HD DVD vs. Blu-ray: what it takes to win a format war

December 20, 2006, 12:06 PM UTC
Fortune

Toshibahda1

The battle between HD DVD and Blu-ray is far from over, but it’s becoming clear that HD DVD will win round one – this season the tepidly reviewed and impossible to find PlayStation 3 (SNE) is the only Blu-ray player that comes close to being reasonably priced (at $500), while discounted HD DVD players can be found during this holiday season for about $415 – and the Xbox 360 (MSFT) add-on is $199.

What’s not yet clear is whether HD DVD backers will be able to ride their early momentum through 2007, when the high-definition movement is sure to gain steam. I’ve been pre-briefed on some announcements due at next month’s Consumer Electronics Show in Las Vegas, and I’m comfortable saying 2007 should bring a raft of LCD TVs at 1080p resolution, 42 inches and up, at prices starting under $2,000.

Once consumers start buying up those true HD TVs in the second half of the year, they’ll be hungry for new media players that take advantage of the higher resolution. If the past is any guide, consumers will make their decisions on a combination of factors including:

Price. Whichever camp has a desirable player available at $300 will have a leg up.

Backward compatibility. If the HD DVD camp truly takes advantage of their ability to put out combo discs, this could be a decisive factor. Also, if the HD DVD camp can bring forward a backward-compatible player that upscales old DVDs to make them appear noticeably sharper, that would be a big benefit.

Computing. This could actually play strongly in HD DVD’s favor. If a PC maker can figure out how to offer a burner that will burn information onto blank HD DVDs and play that information on regular DVD players, that could seal the deal. There is an incredibly large installed base of DVD players out there, and will be for years; if the HD DVD camp can use that to its advantage, it could be game over.

Killer app. The Matrix was the movie that popularized DVDs eight years ago – the scifi/action/thriller was the perfect flick to showcase the new format’s capabilities. The intense action sequences were just the sort of content viewers would want to skip to and watch repeatedly; the underlying themes lended themselves to director’s commentary. If it can figure out how to reprise the Matrix effect, Blu-ray could find an edge – its interactive menus are a cut above HD DVD.