Kind of building on the discussion already in progress on the Home Theater board.

One of the more prominent and boastful pronouncements coming out of CES a few weeks ago was the Blu-Ray Association's declaration of victory over HD-DVD. At the time I thought it was ridiculous and very premature to announce something like that before the HD disc formats have even had two product cycles. Plus, that kind of arrogance could backfire really badly if projections don't pan out.

But, it turns out that the Blu-ray group's statements might simply reflect how the market dynamics have actually shaped up -- with all signs pointing towards Blu-ray. The Digital Bits and Home Media Retailing are reporting that the sales figures now put Blu-ray solidly in the lead; and with all of the major studios except Universal supporting Blu-ray, the format will likely widen this lead.

As problematic as the PS3 launch has been, it has helped swing the market momentum decidedly in Blu-ray's favor. Worldwide shipments for the PS3 have already eclipsed Toshiba's HD-DVD player shipments by more than 10-to-1 (this does not include sales for other Blu-ray players or the HD-DVD Xbox360 add-on), and more than 70% of surveyed PS3 buyers intend to buy Blu-ray discs.

By December, Blu-ray disc sales had passed HD-DVD. By January 7, Blu-ray discs were outselling HD-DVDs by 2-to-1. By January 14, the sales disparity was approaching 3-to-1.

Home Media Retailing interviewed a market analyst who indicated that he would be very surprised if this format war is not over by mid-2008. His reasoning is that by that time market penetration for HD disc players might be 5-6%, but 80% of those players will be Blu-ray because of the PS3.

http://www.homemediamagazine.com/new...ticle_id=10208

# HM: So it could be an all Blu-ray high-def market in just a couple of years?

# Bottoms: I would be absolutely amazed if the format war goes on much further than mid-2008. If you look at what happened in 2006, 80% of what has sold through is Blu-ray. In 2007, [Blu-ray] will be at least that percentage again, but it won’t be a million players we’re talking about. We’re probably looking at something like 8 million units selling through this year across all product types and formats, so by the end of 2007, moving into 2008, it’s possible that 5% or 6% of U.S. homes will be owning a high-definition playback device. And about 80% of those devices will be Blu-ray.
I also think that the Blu-ray's more extensive studio support will increasingly become an issue. The Blu-Ray Association has pointed out that among last year's top 20 DVD titles, 19 of them are already out or will soon come out on Blu-ray and 16 of these titles are exclusive to Blu-ray. In contrast, 4 of last year's top 20 DVD titles are out or will come out on HD-DVD, and only 1 of these titles is exclusive to HD-DVD. The Digital Bits has looked over the 2007 release schedule, and so far Blu-ray's announced titles far outpace what HD-DVD has.

Some HD-DVD enthusiasts had hoped that one of the studios exclusively in the Blu-ray camp would announce at CES that they would start releasing titles in both formats, but that announcement never came. And in fact, a representative from Fox indicated at CES that in their view, the format war was "in its final phases." Not exactly a sign that Fox will start issuing HD-DVDs anytime soon.

Warner has tried to straddle both camps with simultaneous releases in both formats and its recently announced Total HD dual-format disc. While that might succeed in propping HD-DVD up for the time being, I think Toshiba's end game with HD-DVD was never about winning outright over Blu-ray, but in extending the DVD format where Toshiba and Warner hold the patents. All they have to do is create enough uncertainty in the market to force a compromise of some sort, whether it's a dual-format disc or a dual-format player. The Home Media Retailing article seems to indicate as much.

# HM: Does that mean that both formats could possibly exist simultaneously for some years to come if HD DVD companies dig in their heels?

# Bottoms: We believe by the end of the year, we will see one format start to dominate. At the moment all the cards are stacked in favor of Blu-ray coming out on top. In reality, the only companies holding on to HD DVD are Toshiba and Universal and, yes, it will be a difficult pill for them to swallow to switch to Blu-ray. But it was a difficult pill for Sony to swallow when they had to start making VHS machines [after Betamax failed]. It will probably be easier for Universal because they don’t have any real financial incentive to keep HD DVD going. Toshiba has got a strong vested interest in prolonging the life of the DVD format, and that’s what HD DVD is all about. It’s basically extending the DVD format as long as you can take it.
Indeed it's still early in this format war, but Blu-ray's built-in structural advantages with the PS3 and the studio support are starting to take shape and will likely be very difficult for HD-DVD to overcome. It's interesting that a lot of the home theater enthusiasts have been decidely riding the HD-DVD bandwagon, because it was first to market, carried a very reasonable price, and had better-than-expected performance once the early bugs were worked out. Blu-ray was hampered by some poorly done titles and an overpriced and underperforming player at the outset. That plus an inherent distrust of Sony by a lot of people seemed to give HD-DVD an early heads up. But, with the PS3 turning out to be a more than capable Blu-ray player, and a full complement of new players and titles slated for 2007, it seems that Blu-ray has gotten past its early problems

Even though HD-DVD has engendered a lot of goodwill among home theater enthusiasts, I just don't see how the format can win out over Blu-ray. The best it can do at this point is force the market towards dual format approaches, or stay alive by slogging along as an entry level niche format. That same Home Media Retailing article projects that HD-DVD players will remain about $100 cheaper than Blu-ray, and will likely hit the $300 or even $200 price point by this time next year. The question though is what those HD-DVD players will have to play other than titles from Universal and porn producers?