Blu-ray vs. HD-DVD: Knocking Each Other Out?

Who will win the battle for next-generation video format? Maybe no one, at least not for a long time.

By CSO Contributor

December 11, 2006 — CSO —

High-definition televisions are expected to be hot sellers this holiday season, but consumers are likely to have a tough time sorting out the newest-generation video discs and the players that go with them. The culprit: two competing high-definition DVD formats and no sign of a clear winner.

In one corner are Sony, most movie studios and a number of consumer electronics makers pitching a technology called Blu-ray. In the other corner, with the HD-DVD format, sit Microsoft and Intel along with their allied studios and consumer products companies. Both formats provide larger storage capacity than the current generation of DVDs and can store high-definition, full-length movies. And both sides are well funded and unlikely to cave in. In the middle are a few consumer electronics makers hoping to create players that can play both formats at a reasonable cost.

What's striking about the two formats is that they are relatively similar in their general capabilities. Both require consumers to buy new players since they rely on blue lasers to read high-definition discs, compared to the red laser in traditional DVD players. Both camps have signed up major studios and hardware partners, and both hope to use game machines (Sony's Playstation 3 and Microsoft's Xbox) to gain critical mass.

Among the differences: The Blu-ray format holds 25GB to 50GB of data with additional capacity possible to 200GB. HD-DVD holds 15GB to 30GB with a maximum of 60GB. The content partnerships favor Blu-ray, which has all of the major movie studios, except for Universal Pictures, backing it along with consumer electronics and computer companies LG Electronics, Panasonic, Samsung, Apple and Dell. HD-DVD has Universal Pictures in its corner along with Intel and Toshiba. A few industry players, such as Hewlett-Packard, Paramount and Warner Bros., have pledged support for both formats.

How will consumers react to competing formats? Historically, they put off purchases, says Wharton marketing professor David Reibstein. "This is clearly not in the best interest of consumers, and it absolutely hurts demand. Holding back is a natural consequence of two competing formats." The worry: No one wants to get stuck with outdated discs and players.

"There's no question having two incompatible next-generation DVD formats is an untenable situation," adds Wharton legal studies and business ethics professor Kevin Werbach. "The real question is whether either of them will make it. Today, it's not clear why anyone would spend $800 or more on a Blu-ray or HD-DVD player, when you can get a perfectly good DVD player for $30. The difference in quality just isn't that great, especially if you don't have a home theater."

Indeed, the situation has some industry players worried. Netflix CEO Reed Hastings has urged studios to support both formats in an effort to stoke demand because both camps are well funded and unlikely to give up ground.

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