Playstation 3 kills HD DVD

Just a few months ago, the high-definition arena looked like we were in for a lengthy battle between Blu-ray and HD DVD. That impression surely has changed: Blu-ray is capturing the market where it counts – movie sales, which apparently are driven by Playstations making their way into the market. Will the game console break HD DVD's neck?

Well, let’s look at the market we have today.

From a general perspective, HD DVD seems to have all the pieces of the puzzle in its favor and it has a strategy that makes common sense. HD DVD (consumer electronics) players are less expensive than Blu-ray players, suggesting the technology should be adopted faster than the pricey rival. The group behind HD DVD is also pushing much more to bring new interactive features to the format.

The strategy has worked somewhat: When looking at standalone CE players, HD DVD has sold countlessly more units. Yet, some how the format continues to be trampled upon by Blu-ray in terms of movie sales. The latest estimate found Blu-ray movies outselling HD DVD by a factor of 2:1.

So, despite the fact that HD isn't quite mainstream yet, are these early numbers significant? Can it really be that a group of early adopting gamers with a console widely panned for its lack of games has dynamically shifted the home video format war? We here believe it did.

There was doubt earlier this year whether the PS3 could deliver an edge for Blu-ray or not. Now it turns out that Sony had its bet right and it looks like the PS3 could decide the format war much earlier than anticipated. HD DVD has become the struggling format that is losing supporters left and right these days.

It's a timely discussion because we're now in the very beginning stages of seeing more clues who could emerge as a winner. Target, Blockbuster, and other small chains have already cast their votes for Blu-ray, deciding not to devote retail space to HD DVD. For the average consumer, this says Blu-ray is the next format. There is no other choice. This is crucial because the long-term acceptance of a format relies heavily on the average consumer.

Movie Studio support also appears to be shifting with Disney being the latest to heavily invest into the format.

Recently revealed advantages of Blu-ray in movie sales are pretty substantial for a format war just one year in the making. However, Toshiba says standalone HD DVD players are outselling standalone Blu-ray players by a margin of four to one. That disparity raises a lot of questions, most of which can be answered with two words - Playstation 3.

According to a study commissioned by Sony in June, 72% of Playstation 3 owners have purchased a Blu-ray disc movie, and 87% said they intend to buy one in the next 12 months. Of those who said they watch BD movies on their PS3 frequently, 82% said Blu-ray is their preferred movie format.

There's some confusion about whether PS3 owners do actually make use of the console's ability to play Blu-ray movies. In stark contrast to the Sony survey, NPD released a study this week that found that 40% of next-gen gamers didn't even know the PS3 had a Blu-ray player.

However, the NPD survey included owners of any next-gen system, meaning the Wii, PS3 and Xbox 360. It also included participants as young as six years old. This undoubtedly includes people who don't even care about high definition content. For die-hard PS3 fans, though, it seems there isn't even a question. They appreciate the Blu-ray functionality and probably don't even look at HD DVD.

However, HD DVD has always been ahead of the game in terms of interactive features. Some HD DVD titles can now access the Internet to download exclusive content. Users can also view picture-in-picture features for things like video commentary, storyboard comparisons, and street map overlays for car chase sequences. This is all exclusive to HD DVD. Meanwhile, there's a huge collection of Blu-ray movies that don't even have an interactive menu screen comparable to DVD.

There's no question in my mind that HD DVD is a fundamentally better product. If it were up to the true videophiles to decide, it probably would be gaining a lot more traction. However, for the first time in a heated format war, the core audience is not the video enthusiast group that's deciding. It's the much wider audience of video gamers. Even though the PS3 is the slowest-selling next-gen console, it still accounts for over three million Blu-ray players. That's a number HD DVD can't even dream of yet.

Because of the accessibility of it for people who are just barely curious of next-gen DVD formats, Blu-ray has gained steam - so much steam in fact that it has already left HD DVD in the dust.

So, what's next for HD DVD?

We believe, if the HD DVD group wants to keep any chance at a comeback is to pull back the hundreds of millions of dollars it currently pours into promotional campaigns and invest into a sweet spot in the hardware market instead.

The sales of the bare bones drive for the Xbox 360 certainly have been rather disappointing when compared to the Blu-ray/PS3 combination. The format already essentially lost its shot at adoption within a game console. Even big-name exclusive titles like The Matrix haven't really caused much of a stir for HD DVD.

So, aside from just sitting around and waiting, hoping for consumers to look its way, the only thing I can see is that HD DVD needs to expand on its other platforms. Bringing a killer app in the form of an HD DVD-based computer game, standard iuntegration into the Xbox, landing a partnership with TiVo to bring an HD DVD player to the high-definition TiVo box, or even incorporating built-in HD DVD players into a wide variety of HDTVs all could create more awareness for the format.

The clock is ticking, though, and HD DVD simply cannot just wait until the mainstream crowd decides they want to move into high definition. From today's view the battle could be decided much earlier – by video gamers. There's a lot of ground to cover, thanks mainly to Sony's foresight in combining Blu-ray with the PS3.

Yes, we also had our doubts whether Blu-ray was a good move or not. But as it looks right now, Sony got it right and the PS3 investment may pay off big time.