Sony's Blu-ray wins race for high definition

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Sony is set to declare victory in the bitter war for the next generation of DVDs, as talk intensifies that Toshiba is preparing to pull the plug on its rival format.

The technology giants' five-year battle is heading for the final straight after retailers and film studios turned their back on Toshiba's high definition digital versatile disk, or HD DVD, format in favour of Sony's Blu-ray Disc.

Toshiba admitted it was "reviewing the situation" relating to HD DVD, but was adamant it had made no firm decisions after reports at the weekend cited company sources saying it is to give up on HD DVD. This comes after last week's news that Wal-Mart, the world's largest retailer, would exclusively sell Blu-ray DVDs in its high definition range.

Toshiba's statement has been interpreted as an intention to withdraw, with one expert saying: "There is a likely chance that Toshiba will pull HD TV completely in the next couple of weeks." The talk was welcomed by the market, as the stock rose 5.7 per cent to 829 yen (£3.93). A spokesman for Toshiba in the UK declined to comment.

Paul O'Donovan, the principal analyst at research company Gartner, said: "At the beginning of 2007, it looked like Toshiba would go on to become the industry standard. It was much cheaper than its rival, and Sony's Playstation 3, which plays Blu-ray, was not selling particularly well." One year on and it looks set to drop out of the market completely.

The format wars, which have been compared with the battle between JVC's VHS and Sony's Betamax in the 1980s, had its origins in the early 2000s. Companies were racing to develop the next generation DVD format in line with high definition television but wanted an industry standard. In 2003, the DVD Forum, the industry body, ratified HD DVD, developed by Toshiba and NEC. This came despite opposition from the members of the Blu-ray Association founded by Sony the previous year. At that stage neither side had brought a player to market. The two technologies both use blue lasers rather than the red lasers used on traditional DVDs, which are more focused and precise, but are incompatible with each other.

Attempted negotiations to avoid a war collapsed in 2005. HD DVD released its first player in early 2006, beating Blu-ray by several months. Mr O'Donovan said: "In terms of picture quality, the two formats are more or less the same, while HD DVD has more sophisticated special features. The reason that the Blu-ray has overcome is, quite simply, it has more movies. Content is king, and ultimately that is more valuable."

The big corporations started making their mind up last year, an initial indicator that Sony could triumph. In June, Blockbuster announced it would exclusively rent Blu-ray in its high definition range, saying consumers had predominantly chosen Sony's format when both were available.

This came as studios began to release smash films exclusively in Blu-ray including Casino Royale, Spider-Man 3, and Ratatouille. Mr O'Donovan said: "Towards the end of last year the exclusive releases started emerging, sales of the Playstation 3 picked up and Blu-ray overtook HD DVD. When Warner decided to switch over, it looked like the beginning of the end."

On 4 January, Warner Bros. Entertainment said it would release its high definition films exclusively in Blu-ray. Kevin Tsujihara, the studio's president, said the competing formats "has led to consumer confusion and indifference towards high definition, which has kept the technology from reaching mass adoption and becoming the important revenue stream it can be for the industry. Consumers have clearly chosen Blu-ray." Now, seven of the eight major studios support the Blu-ray format. Along with Warner and Sony, these comprise Disney, Fox, Lionsgate, MGM and Paramount. Only Paramount and Universal support HD DVD.

The following week was the International Consumer Electronics Show held every year in Las Vegas. One attendee said that in the wake of Warner's announcement, the HD DVD group cancelled all its one-on-one meetings and press conferences. "They were clearly worried, and sure enough the dominos soon began to fall," he said. US electronics group Best Buy and online rental company Netflix have also thrown their weight behind Blu-ray, and then came Wal-Mart's announcement last week.

Mr O'Donovan said that despite the clarity over the industry standard format, sales of Blu-ray would not soar. "It won't be an immediate acceleration; in fact it will be quite slow ... with the current economic conditions. It should ramp up by Christmas."