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Amazon (Nasdaq: AMZN) has developed an elegant solution -- albeit a temporary one -- to a problem that has been nagging electronics goods retailers: what to do until the high-definition DVD format struggle reaches its conclusion.
For retailers, the unresolved war between Blu-ray and HD DVD formats means they will have to keep two sets of otherwise identical products -- DVDs and players -- on hand for consumers.
An Amazon subsidiary, CustomFlix Labs, has bypassed at least part of this problem by offering an on-demand DVD service that supports not only the two major competing formats but also Windows Media Video High Definition DVD.
The company can do this because its so-called Future-Proof Archive service, a proprietary storage and repurposing platform, is able to deploy digitized files in any format selected by the consumer. In short, all someone has to do is select a movie in Blu-ray, for example, and CustomFlix will burn the DVD, then ship it out.
Like the manufacturers, Hollywood studios have placed their bets on one standard or another -- or, in some cases, both. In an ironic twist in this long and winding saga, Amazon's solution has made the studios' decisions nearly moot.
A Retail Issue
Ultimately, this is a retail 
-- not a standard format -- issue, Yankee Group analyst Mike Goodman told TechNewsWorld. "It is not going to have that much impact on which standard eventually becomes the dominant one." At this point, he said, that call is likely to be made by consumers.
At the moment, Blu-ray appears poised to trump HD DVD, although Goodman added, "that is by no means a slam dunk."
HD DVD players have already begun shipping. Toshiba's HD DVD players can be expected to be on many U.S. retailers' store shelves shortly, while Sony's (NYSE: SNE) scheduled release of its Blu-ray format players is four months away.
For this reason, HD DVD may well dominate market share in the short term, according to ABI Research.
By the end of 2006, the firm predicted in a research note update, Blu-ray players alone will account for only about 30 percent of the global high-definition DVD player market -- that is, until PlayStation 3 is released.
The next generation of Sony's wildly popular game console will play Blu-ray discs, and when it is launched, ABI Research said, it could change the market dominance picture dramatically.
Until that happens -- if it happens -- retailers aren't inclined to take bets.
E-Commerce Comes of Age
Amazon's solution to the problem is best suited to online distribution. Indeed its plans embody -- finally -- what the online retail industry originally promised, at least for information and entertainment products, said Joel Goldhar, professor of technology management at Illinois Institute of Technology's Graduate School of Business.
"What Amazon should really do is e-mail the content to the customer's computer and let them burn the DVD themselves," he told TechNewsWorld.
Amazon's system will also generate unexpected dividends outside the company, according to Steve Weber, author of The Home Based Bookstore, available on Amazon.
"It will bump up sales for the entire video category," he told TechNewsWorld. "Amazon is amazingly successful in cross-selling and upselling additional related products through their e-mail promotions and during the checkout process."
Also, he added, Amazon's decision to support both HD DVD and Blu-ray through its CustomFlix subsidiary makes it more likely that both standards will get in front of consumers -- who will then have a good chance of determining which standard becomes predominant.
Format Kingmakers
The prospect of retailers picking out the format for the next generation of entertainment products and content is uncomfortably reminiscent of the Beta versus VHS format wars of twenty years ago. There is a distinct possibility that they will eventually be compelled to make the call.
"Ultimately, retailers will withdraw support from one standard or another if the consumers do not decide," Goodman predicts. "They will become the kingmakers in that scenario."
That may not happen right away or at all. Meanwhile, if no conclusive winner to the format wars emerges, it may be that brick-and-mortar stores will also put in place a service similar to Amazon's --- although that is less likely, Goodman thinks.
"Yes, a store could have a kiosk where the consumer burns a DVD according to the standard he or she wants," he said. "But that would mean a drastic shift in buyer behavior, and I don't think that would happen overnight."
More to the point, it will not resolve the pressing matter of whether a retailer should stock Blu-ray or HD DVD players.
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