Beta/VHS-like battle shaping up for new high-def DVDs

LAS VEGAS -- It was supposed to be the grand unveiling of a new generation in home entertainment when Kevin Collins of Microsoft Corp. popped an HD DVD disc into a Toshiba production model and hit "play."

Nothing happened.

Despite a few minutes of embarrassed fiddling, the disc never played and the press conference, held Wednesday night during this year's Consumer Electronics Show, continued.

Grand technological pronouncements sometimes fizzle once consumers have their say.

Backers of two rival formats for high definition DVDs are nevertheless betting that the millions of people shelling out thousands of dollars for new high-def TVs and home theater sound systems will spend a few hundred more for new DVD players and discs that offer sharp pictures and interactive features.

Analysts say the early adopters, those who rush out and buy whatever new technology becomes available, will jump right in and pay $1,800 for a Blu-ray player from Pioneer or $499 for the Toshiba HD DVD player.

But a prolonged war between the two incompatible formats may mean consumers have a long wait for a clear winner to emerge, potentially delaying widespread adoption of high-def DVDs for years.

"There's no question that a format war is not a good idea," Howard Stringer, chairman and chief executive officer of Sony Corp., said this week. Sony is a developer and backer of the Blu-ray format.

The Blu-ray team is confident of getting content from most of the top Hollywood studios. It also believes that the new PlayStation 3, which will come equipped with a Blu-ray drive when it debuts later this year, will tip the odds in their favor.

"With the installed base of PlayStation, we do think we have an enormous advantage," Stringer said.

Blu-ray discs will have the larger capacity, at 25 gigabytes or more. The HD DVD will be more similar to regular DVDs, which simplifies production, according to its backers.

The HD DVD crowd has backing from computer giants Intel and Microsoft and will have the slight advantage of coming to market first. Players from Toshiba can already be pre-ordered from Amazon.com and will hit store shelves in March. Blu-ray players will be available one or two months later.

"HD DVD is really 'Now playing"' said Yoshiihide Fujii, president and CEO of Toshiba's Digital Media Network company.

A bigger risk for companies backing the rival DVD systems is that consumers opt to get their video from places like Yahoo and Google, or one of the several companies offering downloadable movies over the Internet.

Computer hard drives, particularly on multimedia PCs geared toward the living room, are getting bigger every day and younger people especially are accustomed and more than happy to store their video there.

Companies such as Starz Entertainment Group, which recently launched its Vongo service, are also allowing consumers to transfer movies and TV shows to portable devices. DirecTV and Dish Network, two satellite TV services, offer portable viewers that can store hours of programs.

"The longer the format war goes on, the more opportunity smart players in the cable and IPTV and online spaces have to build market share," said Laura Behrens, an analyst at Gartner Industry Advisory Services. (IPTV is an up-and-coming technology that many telecommunications companies are employing as they charge into the television service business).

Studio executives argue that people want to own their content and that DVDs offer the same portability options as downloadable programs or video on demand services.

"Portability is a killer application with music and to a degree with movies, but the majority of movie and TV viewing is not on a small two-inch screen," said Mike Dunn, president of Twentieth Century Fox Home Entertainment. Fox is releasing its movies this year in the Blu-ray format.

While studios clearly wanted to avoid a format war and struggled last year to reach a compromise between the two camps, they say that the formats can exist side by side.

"There will be 25 million homes that have high definition TVs by the end of next year. Those people are going to be looking for content," said Stephen Nickerson, senior vice president at Warner Home Video.

Warner Bros., an early backer of HD DVD, has said it will release movies in both formats.

Nickerson said that while many compare the DVD format wars to the battle between the Betamax and VHS video tape formats, another analogy might be more useful.

"The (video) games industry since the early 90s has had two or three incompatible formats and it hasn't slowed the adoption of game platforms," he said.