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High Definition DVD Format Fight Escalates

Toshiba's HD DVD player started shipping to U.S. retailers this week, four months ahead of Sony's scheduled release of its Blu-ray format players.

North America represents by far the most important market for the new high-definition formats, accounting for more than 60 percent of all HDTVs that ABI Research expects will be shipped during 2006.

What does this mean for the prospects of the rival formats? Will HD DVD's earlier entry to the market and substantially lower price tag give it the edge over Blu-ray? The answer is "yes" in the short term, but as time passes, complicating factors may shift the balance.

By the end of 2006, according to the latest update to the firm's Consumer Electronics Research Service, Blu-ray players alone will account for only about 30 percent of the global high-definition DVD player market, but there is a catch: PlayStation 3. Sony's next-generation game console will play Blu-ray discs, and when it is launched, its large expected sales figures could change the market dominance picture dramatically.

According to ABI Research's Vamsi Sistla, Director, Sony has another card up its sleeve: its strong relationships with the movie studios. "However," he cautions, "the studios' support is not carved in stone, but is based on the perceived size of the market for a particular technology. 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."

For example Netflix, the leading online movie retailer, has announced that it will support both formats. But who will bear the brunt of the extra costs needed to support two standards? Initially, it will probably be shared between content owners and consumers.

Releasing titles on two formats simultaneously means that content owners will be less able to benefit from economies of scale. A further consequence of an ongoing "battle of the brands" is that the prices of both players and discs are likely to remain at relatively high levels longer than if there were a single standard.

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