Blu-ray takes the lead, backed by retailers and movie makers
The format war over high-definition video disks, stalemated just a few months ago, may now be turning into a rout: Sony Corp.'s Blu-ray format is moving to a dominant position, with major electronics retailers Best Buy Inc. and Wal-Mart Stores Inc. and movie rental company Netflix Inc. revealing last week they will embrace Blu-ray.
The news is a major blow to the rival HD DVD format championed by Sony's Japanese competitor Toshiba Corp. and also backed by Microsoft Corp. The HD DVD camp was already reeling from last month's surprise announcement from movie studio Warner Bros. that it would release all future high-definition movies only on Blu-ray disks.
Yesterday, Toshiba's shares surged in Japan, due to a Wall Street Journal report that the company may abandon the HD DVD format as early as this week.
Officials of Toshiba, Microsoft, and Sony were unavailable for comment yesterday.
"It appears that Warner's move was decisive," said Tom Adams, president of Adams Media Research of Carmel, Calif., which tracks the video disk industry.
Adams said Warner's shift means about 75 percent of new movie releases are available on Blu-ray disks. Other studios wedded to Blu-ray include 20th Century Fox, Walt Disney Co., Lionsgate Entertainment Corp., Metro-Goldwyn-Mayer Inc., and Sony Pictures. Just two major studios - Paramount Pictures and Universal Studios - issue films in HD DVD, and Adams estimates they generate only about 25 percent of new movie releases.
Adams said Warner abandoned its two-format approach because of declining sales of standard DVDs. According to researchers at the Digital Entertainment Group, sales of standard video disks declined 3.6 percent last year. Adams said DVD demand was bound to cool because the market is saturated, and the industry's best hope for renewed growth is a new technology that will encourage customers to upgrade.
High-definition disks offer a sharper picture than conventional DVDs and were designed to complement the high-definition TV sets now found in about a third of all US households. The new disk technology was supposed to create a surge in sales of new equipment and movies, but the presence of two mutually incompatible formats has scared off consumers.
Warner's decision to support both formats only prolonged the pain, said Adams. "Being agnostic seemed like a reasonable strategy originally," he said, "but it does seem to be holding back sales of high-def players and disks."
Adams said Warner's shift to Blu-ray exclusivity could actually suppress its total high-definition DVD sales for a time, due to lost HD DVD sales. But he predicted standardizing on Blu-ray will mean stronger disk sales in the long run.
Retailers apparently share this view. Starting in June, Wal-Mart will sell only Blu-ray disks and players. "We believe that one format will help increase interest, and with more adoption comes more selection and affordability," said company spokesman Steven V. Restivo.
Best Buy will continue to carry HD DVD disks and players, but will promote Blu-ray as its preferred technology. "We're just choosing Blu-ray as our format of choice," said spokesman Brian Lucas. "If people have HD DVD players, we're going to keep carrying products for them as well."
But Best Buy, the biggest US electronics chain, will feature Blu-ray products in its advertising and promotional campaigns.
Meanwhile, the popular Netflix video rental service will go Blu-ray-only and phase out HD DVD rentals by year-end.
"We saw the industry going that way, and we wanted to provide the best experience for the majority," said spokesman Steve Swasey.
Even as the format war winds down, Netflix has begun competing on another front by streaming movies over the Internet directly to customers' computers. But only about 7,000 titles are presently available, out of the Netflix catalog of 90,000 films. Movies must currently be viewed on the user's computer, though Netflix is planning a service that will deliver movies to TV sets. And Netflix doesn't offer high-definition video streaming because few consumers have enough Internet bandwidth to support this.
Swasey said that receiving standard or high-definition disks by mail would remain the core of Netflix' business for a long time to come. "It's going to be several years before we have a majority of people watching content online," he said. "It's a DVD world, and it's going to be for several years."
Hiawatha Bray can be reached at bray@globe.com. 