Attack of the Blue Lasers

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lthough both Blu-ray and HD-DVD machines will play current DVDs (your movie collection is safe), Sony says Blu-ray represents a quantum leap in technology appropriate to the dawning age of high-definition displays and the blurring of what used to be pronounced differences between digital computers and analog TV sets. Sony is fond of pointing out that single-sided Blu-ray discs can hold two-thirds more data than Toshiba's single-sided HD-DVDs. Yukinori Kawauchi, general manager of Sony's video-planning division, derides HD-DVD as "a half step." Blu-ray is, he says, the "final evolution of optical-disc technology."

Toshiba executives, on the other hand, criticize Sony for what they consider its disregard for the consumer, who is assumed to be forever willing to pay higher prices for snazzy technology. They point to a number of impressive Sony innovations—including Betamax, Mini Discs and Memory Sticks for PDAs—that Sony tried to force on the world but that failed to become industry standards because too few consumers and companies were impressed enough to fork out. "They have a long history of doing this," says Yamada. He insists that proven viability and low costs are the advantages that really matter. Toshiba claims that HD-DVD production lines are easier and cheaper to set up and that as a result prerecorded HD-DVDs will cost only 10% more than current DVDs, a fraction of what they say prerecorded Blu-ray discs will initially cost. Sony, at this point, won't forecast costs, except to say that prices will fall dramatically as sales increase.

Toshiba plans to sell its first HD-DVD players for about $1,000, starting next fall. And Pony Canon, Japan's largest domestic publisher of read-only DVDs, has said it will start selling HD-DVD discs next year to feed these new devices. Sanyo has pledged to get their HD-DVD players down to the $400 range by holiday season 2007. Meanwhile, a few Sony Blu-ray disc recorders are already on sale in Japan for about $3,500. According to Japanese press reports, the Blu-ray machines are not selling very well so far, and Sony does not expect movies recorded on Blu-ray discs to be available until 2006.

So who will win? Sony has already enlisted 12 heavy hitters to its cause, including Dell, Hitachi, LG, Samsung and Sharp. Toshiba, meanwhile, trumpets the fact that Microsoft has pledged its next Windows operating system will be HD-DVD compatible and that HD-DVD is the only format to win approval from the DVD Forum, a trade association of 220 entertainment, electronics and computer manufacturers (including Sony). Sony, which likes to control the development of its own technology, says that the forum's imprimatur is not essential to victory.

There is, however, one thing that everyone agrees is essential: backing from Hollywood. Movie studios are a critical part of the DVD business, because they distribute their product on discs by the millions. Today, home rentals and sales can generate as much as 50% of a film's revenue. DVD rentals surged 55% last year while sales rose 33%. With business good, major studios have been slow to join the blue-laser debate. But they won't be able to fence-sit forever. According to Kagan Research, by 2008 half of American households will own high-definition TVs, on which regular DVD resolution looks noticeably lame.

To be ready with the software and hardware, studios need to start making decisions. "The vote is in Hollywood's hands," says Warren Lieberfarb, the former head of Warner Home Video and now a consultant for Toshiba.

Realizing this, the Blu-ray and the HD-DVD teams are now making trans-Pacific road shows almost monthly, desperately trying to woo the studios with remastered snippets of their biggest blockbusters and boasts about their comparative advantages. Sony's deal to acquire MGM, announced Sept. 13, is a key component of its effort to promote the Blu-ray standard. As a working studio, MGM is a shell of its former self, with no active, lucrative franchises besides James Bond. But it does have a catalog of approximately 4,000 movies ranging from Gone with the Wind to Rocky (boosting Sony's control of all the Hollywood movies ever filmed in color to more than 40%) and 10,000 TV episodes, many of which have not been fully exploited for the home market. "We are not buying a company or a building," said Sony chairman Nobuyuki Idei of the MGM deal, "but rather we aim to make use of the software assets." Putting all that content on Blu-ray discs could swing the DVD fight in Sony's favor.

Unless a clear majority of studios emerges, the consumer's nightmare scenario of walking into the video store and finding Spider-Man (a Sony movie) available only on Blu-ray and, say, The Matrix (a Warner film) available only on HD-DVD remains a possibility. Like the characters in a sci-fi war movie headed for the climactic battle, neither Sony nor Toshiba show any sign of backing down, and as their allies prepare for the final showdown, their blue lasers are set for kill.