Toshiba’s Feb. 19 decision to stop making “HD DVD” high-definition video disc players and recorders brings to an end the largest battle in video formats since VHS and Betamax vied for consumers’ wallets more than 20 years ago—and it means educators, students, and others can start feeling more confident about buying the victorious rival technology for playing high-definition DVDs: a Blu-ray disc player.
In the wake of Toshiba’s decision, analysts say competition is expected to heat up among the manufacturers of Blu-ray DVD players and recorders, which include Japanese makers Sony Corp., Matsushita Electric Industrial Co., and Sharp Corp., as well as Samsung Electronics Co. of South Korea.
In making the announcement, Toshiba Corp. President Atsutoshi Nishida said he wanted to avoid confusion among consumers.
The decision was relatively quick, coming just a few years after the competing technologies arrived.
In the last major video format battle, between VHS—backed by Matsushita—and Sony’s Betamax in the 1980s, it took a decade before Sony stopped making new Betamax products.
“We concluded that a swift decision would be best,” said Nishida, appearing proud and unapologetic.
Nishida said he realized Toshiba had been beaten when it failed to win Hollywood backing. Last month’s decision by Warner Bros. Entertainment to release movie discs only in the Blu-ray format was the definitive blow, he said. In making its decision, Warner Bros. joined Sony Pictures, Walt Disney Co., and News Corp.’s Twentieth Century Fox in backing Blu-ray technology.
“That had tremendous impact,” Nishida said. “If we had continued, that would have created problems for consumers, and we simply had no chance to win.”
Nishida, who stressed HD DVD was a good technology, tried to comfort the estimated 1 million customers—including some 600,000 in North America—who have already bought HD DVD machines by promising that Toshiba will continue to provide product support for the technology.
Neither Sony nor Matsushita would disclose their global sales numbers for Blu-ray machines. But the shift in Blu-ray’s favor became more decisive during the critical holiday shopping season.
Nishida voluntarily brought up the possibility of class-action lawsuits in the United States as he fielded questions from reporters, acknowledging that the idea of disgruntled HD DVD owners had occurred to him.
Class-action lawsuits are fairly rare in Japan, and owners in Japan of HD DVD machines total just 30,000. Nishida denied the company shared in any liability, as it had no say in the format of future movies.
Both HD DVD and Blu-ray deliver crisp, clear high-definition pictures and sound, which are more detailed and vivid than existing video technology. They are incompatible with each other, and neither plays on older DVD players.
Nishida said it was still uncertain what will happen with the Hollywood studios that signed on to produce HD DVD movies, including Universal Studios, Paramount Pictures, and DreamWorks Animation.
Toshiba said shipments of HD DVD machines to retailers will be reduced and will stop altogether by the end of March.
HD DVD supporters included Microsoft Corp., Intel Corp., and Japanese electronics maker NEC Corp.
Microsoft’s Xbox 360 game machine can play HD DVD movies, but the drive had to be bought separately, and Nishida said about 300,000 people have those.
Personal computers with HD DVD drives total about 300,000 worldwide, including 140,000 in North America and 130,000 in Europe, he said.
Although the format defeat is an embarrassment to Toshiba’s image, the quick exit is expected to lessen the potential damage in losses from HD DVD operations.
Goldman Sachs has said pulling out would improve Toshiba’s profitability between $370 million and $460 million a year.
Nishida said the damage to Toshiba’s bottom line, from such costs as leftover inventory, was still uncertain.
With movie studios increasingly lining up behind Blu-ray, retailers had begun to stock more Blu-ray products.
The Feb. 15 decision by Wal-Mart Stores Inc., the largest U.S. retailer, to sell only Blu-ray DVDs and hardware appeared to deal a final blow to the Toshiba format. Just five days earlier, Netflix Inc. said it would cease carrying rentals in HD DVD.
Several major American retailers already had made similar decisions, including Target Corp. and Blockbuster Inc.
Also adding to Blu-ray’s momentum was the gradual increase in sales of Sony’s PlayStation 3 home video-game console, which also works as a Blu-ray player. Sony has sold 10.5 million PS3 machines worldwide since the machine went on sale in late 2006.
Once the balance starts tilting in favor of one in a format battle, then the domination tends to grow and become final, said Kazuharu Miura, an analyst at Daiwa Institute of Research in Tokyo.
“The trend became decisive I think this year,” he said. “When Warner made its decision, it was basically over.”
Blu-ray Disc Association