge the winner of the HD DVD versus Blu-ray next-generation DVD format battle that is shaping up to start this summer. But that's not necessarily the case, according to at least one industry analyst.

Chris Crotty, senior analyst of the consumer electronics segment at market research firm iSuppli Corp., believes the DVD format war will result in stalemate, at least in the short term.

For one thing, according to Crotty, neither technology offers a distinct technology advantage over the other. "It's not as if you can point to one of them and say, 'this is significantly better, for these reasons,' " Crotty told EE Times last week.

Both formats, for example, are build on the Advanced Access Content System, the new standard for content distribution and digital rights management intended to limit sharing and copying of the next generation of DVDs.

A second rationale for Crotty's predicted stalemate is content providers. For now, some have said they will publish in both formats, and some say they will publish in only one.

"I think that studios are very interested in making money," Crotty said. "You have to think that the smart studios are going to have to ask themselves very seriously, 'are we leaving money on the table?' "

Just as video game companies routinely publish games for use on different gaming systems, the majority of studios will soon be publishing movies for both HD DVD and Blu-ray, Crotty said, adding that the resources and effort required to publish on two DVD formats are significantly less than programming video games to work on other consoles.

Crotty acknowledged that publishing in both formats would be tougher for a company like Sony Pictures. Sony Corp. and Matsushita Electric Industrial Co. are the primary backers of the Blu-ray Disk format.

Crotty said that it's likely that forward-thinking consumer electronics companies will offer DVD players that support both formats by the holiday season. Companies like South Korea's Samsung Electronics Co. Ltd and LG Electronics Co. Ltd are rumored to be developing dual-format players, he said.

HD DVD versus Blu-ray will be a lot different than Beta versus VHS, Crotty said. For one thing, unlike the 1980s, when VHS bested Beta, which was considered to be the better technology, through sheer marketing efforts, today's consumers have access to a great deal more information through the Internet. Once companies bring to market players that support both formats, it will also be less of an issue, he said.

"The consumers in the market will not tolerate two formats, unless it doesn't matter, unless it's moot," Crotty said.

Law of unintended consequences
Toshiba, the main backer of HD DVD, has fired the first shot in the next-generation DVD format war. The company got the technology out of the gate ahead of its Blu-ray rivals and is now offering an HD DVD player for $499 that, an iSuppli "teardown" analysis revealed, actually contains nearly $700 worth of components. Toshiba's willingness to take a loss of nearly $200 per unit is a clear indication that the company is trying to press its first-to-market advantage by permeating the market with HD DVD. But Crotty noted that the strategy may backfire, invoking the law of unintended consequences.

"There are already reports that companies that sell high-end computers are buying the player to rip out the drive and install it in a computer," Crotty said. "The only reason they can do that is because Toshiba has priced it so low."

Companies such as Zoran Corp. are currently developing chipsets for next-generation DVD players that are "format agnostic," Crotty noted.

Toshiba and its Blu-ray rivals tried last year to reach a compromise on the next-generation DVD standard. But the efforts broke down last May, with each side saying they would go ahead with their own formatscreating a situation where consumers will be forced to choose between equipment and content for two different formats.

"If you just stand back from a business strategy standpoint, it's a little absurd to think, 'we're going to win,' given how entrenched the other side is," Crotty said. He acknowledged that one format may eventually win out, noting that each has some subtle non-technology advantages.

Crotty pointed to a surprising factor that could influence the ultimate outcome of the DVD format war. "Some people will argue that the ultimate winner in this situation is based on what the adult film business adopts," he said, noting that that industry sells a very high volume of DVDs.

- Dylan McGrath
EE Times

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