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What the High-Def Format War Means for Home Entertainment

2 Dec, 2004 By: Thomas K. Arnold

What a bombshell, last Monday's announcement that five key home video suppliers — including three of the six majors — are jumping in the HD-DVD camp and will actually release product by the time hardware hits stores late next year.

Sony's superior Blu-ray format — HD-DVD's chief rival in the race to develop a high-definition successor to DVD — appears to be left at the altar. To be sure, Blu-ray vows to fight on, but in the battle between a format that has the support of hardware (like Blu-ray) and one supported by the software side (HD-DVD's halfway there), the smart money always favors the latter.

I still believe, however, that ultimately some sort of compromise will be reached, similar to the one struck a year before DVD's launch between an alliance led by Sony (again) and one championed by Toshiba (again!). The fact is, of the three studios that have come out for HD-DVD, only one was a real leader in DVD; the two others were late to the table. I should also point out that software support, particularly nonexclusive software support, doesn't necessarily mean a given format will succeed. Several big studios backed Divx in the early days of DVD — and, later, D-VHS — but Divx ultimately crashed and burned, and D-VHS, well, it's still around, but so are milkmen who deliver glass bottles.

The one thing no one wants is a format war. That would kill the next-generation format, once and for all. Oh, but the VHS-Beta fight didn't kill video, you say. True, but it certainly slowed home video's launch — and keep in mind that when the videocassette bowed it was a revolutionary product, not an evolutionary one, like the high-definition optical disc. The latest format war we saw was on the audio side, between DVD-Audio and the Super Audio Compact Disc (SACD). Sales of either — or both together, for that matter — are negligible and, more importantly, aren't posting any significant year-to-year gains. Don't expect that to change.

So what's going to happen on the home entertainment side? One of four things, and I expect some activity in the coming weeks, probably not before the holidays but certainly by January, around CES, or at the very latest in February or March.

One scenario will see Fox and Disney join HD-DVD charter supporters Warner, Universal and Paramount. If that happens, it's only a matter of time before BD goes away. Chance of this happening: At this point, 20 percent.

A far more likely scenario will be a compromise, either a real compromise or a face-saver, depending on how far the folks at Blu-ray feel their backs are being pushed against the wall by Warren Lieberfarb, the master strategist and primary string-puller at HD-DVD. Sony has grown accustomed to producing a superior product but ultimately losing out in the race for a standard. This time, Sony's heels are dug firmly into the ground, but nothing's ever certain. Chance of this happening: I'd say 60 percent.

Two other dark-horse scenarios: Blu-ray does such a good job convincing Hollywood of its superiority that Disney and then Fox line up behind it, Paramount and Universal vow to support both and, finally, Warner buckles and joins Blu-ray as well — prompting Paramount and Universal to then also go the single-format route. Slim chance, granted — I give it a 5 percent.

The other scenario: It's back to the drawing board for everyone. There is no fourth-quarter 2005 launch, as both sides retreat and agree to try again in late 2006 — 15 percent chance, if you ask me.

We'll find out soon enough.

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