DVD-War Opponents Face Off at Tokyo Fair

The war over the next-generation DVD standard is playing out full force at a sprawling electronics exhibition opening near Tokyo Tuesday with Japanese electronics companies on both sides expressing confidence for victory.

The CEATEC 2005 exhibition (search) in Chiba, Japan, is opening as the battle escalated a notch after Paramount Pictures, which had previously supported the HD DVD (search) backed by Toshiba Corp., became the first major movie studio to support both rival formats.

And Matsushita Electric Industrial Co. (MC), which backs Blu-ray Disc (search), the other technology, was openly gloating.

"The format war is coming to a close," said Matsushita Executive Officer Kazuhiro Tsuga, adding that he was hopeful other Hollywood studios will follow suit. "That's our current scenario."

Until Paramount's decision, the six major studios had been evenly split between HD DVD and Blu-ray, also backed by Sony Corp (SNE).

[HD DVD is also backed by NEC (NIPNY) and Sanyo (SANYY), while Philips (PHG), which developed the compact-disc format with Sony, is in the Blu-ray camp.]

Both formats deliver dazzling imagery in high-definition video and can store more data than DVDs today, allowing for interactive features such as playing an interview with director discussing a movie scene while you watch the footage.

At CEATEC, Matsushita, which makes Panasonic brand products, is demonstrating how it has been able to lower production costs for Blu-ray, a key past weakness of the format. HD DVDs are cheaper to produce because they are more similar to current DVDs.

Although hopes have been high for a compromise to agree on a single format, officials from both sides have made comments recently that hint at a stalemate.

As long as the formats remain incompatible, consumers may end up the losers. One format may eventually win in the market in the same way that Matsushita's VHS defeated Sony's Betamax (search) in home video in the 1980s.

Analysts say it's way too early to say which side has the advantage in the format wars.

"There is no decisive lead for either side," said Koya Tabata, consumer electronics analyst at Credit Suisse First Boston (CSR) in Tokyo.

Not everyone is going to rush out to buy next-generation DVD products, and the situation is changing everyday, although Paramount's decision seems to be putting Blu-ray slightly ahead, at least for the moment, Tabata said.

Complicating the issue is that the consortium backing HD DVD includes chip maker Intel Corp. (INTC) and software giant Microsoft Corp. (MSFT), but PC makers such as Apple Computer Inc. (AAPL), Hewlett-Packard Co. (HPQ) and Dell Inc. (DELL) are backing Blu-ray.

Those who support HD DVD say their format has a timing advantage. HD DVD players are set to arrive at stores later this year in Japan and early next year in the United States.

Sony's Blu-ray recorder models are already on sale in Japan, and the Sony PlayStation 3 (search) video-game console, which supports Blu-ray, is set to go on sale in spring next year. But when Blu-ray players and other models will be available isn't clear so far.

"What will determine the success of the product is consumers. And when consumes have that much lead opportunity to enjoy HD DVD, I think that will be the real decision-maker," Mark Knox, a Toshiba official overseeing HD DVD promotion, told APTV.

Knox played down Paramount's decision, noting that none of the film studios have said their backing is exclusive, leaving room for them to jump ship if that begins to look like a better choice.

The Walt Disney Co. (DIS), Sony's Columbia Pictures and Twentieth Century Fox, which support Blu-ray, have not said whether they will also release films in HD DVD. Universal Pictures and Warner Bros. remain in the HD DVD camp.

"They decided to go both ways," Knox said of Paramount. "While it wasn't the happiest news I've ever heard, it's not really going to make change on how HD DVD goes to market."