It is a fight with more plot twists and intrigue than a Hollywood thriller. For two years now, rival camps have been battling over which new DVD format will prevail: Blu-ray, which is backed by Sony and a consortium of 170 other companies, or HD DVD, which is being championed by Toshiba, Microsoft, and others.
Both technologies promise crisper video that looks better on the new generation of flat-panel, high-definition TVs. And the winner stands to control a lucrative new market worth billions. Each side has been competing to win the backing of the major movie studios. Only Warner Bros., which currently uses both formats, is still playing hard to get.
Now, with the January 7 International Consumer Electronics Show fast approaching, Sony and Toshiba are keen to announce they have won over Hollywood's last holdout. In the meantime, they are falling over themselves to woo Warner. While either side could prevail, the Sony group has suddenly emerged as the front-runner.
Why? Because despite a setback this summer when the HD DVD companies signed up Paramount Pictures and DreamWorks Animation, the Blu-ray forces have still lined up more studios than the HD DVD side.
Plus this year, the Sony team has sold more than twice as many discs. "The rumor is that Warner is coming aboard soon," said Michael Burns, vice-chairman of studio Lionsgate (LGF), which makes its movies available on the Sony-backed format. "That will make it awfully tough for HD DVD to stay in this game." (Sony declined to comment, and Toshiba only would say it is "in regular contact with the studios.")
From the beginning, the two camps' overarching strategy has been the same: getting access to as many movies as possible. It is not hard to see why. Consumers will buy the new technology only if they believe most of the films they want will be available.
Right now the Blu-ray team has enough studios on board--among them Disney, Fox, and, of course, Sony--to account for about 49 percent of current DVD market share. Warner is a prolific film factory, releasing as many as 30 pictures a year, including those produced by sister studio New Line Cinema.
Persuading it to sign an exclusive deal would give the Sony crowd about 70 percent of DVD market share. That could prompt the other studios to abandon HD DVD.
On the other hand, if Toshiba were to win Warner's hand, the two forces would divide the market between them. That could create mass consumer confusion and potentially strangle a new technology that the studios hope will give a lift to flagging DVD sales. That is exactly why Warner has long pushed for a single format.
Wooing Warner
The battle has heated up since HD DVD got Paramount and DreamWorks Animation. Both sides have been beating a path to Warner's doorstep. Yoshihide Fujii, the head of Toshiba's HD DVD business in Japan, has made three trips to the United States since the summer, said those with knowledge of the situation.
And while Andrew House, Sony's chief marketing officer, has been pressing the Blu-ray case, the stakes are sufficiently high that Sony CEO Howard Stringer has been making personal appeals to Richard Parsons and Jeffrey Bewkes, the two top executives at Warner parent Time Warner.
Toshiba is pressing the case that because its technology is cheaper, it will more quickly become a mass-market product. According to the DVD Release Report, an industry newsletter, the suggested retail price of an HD DVD is US$31.74, nearly US$2 less than Blu-ray's suggested price. (Retailers traditionally cut the price to less than US$29.) Toshiba also has been cutting the price of its players, slashing its entry-level machine to US$299 earlier this year.
It was price that prompted DreamWorks Animation and Paramount to throw in their lot with HD DVD earlier this summer. (Like Warner, Paramount had previously backed both formats.)
"The game-changer for us was the hardware costs dramatically coming down to where it could succeed broadly for the consumer," said DreamWorks Animation CEO Jeffrey Katzenberg. "In addition, the software manufacturing costs in the future would be significantly lower than Blu-ray."
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