Jason Unger

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Man, do I love stupid headlines.

Toshiba losing money in HD DVD business - Associated Press

I can remember when I was up late enough to actually watch Jay Leno … "Headlines" was my favorite segment.

Look for more stupid tech headlines soon.

Image by John Brillon

Freakonomics, one of my favorite blogs (and a great book, too), has gathered up a group of "smart people" — as they say — to discuss what the technology industry and consumers can learn from the Blu-ray/HD DVD format war.

What Are the Lessons of the Blu-Ray/HD-DVD Battle? A Freakonomics Quorum

So what are we to make of this format skirmish? We gathered up a group of smart people who think about such things — Shane Greenstein, Andrei Hagiu, Michael Santo, and Pai-Ling Yin — and asked them the following:

Is the battle between HD-DVD and Blu-ray really over? What can we learn from it?

Honestly, there's nothing really ground-breaking in this analysis. Warner's decision was the tipping point, Toshiba and Sony should have come to an agreement back in 2005, and digital downloads are still on the horizon.

Greenstein is the only one who really takes the Freakonomics view of the format war.

Indeed, it looks as if patient buyers benefited from waiting out this format war, and will soon experience lower prices, larger libraries, more convenience, and reduced uncertainty. Yet, as in prior wars, waiting has its risk. Patient buyers ceded control over the format choice to impatient buyers and sellers. Did earlier market participants make a choice that serves the interests of later market participants? It is difficult to say at this point.

I waited. It may have cost me some tech-cred (I'm looking at you, Ben), but in the end, I'm not stuck with an HD DVD player that I'd only use to play DVDs on.

Blu-ray vs. Digital Downloads

So much has been made about the future of high-definition media. Will Blu-ray even get a chance to become the standard? Or will digital downloads prevail?

The answer is not as black and white as it seems. Both standards will prosper, and here's why:

1. The pipes aren't ready yet. Until everyone has FiOS or beyond, downloading high-def movies is still a pain. (Even though cable is already in our homes, but that's another story.)

2. The space isn't there. The 50GB you can fit onto a Blu-ray disc will take up a chunk of space on your hard drive, even if you have a TB of storage.

3. Quality doesn't always matter. We've learned that from the digital music revolution — quality doesn't matter for a large segment of the population. A 720p download from the Xbox Live Marketplace does make some people happy, even if a true HD fan wouldn't do it.

4. Convenience is important. Again, learned from digital music — if it's easier to start watching something on VUDU then it is to drive to Best Buy and pick up a Blu-ray disc, people will do it.

The trendy argument is to match Blu-ray discs vs. digital downloads like Blu-ray vs. HD DVD. But it's apples and oranges.

You can get the same content either way — you're not locked in to one studio's movies. (Assume for the moment that, at some point, all studios will be publishing their content digitally. Which will happen.)

The format war is over. There's not another one coming.

Toshiba Officially Drops HD DVD, to End Shipments in March

Gaming Pushing Blu-ray/HD DVD Market, Research Finds

Gaming hardware is driving the adoption of both Blu-ray and HD DVD, according to new research from DisplaySearch.

According to “Quarterly Global Next Generation DVD and Game Platform Hardware Shipment and Forecast Report,” high-definition DVD gaming hardware—Sony’s PlayStation 3 and Xbox 360’s external HD DVD drive—had revenue growth of more than three times that of standalone players from the second to third quarters of 2007.

This isn't shocking. Why would someone on the fence about the format war invest their hard-earned money in a player that could eventually be useless?

(The exception here is when the price of the units competes with current DVD players, as HD DVD's $98 Wal-Mart special did back in November.)

The only reason I'm considering a PS3 is that it would provide two entertainment options — Blu-ray and gaming. While it's looking more and more likely that Blu-ray will win the format war, at some point digital downloads will be the norm.

One of the big problems with Blu-ray research and the PS3 is that everyone uses it at their convenience. The HD DVD side doesn't include it when discussing "standalone" players — I would consider it one — and the Blu-ray side uses it when totaling their market share.

For all intents and purposes, the PS3 should be included in all Blu-ray statistics. Obviously, it's questionable just how many PS3 owners use it as a Blu-ray player — some studies say a lot, some not a lot.

But it has a Blu-ray drive in it, so it's a Blu-ray player. That doesn't mean that Toshiba should be trying to compete against it — it shouldn't — but you can't ignore its presence.

There's no question that this CES hasn't gone as planned for Toshiba.

Last Thursday night (the day before the official news broke) Friday, the company found out that Warner Bros. would only be releasing titles on the Blu-ray disc format, the main competitor to Toshiba's HD DVD disc.

As Warner goes, so goes the war.

New Line followed Warner out, as did HBO.

Now reports are coming in that Universal and Paramount are contemplating switching, but can't confirm any rumors.

HD DVD has essentially been declared dead.

I spent some time this afternoon talking to Toshiba reps, and the mood is gloomy. They're obviously trying to spin it positively, putting out the message that their retail partners will continue to sell their HD DVD players.

But beyond that, they aren't saying much. In my sit down with a company exec, nearly all of my questions — which were not that hard hitting — got the talking points treatment.

Q: "When did you find out about Warner's decision?"
A: "Roughly the same time you did."

Considering that I didn't find out until Saturday night, I'm hoping that he misspoke. (A Toshiba PR rep let it slip that they found out Thursday night.)

They acknowledge that Warner's decision is a "setback," but they wouldn't answer my question about any fears of other studios leaving.

Q: "So you're not afraid of other studios leaving?"
A: "I didn't say that."

They're also pushing the idea that the final decision is up to consumers, but won't talk about them choosing Blu-ray.

Q: "What happens if consumers choose Blu-ray this year?"
A: "I won't speculate on 2008."

I feel for the HD DVD camp, but in the end, one format is the best for consumers.

I've asked both sides where they thought it went wrong; at some point, the two sides could have agreed on a unified format. The Blu-ray camp has said it was a capacity issue. The HD DVD/Toshiba side didn't say, but says that capacity was "a big thing in the beginning."

We'll all look at this CES as a turning point in the format war. For HD DVD, it's starting to look like a slippery slope down the hill.

Update: Toshiba has clarified that they found out about the Warner decision when the press release hit on Friday, not Thursday night.