“What if nobody wins the high-definition DVD format wars?”, the NYT asks in a non-news summary of the battle between Sony and Toshiba over Blu-ray vs. HD DVD. But that’s the wrong question. The relevant one is “Who’s losing the format wars?” and the answer, still, is: Hollywood.
That’s because conventional DVD sales, the single largest source of revenue for the movie studios, are drying up, the result of a natural buying cycle: Consumers spend the most on DVDs within a few years of buying their first DVD player, and the last Luddite bought a player years ago. Hollywood has been counting on the new format, coupled with the boom in HD TV sales, to get consumers to start buying more discs again. But after 18 months, Sony (SNE) and Toshiba have sold less than 1 million players, combined.
The Times quotes hopeful analysts who think that Hollywood will eventually resolve the format war by agreeing to support both formats; we’ve previously noted Rich Greenfield’s prediction that the war will end when TWX’s Warner Bros. removes its support for HD DVD. But neither scenario helps the studios for years. In the meantime, look for investors to keep hammering studio owners for failing to replace their revenue stream, and for the studios to accelerate their efforts to figure out digital delivery — even if it means cutting deals with the likes of Apple’s Steve Jobs.
Update: Rich Greenfield’s crystal ball is excellent.
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