January 5, 2008

Warner Backs Blu-ray, Tilting DVD Battle
By BROOKS BARNES

LOS ANGELES — The high-definition DVD war is all but over.

Hollywood’s squabble over which of two technologies will replace standard DVDs skewed in the direction of the Sony Corporation on Friday, with Warner Brothers casting the deciding vote in favor of the company’s Blu-ray discs over the rival format, HD DVD.

In some ways, the fight is a replay of the VHS versus Betamax battle of the 1980s. This time, however, the Sony product appears to have prevailed.

“The overwhelming industry opinion is that this decides the format battle in favor of Blu-ray,” said Richard Doherty, research director at the Envisioneering Group, a market research firm in Seaford, N.Y.

Behind the studio’s decision are industrywide fears about the sagging home entertainment market, which has bruised the movie industry in recent years as piracy, competition from video games and the Internet, and soaring costs have cut into profitability. Analysts predict that domestic DVD sales fell by nearly 3 percent in 2007, partly because of confusion in the marketplace over the various formats.

HD DVD, however, is not dead. Two major studios, Paramount Pictures and Universal Pictures, have deals in place to continue releasing their movies exclusively on HD DVD, as does DreamWorks Animation. Warner Brothers, part of Time Warner, will also continue to release its titles on both formats until the end of May.

But by supporting Blu-ray, Warner Brothers, the largest player in the $42 billion global home entertainment market, makes it next to impossible for HD DVD to recover the early momentum it achieved.

While the specifics of the Blu-ray and HD DVD skirmish might be of interest only to insiders, the consequences of deciding a winner are not. Consumers have been largely sitting on the sidelines, waiting to buy high-definition players until they see which will have the most titles available. Retailers have been complaining about having to devote space to three kinds of DVDs. And the movie business has delayed tapping a lucrative new market worth billions. High-definition discs sell for a 25 percent premium.

“Consolidating into one format is something that we felt was necessary for the health of the industry,” Barry M. Meyer, the chief executive of Warner Brothers, said in a telephone interview. “The window of opportunity for high-definition DVD could be missed if format confusion continues to linger.”

In addition to Sony, a consortium of other electronics makers back Blu-ray. For Sony, Warner’s decision is a chance to rewrite history: the company faltered in its introduction of Betamax in the consumer market in the 1980s. Many analysts say the HD DVD players now risk becoming the equivalent of Betamax machines, which died out in large part because it became harder for consumers to find Betamax movies as studios shifted allegiance to VHS.

With Warner on board, Blu-ray now has about 70 percent of the market locked up; Walt Disney, 20th Century Fox, MGM, Lionsgate and, of course, Sony are all on Blu-ray’s team. Warner Brothers has some of the bigger releases in 2008, including “Speed Racer,” the Batman sequel “The Dark Knight” and the sixth Harry Potter installment.

“This doesn’t necessarily kill the HD DVD format, but it definitely deals it a severe blow,” said Paul Erickson, an analyst at the NPD Group’s DisplaySearch. “When a consumer asks a store clerk which format to buy, that clerk is now going to have a hard time arguing for HD DVD.”

In a prepared statement, Toshiba said it was “quite surprised” and “particularly disappointed” by Warner’s decision. “We will assess the potential impact of this announcement with the other HD DVD partner companies,” the company said. Universal Pictures declined to comment.

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