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HD Disk Wars: Mutual Assured Destruction

August 29, 2007

Clapperboard The protagonists in the increasingly desperate Blu-Ray vs HD-DVD war are both determined to win at all costs, even if that means financial disaster for both camps.

Silly me, I had assumed big businesses were driven by the goal of maximising financial return for their shareholders. That would surely mean doing whatever is necessary to make the market as big as possible, to sell as many HD disks and players as possible. However, both the Blu-Ray and HD-DVD camps seem hell-bent on getting one over on each other, even at the cost of putting off the vast majority of would-be buyers from entering the market at all.

Last week we saw Paramount and Dreamworks Animation throw their lot in with the HD-DVD camp, declaring that they will only produce HD movie disks using the HD-DVD format, having for a while supported both formats.

This is how the major studios line up now:

Studio Format(s)
Sony Blu-Ray  
Disney Blu-Ray  
Fox Blu-Ray  
MGM Blu-Ray  
Lionsgate Blu-Ray  
Warner Blu-Ray, HD-DVD  
Paramount (inc Dreamworks) HD-DVD  
Universal HD-DVD  

Paramount and Dreamworks Animation have reportedly been paid $150m between them to drop Blu-Ray. Now only Warner still supports both formats.

This is infuriating for the consumer who justs wants to be able to buy the film of their choosing in High Definition, without having to worry about which studio made it and which players it will work on.

Let’s just stop and do a quick thought experiment. How might this war pan out? What are the possibilities?

(i) Blu-Ray wins

(ii) HD-DVD wins

(iii) Both co-exist for a long time

(iv) Both superseded in foreseeable future by Internet-based media delivery

If either (i) or (ii) happened anytime soon, the winner would clean up. But how likely is that? There are no signs of either side getting a clear upper hand. They are both kidding themselves.

The most likely outcomes are (iii) and (iv), but either of these means financial disaster for both formats. Neither camp will be selling very many disks or players, because consumers are too scared of plumping for the wrong one and don’t want the expense and inconvenience of owning both. Meantime both camps are wasting fortunes promoting their own format to no avail. This is Mutual Assured Destruction; MAD for short.

From the point of view of Warner, Paramount and Universal, they would do better to capitulate now and switch exclusively to Blu-Ray. Or vice versa with the current Blu-Ray studios jumping ship to HD-DVD. It really doesn’t matter which way. For any of the studios, one format means confident consumers, sales, profits.

To slightly paraphrase Highlander, “There must be only one”.

It is sobering to think we are reliant on the doctrine of Mutual Assured Destruction to stave off a nuclear holocaust. All I can say is I’m glad that it’s not the technology companies and studios with their fingers on the nuclear button. And you thought Dubya was bad.

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