DVD formats Blu-ray, HD square off

It's becoming a holiday tradition: The two competing high-definition DVD formats are gearing up for the Christmas season, each hoping to consign the other to the dust bin of consumer electronics and declare victory.

And just as last holiday season, Santa isn't going to declare a winner yet. In fact, a vexing contradiction has settled into the marketplace that is likely to prolong the fight between the Toshiba-backed HD DVD and the Sony-backed Blu-ray formats.

One contender, HD DVD, has taken the lead on the hardware side, with about 58 percent of sales, according to Adams Media Research.

HD DVD is moving ahead in that department because players in that format are cheaper.

At least two HD DVD players are available for less than $300, and by the holidays there should be an offering at around $199, many movie-studio executives believe.

By contrast, Blu-ray players start at $449.

Yet Blu-ray has taken a big lead in sales of movie titles. Blu-ray discs are outselling HD DVDs by about 2-to-1 this year. That's in part because so many people who bought Sony's PlayStation 3 game console, which also plays Blu-ray discs, have bought some high-definition movies.

Plus, supporters of the Blu-ray technology have had an edge so far in brokering deals with movie studios for exclusive distribution of titles.

The upshot: Both formats remain viable. And even though consumers can get free movies when they purchase a player, millions of people are sitting on the sidelines, their wallets untouched.

Lack of caring

Couper Samuelson, a producer in Los Angeles, recently bought a top-of-the-line Samsung high-definition television set. But he skipped buying a DVD player of either format to go with it.

"If there was a clear winning horse, I would have bet on that horse," says Samuelson, who mostly watches high-definition movies and shows that his digital video recorder snags from his cable service.

Compare the situation to regular DVDs, which were launched more than 10 years ago, in March 1997. That calendar year, consumers bought 350,000 DVD players, according to the Consumer Electronics Association. But while high-definition players of both formats have been available since the middle of last year, only about 300,000 have been sold, according to Adams Media Research.

Gaming devices that play one format or the other add about 1.6 million to the tally, mostly Blu-ray, but not everyone uses gaming devices for movies.

Paul Erickson, an analyst at NPD Group's DisplaySearch, says that like many analysts, he has been forced to revise his next-generation DVD sales projections downward this year, though he declines to give a precise estimate. He blames the format war less than the industry's failure to deliver a compelling product at compelling prices.

"You have to get people to care about this category to begin with," he says.

The growing popularity of big-screen, high-definition TV sets, which can play either format, depending on the player you buy to go with it, suggests that consumers are eager to watch cutting-edge, super-crisp movies. And hardware prices for both HD DVD and Blu-ray players are dropping.

But the battle over availability of titles is further muddying the picture.

Pickin' and choosin'

Until just a few weeks ago, it was looking like Blu-ray could take a decisive lead. The Sony-led coalition that backs Blu-ray has exclusive deals with News Corp.'s Fox, Walt Disney Co. and Sony Corp.'s Sony Pictures. Blu-ray alone would be able to offer high-definition versions of two big expected holiday DVD releases, Disney's "Pirates of the Caribbean: At World's End" and Sony's "Spider-Man 3."

The Toshiba-led consortium that backs HD DVD had only one of the major studios, General Electric Co.'s Universal, signed on exclusively. Warner Bros. and Viacom Inc.'s Paramount were publishing on both formats.

But last month, after offering huge financial incentives such as marketing support and cash payments, the HD DVD camp got Paramount and DreamWorks Animation SKG to agree to publish high-definition versions of their titles on HD DVD only. That added two big holiday flicks, Paramount's "Transformers" and DreamWorks Animation's "Shrek the Third," to the list of HD DVD exclusives.

Now, just one expected top DVD blockbuster, Warner Bros.' "Harry Potter and the Order of the Phoenix," will appear in both formats. (All of these movies, of course, are available in the traditional, non-high-definition DVD format.)

The latest deals were key for HD DVD, says Tom Adams, president of Adams Media Research. "Generally, Paramount and DreamWorks (Animation) are moving toward bigger market share than they've had in the past," he says. "Their move has more long-term significance" than it would have even a couple of years ago.

Trying to pick the winning format by looking ahead to next year's hot releases is tricky, too. Releasing new titles in hit movie series is always a sales driver, but neither camp has the clear lead here. The Disney "Pirates" franchise is on pause, at least for now. New "Spider-Man" and "Shrek" movies won't be ready yet.

The studios that have signed on exclusively to one format or the other are putting some of their own marketing heft into the battle. Anyone buying a player can expect free DVDs with their purchase; most Toshiba players, for example, come with two free HD DVDs in the box and coupons for five more. Sony players come with coupons for five free Blu-ray movies. Expect such promotions to ramp up as the holiday season gets into high gear.