DVD Format Wars: Toshiba Surrenders

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NBC Universal's (GE) Universal Pictures. On the Blu-ray side, Sony had its own Sony Pictures Entertainment along with Walt Disney (DIS), News Corp.'s (NWS.A) 20th Century Fox and Lions Gate Entertainment (LGF).

When Time Warner, with its huge movie library, switched to Blu-ray (BusinessWeek.com, 1/8/08) on the eve of the Consumer Electronics Show in Las Vegas in early January, it started a chain reaction among retailers that had been stocking machines and movies in both formats. The Warner Bros. announcement "came practically out of the blue," said Nishida, whose management team was about to discuss raising production volumes for HD DVD products.

Retailer Best Buy (BBY) soon said it would sell Blu-ray products exclusively, and online video rental company Netflix (NFLX) followed suit. After Wal-Mart (WMT) became the latest convert, on Feb. 15, the emptying of the HD DVD camp seemed complete. (Retailer Target (TGT) and video rental heavyweight Blockbuster (BBI) had already sided with Blu-ray.) Without Warner Bros., HD DVD "had no chance of winning," Nishida said. It didn't help that the Blu-ray camp's sales volumes were far higher thanks largely to Sony's Blu-ray compatible PlayStation 3, which launched in November, 2005, and is expected to have sold around 15 million units by this March.

Funeral for a Format

For consumers, the result is a mixed bag—a relief to some and an annoyance to others. Despite aggressive marketing for both formats, most consumers had avoided picking sides until a clear winner emerged. Still, there were about 1 million people worldwide who did buy a standalone HD DVD video player or recorder. Some 300,000 bought PCs with a built-in HD DVD drive and about 300,000 others a separate drive for Microsoft's Xbox 360 video game consoles. Those gizmos play ordinary DVDs as well as a movies from a library of about 1,000 titles, but they can't play Blu-ray DVDs. Nishida pledged to continue tech support for HD DVD products.

HD DVD's fate draws frequent comparisons to the battle over videotape standards in the 1980s, when Sony's Betamax videotape machines lost to VHS. But the industry is littered with past products that seemed like a good idea at the time but ultimately bombed or got canned by executive fiat. Among the products that have come and gone: Apple's (APPL) Newton PDA, Sony's Aibo robot dog, Tiger Telematics' Gizmondo portable gaming console, Circuit City's (CC) disposable DIVX movie-rental discs with built-in expiration, and Internet-connected smart refrigerators that would alert you when you were low on milk or ketchup. Add HD DVD to this overcrowded tech graveyard.

Hall is BusinessWeek's technology correspondent in Tokyo .