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Analyst cites reasons for HD DVDís failure

By Lawrence Casiraya
INQUIRER.net
First Posted 15:48:00 01/10/2008

Filed Under: Cinema, Media, Technology (general)

MANILA, Philippines -- While it has advantages over its rival format, the writing was on the wall for HD DVD?s imminent demise, says one analyst.

Warner Brothers? announcement that it would release DVDs exclusively on Sony?s Blu-Ray format dealt a big blow to rival format HD DVD, backed by companies led by Toshiba.

This ?surprise? move has sent the backers of HD DVD reeling, resulting in the cancellation of events, including a scheduled press conference at the ongoing Consumer Electronics Show in Las Vegas.

?This panic-like reaction can only imply that the Promotion Group was caught unaware, and did not anticipate that Warner would drop its support for HD DVD,? said Carl Gressum, senior analyst at London-based Ovum.

?It is more likely that the HD DVD Promotion Group was very close at getting the exclusive deal, and was on the verge of announcing it at CES,? he added.

In an ensuing statement, Toshiba said it would continue its support for HD DVD and remain in consultation with other companies that support the standard. Paramount Studios and NBC Universal release movies in HD DVD format.

Gressum said: ?There is a lot of speculation whether this is the end of HD DVD. It is not, but we are getting dangerously close to a ?chapter 11? for the group.?

He likewise predicted: ?If the other supporting studios now decide to drop HD DVD, the situation will turn dire, and HD DVD could become more of a replacement to DVD on the PC client than as a movie distribution playback format.?

In an Ovum report, Gressum highlighted areas where HD DVD had an advantage over Blu-Ray (especially lower-cost structure) but nonetheless failed to exploit.

Even though HD DVD has a cost structure better suited for low-cost vendors, the format failed to actually bring these vendors on board, and to bring products to market in large scale.

PC vendors operate on razor-thin margins, and thus avoid costly components as long as possible. The format therefore had an opportunity to bring on board PC vendors to boost shipments and the install base of HD DVD playback devices. This also largely failed.

Toshiba was the main A-brand consumer electronics vendor backing the format with products, and the format failed to gain the support of other well-known consumer electronics brands.

HD DVD was often cited as the favored format for small content owners and content distributors, due to the cost structure of the format. However, it failed to ignite the markets in Europe and in Asia. These are huge markets, however the industry has so far taken a 'wait and see' until the format war settles down in the US.



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