Will CES Solve the HDTV DVD Format War?

Palo Alto, California (December 31, 2006) -- The Consumer Electronics Show has a tradition of setting the stage for the next year in the electronics marketplace. Last year’s show introduced the new HD disc players and new video game systems. There is now a chance that this year’s CES, due to begin January 8 in Las Vegas, will virtually decide the HDTV DVD format war.

The industry wants this format war resolved. Sales of both formats (players and discs) have been smaller than expected, and there is a clear feeling of frustration among retailers and the movie studios about the prospects of having two very similar formats to confound the customer. This Christmas season, HDTVs were selling well, yet HD-DVD and Blu-ray players remained a curiosity to most consumers.

A year ago at CES, it appeared that Blu-ray was a shoo-in. The Blu-ray format was judged technically superior, and Sony had assembled an impressive coalition of CE companies and studios to support Blu-ray, capped by the PlayStation 3 gaming system. In contrast, Toshiba appeared to have little going for its simpler HD DVD format, except for an earlier launch date and support from Microsoft.

However, Toshiba lowered the price of its entry-level player to $499, and the launch titles from Warner Bros. and Universal were stunning. In contrast, the only Blu-ray player to launch was the Samsung, overpriced at $999; more importantly, Sony Pictures Home Entertainment launched with rather poor looking Blu-ray titles. So, by last summer, the rap on Blu-ray was that it was twice as expensive but not as good as HD DVD.

First impressions count and cost Blu-ray any chance of an early victory. However, the Blu-ray group has steadily made progress since the fall. Titles from both formats are on a par in terms of quality, and while Blu-ray has yet to demonstrate convincingly that it is better, the higher-capacity 50GB disks are now common and it appears that studios like Disney and Fox are learning how to use Blu-ray’s features to create a compelling product.

Toshiba and ally Microsoft have been nimbler, more customer responsive, and have used the Internet (such as avsforum.com) to great advantage. They orchestrated a 180-degree turnaround in support among early adopters. Sony and other Blu-ray companies have seemed stubborn and unresponsive, and have stayed with their game plan. Sony was also hit by any number of problems throughout its business, some of which it handled badly.

But at this point, it appears to this observer that the Blu-ray game plan is finally working. CES may ratify this, or may put yet another twist on the format war. Let’s see why.