Battling Sides in DVD Format War Not Happy About Hybrid Products

The war between dueling next-generation DVD formats is far from over despite a peace offering in the form of new products that cater to both, industry officials said.

Hollywood and electronics manufacturers had hoped new high-definition DVDs, with better picture quality and more capacity, would rejuvenate the slowing $24 billion home DVD market.

But a war between Sony Corp's (SNE) Blu-ray Disc standard and Toshiba Corp.'s HD DVD has curbed adoption in a way reminiscent of the Betamax-VHS videotape format battle.

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This week at the Consumer Electronics Show, South Korea's LG Electronics Inc unveiled a player supporting both formats, and Time Warner Inc. (TWX) announced plans to unveil a disc that holds films in both formats.

While the backers of the hybrid products say they offer a solution to the format war, many industry experts said they actually extend the battle and consumer confusion.

"To me, it makes no sense," said Steven Hirsch, co-CEO of Vivid Entertainment Group, an adult entertainment firm supporting both formats. "Now there will be three discs, adding yet another cost to producers. These two sides should get together to prolong the life of DVDs, since sales are stagnating."

LG, a member of the Blu-ray camp, said its new Super Multi Blu Player, due in February for about $1,200, has not generated any ill will among its Blu-ray partners.

Yet many Blu-ray proponents like Philips Electronics NV (PHG) said they were not pleased.

"We don't believe that this will unify this industry," said Lucas Covers, chief marketing officer at Philips. "It will only create confusion, add complexity and cost."

Some analysts said Blu-ray had more to lose from the hybrid products than HD DVD, which has long been touted as having a disadvantage due to lighter studio backing than Blu-ray.

"Pure Blu-ray proponents don't like it at all because it lends more credibility to HD DVD. It definitely extends the debate," said analyst Richard Doherty of Envisioneering.

Indeed, HD DVD spokesman Mark Knox called it a positive. "It's not a bad thing. It means there are that many more pieces of HD DVD-compatible hardware out there, which means that many more potential customers for HD DVD movies."

The North American HD DVD Promotional Group this week forecast more than 2.5 million players would be sold by the end of 2007, with HD DVD movie title sales exceeding $600 million in North America for 2007.

At a Blu-ray event at the CES, Mike Dunn, president worldwide of News Corp.'s (NWS) Twentieth Century Fox Home Entertainment, said he believed Blu-ray will outsell HD DVD.

By the end of the first quarter of 2007, he projected Blu-ray sales to be three to four times higher than HD's.

"By the end of the first quarter, the format war is over," he said, noting Sony's recently released PlayStation 3 game console with a Blu-ray drive had boosted sales.

"I'm selling 70,000 discs a week. Sales are doubling every week. ... Average PS3 owners buy 6 discs," he said.

With so much riding on the success of either format, various studios also cited resistance to Warner Brothers' plans for a disc that stores movies in both HD DVD and Blu-Ray.

"It's very, very hard. I understand it's twice as hard to make a dual mode disk and twice as expensive," said Walt Disney Co.'s (DIS) Buena Vista Worldwide Home Entertainment president Bob Chapek, noting he would never make a dual mode disk.

Lionsgate Entertainment (LGF) studio director Steve Beeks also ruled out producing dual mode disks.

"If we end up with one format and diminish the confusion that consumers will experience, we get to the end game more quickly," he said. is owned and operated by News Corporation, which also owns and operates the Twentieth Century Fox film and television production studio.