After a six-year battle to impose high-definition DVD standards, Toshiba signalled Tuesday that it gives up its HD DVD following major Hollywood studios backed rival Sony's Blu-ray.
Sony's Blu-ray looks set to become the standard for high-definition DVDs after Toshiba signalled Monday that it may give up in a long-running format battle, to the relief of investors.
Toshiba Corp. is reviewing its HD DVD business and "a complete withdrawal is one of the options it is considering," an industry source told AFP on condition of anonymity.
Blu-ray and HD DVD -- which are incompatible -- can provide cinematic-quality images and multimedia features but the players come at a much steeper price than current-generation DVDs.
The demise of HD DVD could spur sales of next-generation DVD players among consumers, who have been reluctant to gamble on one of the formats, analysts said, although Blu-ray was already far ahead in sales, particularly in Japan.
Blu-ray can store more data than HD DVD but was initially seen as more expensive to make.
Nonetheless, a growing number of Hollywood studios and retailers have decided to go exclusively with Blu-ray. US giant Wal-Mart gave a decisive boost to Blu-ray last week when it said it would stop selling HD DVDs.
Weekend news reports said losses for Toshiba could reach tens of billions of yen (several hundred million dollars) if it decides on the pullout.
But investors responded positively to the news on the belief that Toshiba, which has enjoyed healthy profits in recent years, was acting quickly to stem losses.
Toshiba shares shot up 45 yen or 5.74 percent to 829 despite a flat performance on the Tokyo Stock Exchange. Shares in Sony Corp. rose 50 yen or 1.03 percent to 4,900.
"Because the more HD DVDs it sells the bigger the loss becomes, it is much better if it (Toshiba's withdrawal) happens at an earlier stage," said Tokai Tokyo Research Institute analyst Haruo Sato.
A victory for Blu-ray would be sweet revenge for Sony, whose Betamax lost out in a similar duel in the early 1980s to Panasonic's VHS to set the standard for videocassettes.
The camp supporting HD DVD includes computer behemoths Microsoft and Intel as well as Universal Home Studios, and Paramount Home Entertainment.
The death of HD DVD has been heralded since January, when Warner Brothers studio -- Hollywood's largest distributor of DVDs -- pulled out of an alliance with Toshiba and switched to Blu-ray.
Toshiba said Monday it has not reached a final conclusion on HD DVD.
"We are cautiously assessing market movements as it is true that Warner Brother's decision to sell titles exclusively on Blu-ray affected our sales in January," a Toshiba spokeswoman said.
Industry analysts and electronics makers maintain the format war has stifled sales of high-definition DVD players because consumers are waiting for a victor before putting down money for the expensive new technology.
"The availability of software titles decided the battle this time, just like in the VHS-Betamax war," said Yuichi Ishida, an analyst at Mizuho Investors Securities.
"Movie distributors have a decisive say as DVD machines would only be an empty box without software," he said.
As it focuses more on growth areas, Toshiba and its US partner SanDisk Corp. will spend up to 1.8 trillion yen (16.7 billion dollars) on two new flash memory plants in Japan by March 2009, the Nikkei business daily reported without naming its sources.
Toshiba said nothing had been decided on the reported plants. The company has been diversifying its business interests and in 2006 bought US nuclear power plant maker Westinghouse.
Blu-ray also received a boost from its inclusion in Sony's PlayStation 3 video-game machine. Microsoft opted to offer an HD DVD player for its rival Xbox 360.
A study last month showed that Blu-ray, even excluding PlayStation, enjoyed a crushing 90 percent of next-generation DVD recorder sales in Japan in the last three months to 2007, although HD DVD fared somewhat better in the US.
Date created : 2008-02-19