Cooperation Expands in Next-Gen DVD Battle

The electronics giants who have battled for years over the next-generation DVD format appeared to be moving to avert a war this week, with Sony (NYSE: SNE) and Toshiba -- promoting different high-definition DVD formats known as Blu-ray and HD DVD, respectively -- leading an effort to come together.

Today, Panasonic and Philips (NYSE: PHG) jumped into the mix as well, adding further emphasis to the need for a clear, single standard. However, both sides -- which have lined up substantial hardware manufacturing and content provider support -- seem fixed on their own technology as the best solution, leading industry observers to continue warning that we may be in store for "Beta vs.VHS II."

Analysts said that while both sides may have good technical arguments for the differing DVD standards, the market is what will determine the specifications of future DVDs.

Consumers Will Decide

"At the end of the day, a technical argument won't win over consumers," Jupiter Research vice president Michael Gartenberg told TechNewsWorld. "They're going to wait until prices come down and see what the center of gravity has gone to."

Gartenberg noted that while it is good to see the opposing sides come together on the matter, the companies are likely holding fast to their opinions that their own solutions are the best.

"It's one of those cases where everyone wants to do the right thing," Gartenberg said. "Everyone wants to do what's right for consumers. At the same time, they're all driving their own answer. There's a recognition the market would be better served with a single solution, rather than making consumers wait and see. At some point, though, the companies understand the importance of being able to control the standard."

Market Makes or Breaks

Gartenberg said while backers of both the Blu-ray format, which is credited with more capacity, and HD DVD, which is backward-compatible, have valid technical arguments in their favor, the market will ultimately determine the accepted standard.

"It's really about who can get the best and most content with device makers who can produce devices with economies of scale to bring the price down," he said. "That's what is needed for the mass market."

Gartenberg said although one would think the companies would have learned from the Beta versus VHS war that competing standards can confuse the cramp the market, there is still a willingness to fight it out for the standard.

"Is it better to compromise and drive things forward? Absolutely," he said. "We see also all sides saying that they're willing to roll the dice on their own standard. The clock is ticking now," Gartenberg added, referring to the upcoming holiday season. "Everything says this is looking a lot like it did before (the Beta-VHS fight). Customers will start listening and paying attention. The last thing they want to hear is a story that's anything close to Beta versus VHS."

Positive Signs

Yankee Group senior analyst Mike Goodman -- who pointed out the problem with hardware support behind Blu-ray and content support behind HD DVD -- said the fact that the two sides are talking is a positive sign.

Goodman also highlighted Sony's new leadership under Chairman and CEO Howard Stringer, a content industry veteran who has a reputation for bringing parties together, telling TechNewsWorld it could be an indication that Beta v. VHS II might be avoided.

"Both sides recognize that right now, that is the path they're traveling down," the analyst said.

Goodman said the best resolution would be a blending of the two technologies and standards. He indicated the alternative of letting the market pick the winner represents a big risk to both sides, which have an equal chance of success .