Blu-Ray of Hope

The question hanging over the DVD industry is simple: Has Toshiba's HD-DVD become the new Betamax?

The facts are indisputable on the high definition DVD front. Not only have more of Sony's Blu-Ray discs been bought in total, but Blu-Ray is consistently outselling HD-DVD on a weekly basis. Add to that a credible rumor that there will be bare-bones Blu-Ray players in the $300 range available before the end of 2007 and the writing, as they say, is on the wall. A year from now, the format war may be a fading memory.

Not that Toshiba will go down quietly. They have already fired the first salvo in their offensive: buy an HD-DVD player and get five free movies (a $150 value). As Blu-Ray's star continues to ascend, desperation will prod Toshiba to become more aggressive or face a quick Waterloo. Their exact strategy has not been made public, but I have heard about three possibilities. The first would be to reduce the price of the player to about $200 and increase the number of free discs to ten (a $300 value). The second would be to sell the player at $99 - a significant loss - and package two bonus discs with it (one would be a high-def demo disc and the other would be a recent blockbuster). The third, and in some ways the most intriguing, would be to offer a free HD-DVD player to anyone who purchases five discs. (The concept is cool. Go to the store and buy five discs and have someone hand you a free player. This is especially valuable if you were going to buy those five titles in standard DVD in the first place. Why not go high-def if the cost is about the same?)

The key for HD-DVD to survive is to get players in homes, even if they are given away. As razor blade manufacturers will confirm, the money doesn't come from the razors, it comes from the blades. Losses on DVD players are acceptable if the profits from the software compensate. These kinds of tactics could result in a war of attrition that will prolong the dual-format situation but could drive prices so low that buying multiple players will not be financially crippling to the consumer. (But the confusion would remain.)

However, a victory in the format war would not necessarily mean triumph for Blu-Ray. Arguably, a bigger hurdle lies in its path: the lure of downloading. Currently, this approach to purchasing movies remains in its infancy, but it has proven to be remarkably popular. At this time, only a very limited selection of titles is available and none are in high-def. This is expected to change and nearly every expert agrees that downloading will become the primary means of obtaining movies eventually. But how long is "eventually"?

Therein lies the key to Blu-Ray's success, and it's impossible to determine at the moment. It's true that consumers like to have something they can hold in their hands, but how long will it take before the convenience and possibly the cost effectiveness of downloading trumps the comfort of fondling a disc? (Plus, those who have large numbers of discs know how cumbersome they can be to store. I have spent hundreds of dollars on racks and shelves.) No one knows and that's what makes the future of a high def format winner a crapshoot. If the answer is a year or two, then a Blu-Ray victory would be pointless. Ten years would provide Blu-Ray or HD-DVD with a sufficiently lengthy lifespan to justify its existence. The reality, as is often the case, will probably be somewhere in between.

My advice for now is to remain in the dugout. Unless you're desperate for high def movies and have a screen that can show them to their full effect, there's no reason to commit. Yes, we might be getting into later innings, but that means the teams are into their bullpens and we all know how inconsistent relief pitching can be.

---