It is sometimes exciting to think of myself like the heroic Edward R. Murrow reporting from the heart of war torn London. Unlike that war, some sixty-five years ago, the battle over the consumer electronics "format war" will see no blood-shed, or lives torn apart by bombing raids. But to Sony and Toshiba-it’s war none the less as the two rival empires continue firing salvo’s one against the other in the very real battle to gain format dominance in living rooms from Tokyo to Manhattan, and all points between.

Steve Sechrist
Senior Analyst and Editor
Projection Monthly

Yet like the public in pre-war US, most Americans are still unaware of this conflict raging between the two competing HD formats. According to a recent Parks Associates report: Next Generation DVD Players: Will History Repeat?, less than 10% of US consumers said they were familiar with Blu-ray (BR-D) or HD-DVD (HD-V) formats. Aware or not, the space is set to grow to 32M players (of both vintage) in the next four years, up 85% from the 2007 forecast of just under 5M units. The real question is: which format will dominate?

Much of that answer will come from the amount of "mindshare" (the awareness and perceptions consumers have about a given product or issue) that each side can claim. Take the latest salvo fired off by the HD-V group yesterday. Headline: "Paramount and Dreamworks Animation Declare Exclusive Support for HD-DVD." According to a report in today’s New York Times, Paramount and Dreamworks together will receive about $150M in financial incentives (cash and promotional guarantees) for their commitment, according to two unnamed Viacom executives. "This sounds like an act of desperation," said Andy Parsons, a member of the Blue-ray Disc Association, according to the Times.

There are caveats too. For instance, it’s Dreamworks SKG but the titles do not include those made by Steven Spielberg (the "S" in SKG). And, the exclusive deals runs only for 18months.

This announcement came on the heels of Disney (an ardent BR-D supporter) stating its plans to release the family jewels, the timeless "Platinum" films, starting with Sleeping Beauty, exclusively on the Blu-ray format in Fall-08. "The Platinum titles are the crown jewels of the Disney Studios and we do not take releasing them lightly on any format." said Bob Chapek, President of Walt Disney Studios Home Entertainment. Indeed, the release of Disney’s platinum series represents a bit of a technology milestone that, in essence, validates a new technology category. In the past the Disney classics served as a catalyst that gave a dramatic boost to consumer sales. At least this was the case for the VHS format (Pinocchio-1988) and the original DVD format (Snow White-2001). By June 2003, the DVD video format outsold VHS tapes for the first time.

But that’s not all from the Blu-ray side. Last week the Home Media Research division of Home Media Magazine said in the first half of 2007, BR-D’s outsold HD-V discs by a factor of 2X in the US. For those keeping score, it was 1.6M BR-D to 795K HD-V discs. The group cited the action film "300" as an example of Blu-ray dominance. This film ships in both formats and sold 190K units in Blu-ray to 97K discs in HD-V format (as of July 31).

Other advantages at retail seem to be going to BR-D as well. First rental giant Blockbuster Inc. recently announced it would stock only Blu-ray titles when it expands its high-def DVD offerings this year, and Target Inc., the number two US retailer, said it will only sell Blu-ray DVD players in its stores during the make-or-break Q4 holiday season.

This, along with the 2X advantage in retail sales, stronger studio support (Sony, 20th Century Fox, and Walt Disney) and Playstation III player sales, was perhaps enough to push Parks analyst Chris Roden, into the BR-D camp stating: "We are starting to see the pendulum swing slowly in one direction, …the Blu-ray format [is] in the lead."

But don’t count out Toshiba, Microsoft, (XBox 360) and others committed to HD-V format. NPD recently reported that in stand-alone players HD-V has some 61% market share to the BR-D 36%. But when the Sony Playstation III units (with on-board BR-D players) are added to the mix, the research company said the number tips to the BR-D side. XBox offers a stand-alone HD-V peripheral, but to date they have only sold 160K units vs. the 1.5M PS3 consoles, NPD said. There is no word yet on just how many gamers are actually watching HD films on their consoles.

Some analysts are betting on the low cost and simpler technology from Toshiba, now in its (recently announced) third generation of players, which sell as low as $299, along with the high-end unit with 1080p/24fps support. And as Microsoft will tell you, low cost goes a long way to winning market share. It was much lower cost PC’s that gave that platform the edge over the higher priced Apple personal computers, and built the Gates fortune.

We believe it’s still too close to call. Perhaps this holiday with low cost players and plenty of HD flat panel screens crying for full-HD content, we will have a clear winner. For now we will continue to report the blow-by-blow account of the raging format war standing in the shadow of greatness, and reminded of a war once reported from the underground bunkers in London, at great risk, we honor a heroic voice with a sincere "good night and good luck".

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