Monday, January 7, 2008
Warner backs Sony high definition films only in Blu-ray format
Warner backs Sony Blu-ray format
Warner Brothers is to release high definition films only in Sony's Blu-ray format, in what is seen as a blow to Toshiba in the long-running format war.
Warner was the only major studio still releasing films both in Blu-ray and Toshiba's rival HD DVD format.
Five studios have opted to only release Blu-ray. Only Universal Pictures and Paramount Pictures favour HD DVD.
Toshiba has denied that its format is dead but it admitted disappointment with the Warner Brothers' decision.
Walt Disney, Twentieth Century Fox, Metro-Goldwyn-Mayer and, unsurprisingly, Sony Pictures are the other studios that only release in Blu-ray format.
Both formats deliver high definition pictures and sound and work with HD televisions, but they are not compatible with each other and neither will play on older DVD players.
Warner said it had opted for Blu-ray because 60% of its US high-definition sales last year had been in that format.
Warner Home Video will stop releasing new titles on HD DVD at the end of May.
'A quick death'
Rich Greenfield at Pali Capital predicted that HD DVD would now "die a quick death" and predicted that would be good news for DVD sales.
"While we still expect overall consumer spending on DVDs to decline at least 3% in 2008, the risk of an even worse 2008 DVD environment has most likely been avoided by Warner's early 2008 decision," he said.
Toshiba denied that its format was dead, with Akiyo Ozaka, president of Toshiba America Consumer Products saying that HD DVD "has not lost".
"We were very disappointed with Warner Brothers' announcement," he admitted at CES.
But he added: "Sales of HD DVD were very good last year, especially in October to December."
Warner's announcement was made ahead of the high profile Consumer Electronics Show (CES) in Las Vegas.
Sony shares rise after Blu-ray wins Warner support
Shares of Sony Corp. edged higher Monday, despite broad market declines in Tokyo shares, after Time Warner Inc.'s Warner Bros. said late last week it plans to release high-definition movies on the Japanese company's Blu-ray format.
Warner's decision to support Sony'sformat for high-definition video was seen as an important victory over Toshiba Corp.'s HD DVD standard, which has fallen behind in the race to win over large film studios.
With Warner aboard, the Blu-ray format now has the support of four major Hollywood studios, which means about 70% of major studio films will be released exclusively on the format. Toshiba's format is backed by just two major studios: Universal Pictures and Paramount Pictures.
"I believe that the Warner's deal is a game changer; it's game over for HD DVD," said David Gibson, consumer electronic analyst at Macquarie Securities in Tokyo. "Now you've got the biggest players all supporting Blu-ray."
In Tokyo trading Sony shares ended 0.7% higher while Toshiba fell 2.3%. The benchmark Nikkei 225 Average traded weaker, shedding 1.3% to 14,500.55. Also see Asia Markets. Warner Bros,which currently releases films on both formats, will reportedly stop producing HD DVD discs from May.
"Warner Bros. has produced in both high-definition formats in an effort to provide consumer choice, foster mainstream adoption and drive down hardware prices," said Jeff Bewkes, president and CEO of Time Warner Inc. in a statement.
"Today's decision by Warner Bros. to distribute in a single format comes at the right time and is the best decision both for consumers and Time Warner," he added.
Macquarie's Gibson said studios such as Paramount are likely to abandon the HD DVD format once their agreement expires in 18 months. Gibson added the next dominos to fall in Sony's favor might be on the retail side, with an exclusivity deal by Target stores to stock only Blu-ray compatible players, although he cautioned such a commitment was only speculative.
The race to become the dominant market format bears the hallmarks the 1980 video-format war between VHS and Betamax. The two standards battled for about a decade for dominance, with VHS eventually emerging victorious. Both technologies were eventually made obsolete by digital.
Similar to that battle, the home-entertainment industry is likely to consolidate around a single industry standard, which means the less popular format is doomed to extinction once a clear winner is evident.
Gibson said Sony had a formidable head start in the format war, having sold about 5 million Blu-ray-compatible PlayStation 3 consoles in North America.
Other studios supporting Sony's high-definition format include Sony Corp., Walt Disney Co and 20th Century Fox, which is owned by News Corp., also owner of Dow Jones, parent company of MarketWatch and publisher of this report.