HD DVD vs. Blu-ray: Will the War End With Two Losers?

The holiday selling season has come and gone, and the Blu-ray vs. HD DVD war is still on.

The HD DVD camp came out strong with a hard jab when Toshiba's HD-A2 DVD players sold for a rock-bottom price of US$98.97 at Wal-Mart (NYSE: WMT) and other outlets like Best Buy (NYSE: BBY) in late October, but since then prices have remained well over $200 for both HD DVD and Blu-ray players -- and many models still cost much more.

What are consumers waiting for? Is price alone keeping them from even approaching the category, or are potential buyers waiting for HD DVD or Blu-ray to become an obvious standard?

"I think those that are aware are waiting for a single standard to emerge," Mike McGuire, a vice president of media research for Gartner (NYSE: IT), told TechNewsWorld.

"Certainly, the cost associated with any new device is a challenge, especially when the benefits might not be totally obvious to most consumers. And the dual-format players are just too expensive," he added.

Hollywood Allies

The major movie studios in Hollywood aren't exactly helping the format war. Most studios have aligned themselves with one camp or the other, which means that a successful animated movie like "Ratatouille" -- which would typically be played and replayed by children in a family -- is limited to a Blu-ray audience. So even a high definition movie that would likely see a lot of living room big-screen TV use is unavailable to a parent who bought an HD DVD player.

Warner Bros. releases movies for both Blu-ray and HD DVD, but it's the only major studio doing both. DreamWorks, Paramount and Universal are entrenched in HD DVD, while Columbia, Disney, Fox, Lionsgate, Miramax, New Line and Sony are burned into Blu-ray.

"I think the consumers are sitting back and waiting for something less risky that won't make the consumers look stupid in front of friends and family," Rob Enderle, principal analyst for the Enderle Group, told TechNewsWorld. Plus, existing up-converting DVD players that boost standard DVDs into near-HD quality are good enough for most consumers, Enderle noted, especially when those consumers already have large libraries of standard DVDs.

Generating Excitement

Does the average consumer understand or care how cool HD DVD and Blu-ray is? Other than eye-popping graphics, which come with both formats, HD DVD's angle is connection to online content associated with the movie. For most consumers, that's the biggest differentiator, because both formats come with amped-up features wrapped around the basic movie -- like multiple camera angles.

With the studios aligning themselves with one format over the other, are they doing enough to market the richer movie experience that consumers can enjoy with Blu-ray or HD DVD? Can Hollywood excite passion in consumers to leap to high-definition players?

Noise Canceling Messages

"The problem is their efforts tend to negate each other," Enderle explained. "Blu says, 'Buy Blu;' HD says, 'Buy HD.' The promotions are blocking each other, and so they aren't particularly effective, and all of the movies are available on regular DVD, which then becomes the safest choice."

If standard DVDs, especially when used with inexpensive up-converting DVD players, are good enough -- especially when played on up-converting DVD players -- what's next for HD DVD and Blu-ray? Can either format ever truly win? Even if one camp folded up its tents and went home, would consumers care? Would they rush in and buy the winner?

The question may be moot because few people in the industry seems to believe that either camp is willing to give up. Dual-mode players that can play both HD DVD and Blu-ray may give buyers the most flexibility regardless of how the format war plays out, but dual-mode players are running around $1,000, nowhere near the more consumer-friendly $100 price point.

"There is a chance these dual mode drives will get cheap enough by the end of the year to effectively make the war not matter," Enderle said. "But overall, Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Intel (Nasdaq: INTC), AMD, HP (NYSE: HPQ), Cisco and others seem to have moved their focus to downloads, and the services are consolidating, suggesting that downloads will likely be the next big play."

Two Losers?

If the market and industry is moving toward HD downloads to a growing number of consumers with broadband Internet access, the outcome for Blu-ray and HD DVD doesn't look particularly sunny.

"Just as we've seen with audio, where audiophiles tend to prefer analog LPs or tape to digital downloads, we could see Blu-ray or HD DVD discs being the province of cinephiles," McGuire said.

"The problem with that is the cost associated with maintaining a niche format. Ultimately, though, downloads and streams [will likely] win out, and I think what you find is that the majority will opt for the temporary ownership of a movie or TV show," he added.