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High-Def DVD Competition Impacts Demand

The last quarter of 2007 is seen by many as a crucial time in the life of both HD-DVD and Blu-ray Disc (BD) formats, according to the latest assessment by Understanding & Solutions (U&S).

It is also a crucial time for PS3, having underperformed last year in the U.S. market due to its high price, delayed availability and the unexpected success of the Wii gaming console.

Though DVD player prices are falling across the board, there is growing concern that the consumer does not fully understand the high definition (HD) concept -- and the confusion is further compounded by the choice of two different disc-based formats.

Taking everything into account, U&S says that BD has been the leader for much of the year, accounting for close to two thirds of HD discs sold in the U.S. market. In Europe, the BD format share is at a lower level, but it enjoys a stronger performance in Japan.

However, developments over the past few weeks have the potential to erode BD's current lead, and there is growing concern throughout the industry that both high definition disc formats could be lost completely in a world of competing delivery options and viewing platforms.

U&S believes that the decision by Paramount and DreamWorks to release exclusively on HD DVD was not in itself sufficient to change the balance significantly, though it was a major PR coup for the HD DVD group and did erode BD's industry strength.

At the same time they expressed the opinion that the major impact of this decision would be to prolong the format battle -- something that is not good news for the industry overall.

In conclusion, according to U&S, industry support for BD across content and hardware remains the strongest grouping and it is therefore the format with the greatest chance of market success, although its strength is being eroded.

Whatever happens, U&S believes that continued competition between the two groups will lead to ongoing confusion and uncertainty, and therefore delayed consumer purchase decisions. This in turn will lead to further price erosion of hardware -- and to a lesser extent, software.

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