Deciding the Future of DVD Domination

Movie studio allegiance won't matter. Video game consoles won't be the deciding factor. Neither will support from the porn industry. The war over the next-generation DVD format (Blu-ray vs. HD-DVD) could all come down to price and who has the most players in stores for $500 or less in time for the holiday season, or so says Business Week. Per the piece:

Typically, the early adopters who want the latest and greatest in home theater are more interested in having the best technology, even if it costs more. The problem with HD-DVD and Blu-ray is that there's no clear "best" format. The 2007 offerings in both camps let users make the most of their high-definition TV and audio systems. Both deliver a sharply detailed, color-rich picture and audio capable of making home theater sound like the real thing. Both have extra storage space for features such as multilanguage broadcasts, directors' cuts, and interactive menus (though Blu-ray has more storage capacity)..."There is not enough distinction between these two formats to justify that one should win," says Chris Crotty, senior consumer electronics analyst at iSuppli."

And even though Blu-ray, championed by Sony (SNE), has more major movie studios in its camp, that alone is unlikely to give Blu-ray the edge, says James McQuivey, a principal analyst at Forrester Research (FORR). No major movie studio will ultimately refuse to support a format compatible with players being used by a significant slice of the potential audience, McQuivey says.

The same logic extends to HD DVD, which has won the support of the multibillion-dollar adult entertainment industry. There was early speculation that backing by adult film studios would decide the format wars, as arguably was the case in the battle between VHS and Betamax in the 1980s (see BusinessWeek.com, 1/22/07, "Next-Gen DVD's Porn Struggle"). However, with plenty of porn on the Internet available for download, the adult entertainment industry doesn't carry the weight it once did. "Now adult content is so widely available, I don't see it as important," says Steve Wilson, principal consumer electronics analyst at ABI Research.

Coincidentally, Reuters also weighs in on the issue today, but they say that XXX will be the X-factor:

Thirty years ago, VHS toppled Betamax in part because of the adult film industry, and now some see blue movies playing a key role again as backers of HD-DVD and Blu-ray maneuver to make their formats the standard.

The stakes are high. As prices of high-definition televisions and DVD players fall, backers of the rival -- and incompatible -- formats are looking to tap a home and rental DVD market approaching $25 billion. Yet so far, neither next-generation format has been able to land a knock-out blow. James McQuivey, a principal analyst at technology research firm Forrester, said in the VHS-versus-Betamax war, porn provided a significant boost for the winning format.

He also noted the adult entertainment industry has often paved the way with new uses of technology -- such as streaming video on the Internet -- and said porn could help tip the scales in the current DVD format battle. "If the porn industry wanted to break the logjam of HD-DVD and Blu-ray, it could," McQuivey said. "If they said 'We are going to go with HD-DVD' you would see a few million homes immediately go out and buy HD-DVD players. They have that power."

It is a potential weapon that one side, at least, has ignored. Instead, Blu-ray backer Sony Corp.blocked manufacturers from producing porn DVDs in that format -- a move that some say has pushed adult film studios into the camp of HD-DVD camp led by Toshiba Corp.

So who is right? Who knows? Maybe someone should just ask Forrester analyst James McQuivey. Again.