Blu-ray vs. HD DVD: Sony says the war has just begun

June 14, 2007: 9:05 AM ET

Sony (SNE) executives in the United States are well aware that the battle has barely begun between their Blu-ray disc format for high-definition content and rival HD DVD, they told me over lunch this week.

Randy Waynick, senior vice president of marketing in Sony's Home Products Division, said that Sony has sold somewhere in the neighborhood of 100,000 stand-alone Blu-ray disc players so far; that number does not include the hundreds of thousands of PlayStation 3 consoles that include a Blu-ray drive. That number is low enough, I told him, that it probably will be dwarfed by the number of high definition players that sell in the month of November alone. He didn't disagree. (The holiday season and its discounts will really begin to shape the HD player landscape. Note: Microsoft (MSFT) has backed HD DVD with an add-on for the Xbox 360.)

Meanwhile, the rival HD DVD format is showing signs of life. Though fewer movie studios are backing the HD DVD format, the machines that play the discs are far more affordable than Blu-ray players. At Amazon.com, the Toshiba HD-A2 HD DVD player costs $250, and is the top-selling DVD player as of Thursday morning. Sony's most affordable Blu-ray player, the BDP-S300, costs twice as much. The highest-ranked Blu-ray player on Amazon's list is at #30.

Waynick said he believes one format, either Blu-ray or HD DVD, will win this format war – the players that combine both formats are just too expensive, he said. He acknowledged that Blu-ray's price would be a big factor in determining which format wins, and said Sony is working hard to close the gap.

I pushed a bit on this point about price. If HD DVD players are already selling for $250, it's conceivable that they could be at $199 or even less during the holiday season sales, I pointed out. If the Chinese manufacturers start building HD DVD players, the price will get especially low. How will Blu-ray compete? Waynick pointed to the larger volume of movies that are available in Blu-ray format, which is a decent argument.

But again, Amazon.com's listings offered a powerful counterpoint Thursday morning. On the list of top-selling DVDs, Planet Earth in HD DVD format is ranked #4 – higher than the regular DVD versions of Seinfeld - Season 8, The Sopranos: The Complete First Season, and Ghost Rider. The top-selling Blu-ray title is Planet Earth – but it's way down at #19. I've been checking for several days, and they've stayed in roughly the same positions.

What does this mean? Here's my take:

Blu-ray has an early lead, but that doesn't count for much. What matters is, who will have the lowest-priced high-definition players at a decent quality level when mainstream consumers finally start buying HD?

If the mainstream starts buying HD players this holiday season, expect to see HD DVD surge ahead of Blu-ray in a big way. Market makers like Wal-Mart will run with whatever player they can price below $200, just to draw people into stores. And most people in the mainstream won't necessarily buy 10 HD movies; they'll buy one or two, and wait for the studios to follow the installed base.

And if HD DVD sells big, you'd best believe the Hollywood studios will follow. Aside from Sony, they really don't care which HD format wins – just as long as they get sell a lot more movies.

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