FAQ: What's next in HD video fracas?

This time last year the so-called high-definition format war between HD DVD and Blu-ray Disc had become so entrenched that the buzz at the 2007 Consumer Electronics Show was around combo players and discs, like LG's Super Multi Blue and Warner Bros.' Total HD format. People hoped for a manageable truce that would stop scaring consumers from choosing a side.

Neither combo players nor the dual-format discs really went anywhere, however. And 12 months later the predictions are not of which side will emerge the victor, but exactly how hard Blu-ray backers are laughing all the way to the bank. Convincing Warner Bros. in January to give up its stance as neutral partner to both in favor of throwing all of its Hollywood heft behind Blu-ray was a major coup for the Sony-backed format.

But HD DVD backers have shown they're not giving up so easily, as evidenced by Toshiba's decision to lower prices on its HD DVD players a week after the Warner announcement. So what's next for the beleaguered format and the world of HD video? Here are some answers to the most common questions.

Q: Is the format fight over already?
Not yet, but it's close. HD DVD made big gains at the end of 2007, due mostly to holiday promotions as low as $99 in some cases, to bring the number of units sold to a dead-even tie: both Blu-ray and HD DVD had 49 percent of unit sales for the year, according the The NPD Group, which tracks retail sales data.

The Warner announcement on January 4 represented a seismic shift, though: The week of January 12 showed player sales distributed 90 percent Blu-ray, 7 percent HD DVD, and 3 percent for combo players. The week after, January 19, showed less polarized results, with Blu-ray getting 63 percent of sales, HD DVD 33 percent, and combo players 4 percent. NPD does not normally give out weekly data, and does not offer a more recent update of sales figures.

Momentum isn't the only thing that's shifted. Prices have come way down in the last year. HD DVD players now range in price between $150 and $500, and Blu-ray players between $250 and $1,000.

Of all the major Hollywood Studios only two, Paramount and Universal, have agreements to release their titles exclusively on HD DVD. The rest--Sony, Disney, MGM, and now Warner Bros.--are pledged to Blu-ray. And there's talk that even Paramount and Universal could be persuaded to switch to Blu-ray also when those contracts end.

Q: Is it time to abandon HD DVD?
Not quite. Much was made of Blu-ray's overwhelming sales dominance the week following the Warner announcement in January. But it's hard to base the viability of an entire format on a single week's worth of data since there are other factors at play here.

Toshiba, the main backer of HD DVD, lowered prices on its players significantly the following week, and it's probably not fair to call the game for Blu-ray before all Sunday circulars are updated to show the new pricing ($149 now versus $299 on the HD-A3 model) and customers have a chance to be lured into stores. It's also important to note that there are several "bundling" promotions being offered by a variety of manufacturers, including a high-def video player with the purchase of an HDTV or other electronics item. It's a practice that tends to juice the numbers for both sides.

"Are people organically running out and buying $400 Blu-ray players? Probably not," said Paul Erickson, director of DVD and HD market research for The NPD Group. "Are people going out in droves to buy $149 HD DVD players? Possibly, but obviously not as much as the HD DVD side would want."

And Blu-ray isn't necessarily the perfect solution even if it becomes the default high-def format. As CNET Reviews points out, there are several reasons to proceed with caution still, including the software upgrade process for Blu-ray players, and the availability of your favorite movies and TV shows.

Q: What's next for HD DVD and its backers, particularly Toshiba?
Toshiba is undeniably bruised. The tone at the company's CES press conference reflected not only damaged egos, but serious disappointment.

The company responded after the Warner fallout with aggressively lowered prices. Now, Toshiba could continue on that path, plodding along, gaining as much as it can from having the lower-priced player on the market, but it's not the only tack it could take. The electronics maker has actually set itself up to duck the format war now by venturing into the territory of upscaling DVD players, says NPD's Erickson.

At $149, the entry-level player from Toshiba is only slightly more expensive than a regular DVD player that will output in HD resolution. Toshiba could choose to change its marketing strategy and sell the HD-A3 as a so-called upscaling DVD player which, for a bit more, also plays HD DVDs. Instead of the main draw, HD DVD could become a bonus feature: it's an entirely different value proposition to buy a regular DVD player which, as a bonus, is able to play HD DVDs for a slightly higher cost, as opposed to feeling like you're dropping $150 on a player based on a format that might not be around in a year.

"Logically, if they succeed in selling a number of standalone players, that's impossible to ignore. That's going to be a very strong argument in their favor," Erickson said. In other words, studios would almost be forced to pay attention.

Toshiba hasn't given any indication that this is the route it'll pursue, but it's certainly a possibility.

Q: When will I have to choose sides?
Not for a while. The problem is that the majority of us are satisfied with DVDs and therefore not in a rush to buy a more expensive video player that plays more expensive discs. The current technology is acceptable to the vast majority of consumers and more importantly, we're used to buying discs for $10 to $20. Spending $35 on a title whose quality is good, but not dramatically different, has been a tough sell for the majority of consumers.

That could all change as the natural cycle of consumer electronics churns along, as prices on components drop, and as studios are able to produce discs in larger volumes.

Q: When exactly will prices become reasonable?
It is a legitimate concern that a loss of HD DVD as a viable format could slow down the rate at which Blu-ray has been forced to drop its prices over the last year. But analyst Josh Martin of the Yankee Group says even without a serious competing format, the major backers of Blu-ray, who've stuck together thus far, will begin to compete with each other.

The 2008 year's holiday shopping season is going to be very important for this. NPD says it doesn't anticipate mainstream adoption--based on anticipation of a variety of players under $200 and less expensive discs, until at least 2009.

"Those guys want to gain market share," said Martin of the Yankee Group. "Individual companies are going to make their stance, and we'll see price drops by and large from most of the big CE guys."