How Blu-ray Lost, Then Won, And May Lose Again

By early January, everyone knew that the end was near for HD-DVD. At the annual Consumer Electronics Show, Time Warner announced that its Warner Bros. film studio would no longer support both high definition film formats and that it would go exclusively Blu-ray. Six weeks later, after a series of defections, Toshiba announced that it would no longer manufacture or market the HD-DVD format. These events were the end of a war that waged for two years, costing consumers and companies millions that they spent on a soon-to-be obsolete technology. To really understand what happened, you need to start at the beginning.

The year was 1993 and two distinct groups representing various electronics companies came together to create a successor to the CD. It would be a new format that would offer the ability to save and distribute music, as well as film and computer data. Sony led the formation of one group, while Toshiba parented several companies in another. The two groups worked individually until collaborating in 1995 to develop a standard format called DVD. Many news reports surfacing at the time highlighted how much the union of the two camps benefitted the industry by preventing a format war like that of VHS vs. Betamax in the late 70s.

By March 1997, Toshiba made the first DVD player available for consumers in America, while Sony and other companies followed in the ensuing months. The first full year that DVD was available, almost 1 million players were purchased, with more than 14 million discs sold in the U.S, according to industry association DEG. By 2001 the numbers of players purchased had ballooned to 16.7 million, the number of discs to more than 300 million.

It was great news for Toshiba. The company earned patent royalties on all sales related to the DVD format. But Sony, having only contributed an error protection process in later stages, earned no revenue from the success. The fact that Sony's DVD-enabled PlayStation 2 sold extremely well and promoted the fledgling format did not insure Sony a sizable piece of the DVD pie.

But as new technologies for film and TV emerged and computers enabled people to create more data that required backing up, the DVD's limitations began to emerge. In February 2002, Sony announced the development of a new technology for archiving data into a media format for high-definition films. It was called Blu-ray. Sony then formed the Blu-ray Disc Association, and in April, the DVD Forum announced that it was also working on a high-def format. Created in 2003 by Toshiba, the format was named HD-DVD.

In early 2005, the BDA and the DVD Forum came together to talk about combining efforts on one format, but Toshiba and Sony engineers disagreed about the formats with each side citing that one was more superior than the other.

"The companies behind Blu-ray very passionately believe we had the best technology and the right format. I believe the folks at Toshiba had a similar passion for their technology," Andy Parsons, Chairman of the BDA and senior VP of advanced product development at Pioneer Electronics, said. And there was a lot at stake. "When all these DVD players were sold, Toshiba got all this money. And Sony was locked out and they didn't want to get locked out of a next generation format," says Peter Bracke, Editor of High-Def Digest.

Technically speaking, the two formats were actually quite similar. While Blu-ray had more disc capacity, HD-DVD had an edge in interactive features. "HD-DVD's tech specs were actually better for the consumer than Blu-ray's," says Jason Chen, Senior Associate Editor at gadget blog Gizmodo. The real difference between the formats came in their physical specs. The HD-DVD format closely resembled its predecessor, the DVD. The switch from DVD to HD-DVD would be easier for both manufacturers and consumers.

As tensions rose, both camps began divvying up Hollywood studio support to gain an edge: Blu-ray would launch with exclusive support from Fox, Disney, and Sony subsidiaries MGM and Columbia, while HD-DVD had exclusive support from Universal, and Warner Bros. and its partner, Newline. Paramount and Dreamworks decided to release films in both formats.

In early 2006 Sony announced that it would debut Blu-ray films and players in May. Around the same time, Toshiba released its first HD-DVD players -- both a $500 and an $800 version. But HD-DVD gained first mover advantage when Sony delayed its releases. In the end, it was actually Samsung that released the first Blu-ray player for $1000.

The cheaper price tag for HD-DVD convinced many early adopters to side with HD-DVD. When the first Blu-ray films were finally released, quality comparisons began. Initially, HD-DVD was praised for its higher quality picture and interactive features -- like picture-in-picture or live film updates over the Internet. The first Blu-ray films didn't contain the best technology when it came to picture display, but soon the same high-def visuals would be used on both formats.