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Double Dose Of Bad News For HD DVD

February 11, 2008 may well be known as Black Monday for backers of HD DVD because it received a double dose of bad news that's as devastating as last month's decision by Warner Bros to abandon the format.

The day started when Netflix, the leading DVD rental by mail company, announced it would no longer offer HD DVD titles for rent, only Blu-ray. A few hours later, retail giant Best Buy announced it would prominently showcase Blu-ray hardware and software products in its retail and online stores.

Even the New York Giants weren't this big of an underdog, nor were they ever down by this much.

HD DVD and Blu-ray have been dueling it out for the chance to be the successor to standard definition DVD. High definition DVD offers six times the resolution of standard DVD and greatly increased disc capacity. Sony is the primary developer of Blu-ray and has the support of Warner, 20th Century Fox and Walt Disney Pictures exclusively. HD DVD comes from Toshiba and is supported by Universal Pictures and Paramount Pictures exclusively.

[cob:Related_Articles]Warner had been supporting both formats, meaning it had to release the same film three times. It decided to end its support of HD DVD effective this summer. The decision, made just days before the CES show, was cited by Netflix as the reason for its switch.

"We're now at the point where the industry can pursue the migration to a single format, bring clarity to the consumer and accelerate the adoption of high-def. Going forward, we expect that all of the studios will publish in the Blu-ray format and that the price points of high-def DVD players will come down significantly," said Ted Sarandos, chief content officer for Netflix in a statement.

To that end, Netflix will acquire no new HD DVDs but will continue to offer the HD DVDs it has now until their "end of life," which means breaking, scratching, or until a Blu-ray version becomes available. Netflix offers more than 400 Blu-ray titles. Retail rental giant Blockbuster went Blu-ray-only last year.

In the case of Best Buy, it's not discontinuing HD DVD but it might as well from its statements. "Consumers have told us that they want us to help lead the way. We’ve listened to our customers, and we are responding. Best Buy will recommend Blu-ray as the preferred format," said Brian Dunn, Best Buy’s president and chief operating officer in a statement.

It will continue to offer HD DVD movies and the three players from Toshiba, which had their prices cut in half following the Warner announcement in an attempt to counter Blu-ray's momentum. It does not appear to have worked.

Tim Bajarin, president of the consultancy Creative Strategies, was reluctant to say this was the end for HD DVD because there was too much money involved for Toshiba to just quit. Having said that, "the increasing amount of endorsements from all these companies s making it impossible for HD DVD to gain any ground. I think with this Best Buy move, it will reemphasize to consumers that Blu-ray is the preferred medium," he said.

Where Blu-ray goes from here is still up in the air, as its fate is somewhat tied to the success of HDTV sets. A standard definition television, which most American families still have, will not display a Blu-ray movie in all its glory. A Consumer Electronics Association report in mid-2007 estimated 30 percent of U.S. households, 52 million, have an HDTV set and that number could reach 36 percent by the end of 2007.

Many prognosticators thought high definition DVD would be a niche player, a luxury item, for a long time. Bajarin thinks that remains the case, but it won't be in a niche too long.

"I think it will be a luxury item for the next few years. But if more and more studios push their movies into Blu-ray, eventually prices come down and get to a mass market price point and it will take off as well," he said.