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Remember the old Betamax vs VHS standards war?
Sadly, my family made the wrong choice and I have a box of Beta tapes of my old figure skating competitions languishing about somewhere.
There’s a similar war being waged right now between competing high definition DVD standards — Toshiba/Microsoft/etc’s HD-DVD and Sony’s Blu-ray. Blu-ray and HD-DVDs look and generally act like normal DVDs but they support video resolutions that are about 4x the existing DVD format. The most prominent (and cheapest, if you can find one) players are the Playstation 3 for Blu-ray and Microsoft’s HD-DVD add-on for the Xbox 360.
The impact of the DVD format wars is currently spilling directly into the gaming industry’s latest console generation as Sony designed the Playstation 3 to be a fully fledged Blu-ray DVD player as well as a gaming device. Sony’s strategy in this area was pretty sound – use the PS3 to trojan horse a large installed base of Blu-ray players, giving them a potentially large and early advantage in the high def DVD battle.
The execution of this strategy has not gone so well, however, as the Blu-ray part of the PS3 has been one of the primary reasons the device was delayed several times (the PS3 ended up launching a year after the Xbox 360) and also a reason why Sony has been unable to produce the PS3 in bulk. This has resulted in a huge supply shortage and a very small installed base for the foreseeable future. Given how dependent Sony has become on its gaming division to make up for losses in other divisions, these production problems (and the resulting botched PS3 launch) are likely to be cited as a serious misstep for the company, particularly since - for reasons I’ll go into below - it seems increasingly likely that the high definition format war is unwinnable by either the Blu-ray or the HD-DVD contingent. In essence, Sony has bet their future on a technology that is currently very shaky at best, and which has the potential to pull their gaming division down from the dominant position it currently enjoys. It remains to be seen how well they manage to fix the PS3’s current production problems in the second act of the console’s life, but if the device remains as costly to produce and as difficult to buy as it is now well into 2007, it is easy to see Sony’s PS3 related costs running blood red, turning the go-to profit division of the company into yet another money loser for the company. Paul Kedrosky has a good blog post here about how Sony is losing several hundreds of $ on every unit sold. Microsoft employed a very similar upfront loss strategy during the Xbox 1’s launch (as an attempt to gain market share in a market that most people considered pretty locked up,)losing about $4 billion over the life of the console. The problem for Sony is that they only have about $3b in cash and short term investments to lose (from their 3Q2006 quarterly report,) whereas Microsoft still has about $28b and the profitable Windows and Office divisions to keep growing that pile.
There are, two big problems that lead me to believe nobody will ever actually win the high def DVD war outright:
1) The jump from videotape to DVD was a much bigger value add than the move from DVD to high def DVD. Videotapes were large, bulky and prone to being worn out, due to the magnetic tape technology used. They had to be rewound and had no instant chapter jump features. There was no way to add multiple audio tracks, flexible subtitles or crew commentary features. With high def DVDs, the only true value add is the higher resolution, and while high def does look noticeably better than standard DVD resolution, the difference between a good upscaling DVD player playing a standard DVD and a full high def DVD are not, in my opinion, great enough for the masses to throw out their existing movie collections and start over. The jump from standard DVD to high def DVD formats is more like the move from CD to SuperCDs or DVD-Audio discs than from videotape to DVDs, and those formats never really caught on in the mass market. High definition DVDs will do well with the videophile niche and certainly won’t disappear but they also don’t really have a chance to become mass market for years and years and years when there is no difference between the price of current standard upscaling DVDs (less than $100) and HD-DVD and Blu-ray players. 2) The reason why I don’t think either side will ever technically win this “war” is that downloadable video is likely to take off long before either side can win over the mass market, obsolescing physical media formats altogether. With services like iTunes video store, Direct2Drive and Microsoft’s Xbox 360 video download service and new hardware like Apple’s iTV soon to be on the scene, coupled with really cheap cost per gigabyte harddrives, the (near) future is Tivo-like devices with terabyte+ harddrives and always-on network connections with on-demand video services that stream and download movies in HD resolution. The movie companies seem to be doing a decent job of not making *all* of the same mistakes the record companies made during the MP3 boom, so I believe this future will materialize before either high def DVD standard can declare victory.
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