Analyst: HD DVD Could Lead Disc Format War In Short Term

According to a new study, next-gen disc format HD DVD's earlier entry to the market, along with a lower cost, will help give it the initial edge over Blu-ray, according to a new survey on the battle, which will significantly affect the video game market, due to the PS3's use of Blu-ray. Blu-ray will account for only about 30% of the global high-definition DVD player market by the end of 2006, according to ABI Research's Consumer Electronics Research Service. However, over time, certain factors may shift the balance, with the most prominent such factor being the rapid rise in installed base of the PlayStation 3, which is expected to launch globally this November to high customer demand. Widespread adoption of this platform, coupled with Sony's strong relationships with movie studios, could dramatically change the face of the format war in the long term. (Microsoft has previously announced an HD-DVD add-on for the Xbox 360, but has not yet set a release date for the relatively cumbersome extra optical drive.) Despite Blu-ray's installation in all PlayStation 3 consoles, studios are not inclined to throw all of their weight behind Sony just yet, according to ABI Research's Director of Broadband and Multimedia Research Vamsi Sistla. "The studios' support is not carved in stone, but is based on the perceived size of the market for a particular technology," said Sistla. "If studios see that HD DVD has a higher market share, or continues to increase its penetration, they could support it instead of--or as well as--Blu-ray. They don't really care what technology is used as long as it meets their copyright protection needs and enjoys support from the vendor community." An early example of divided support comes from online movie retailer Netflix, which has opted to support both formats. However, support for two simultaneous formats will not be cheap, and ABI suggests that such costs will initially have to be shared between content owners and consumers. The firm also is of the opinion that by not settling on a single standard, the prices of both players and discs are likely to remain at relatively high levels for a longer period of time than they would otherwise. Retailers, however, are set to win regardless of which format ends up coming out on top in the format war, as they will simply "carry whatever sells," says the report, suggesting that retail outlets may not be inclined to keep large volumes of stock on hand of either format, at least initially, until there begins to be indication of which way their customers will lean.