DVD War

AS VENUES GO, Las Vegas isn't a bad choice for the year's biggest video fight. This week, at the huge Consumer Electronics Show, two rival groups of tech and entertainment heavyweights will debut the next generation of DVDs. In one corner is Blu-ray, backed by Sony; in the other, Toshiba's HD DVD.

DVD War

AS VENUES GO, Las Vegas isn't a bad choice for the year's biggest video fight. This week, at the huge Consumer Electronics Show, two rival groups of tech and entertainment heavyweights will debut the next generation of DVDs. In one corner is Blu-ray, backed by Sony; in the other, Toshiba's HD DVD. Both formats promise more vibrant sound and video to take advantage of the new high-definition TV sets, massive storage space for interactive features, and better copy protection to ward off pirates. And while the promises are great, so are the stakes: the loser faces millions squandered on R&D; the winner gets control of a US$20-billion DVD hardware industry. It's Betamax vs. VHS all over again.

Technically, there isn't much difference between the two new formats. Both use blue LASERS - instead of the red in conventional CDs and DVDs - to burn much larger quantities of data onto discs. And both sets of new players will accept old DVDs - although you'll have to restock your movie collection to see the enhancements. Yet despite their similarities, the formats are incompatible. In time, the market will adopt one or the other, and at the CES the two groups will stress how they're different - and better. "They're in a dead heat now," says Michael Goodman, an analyst with the Yankee Group. "At the show, they're going to try and capture the hearts and minds of retailers."

What are the respective pitches? The Blu-ray camp emphasizes capacity: a double-layer disc will hold about 50 GB of data - enough space for all three extended The Lord of the Rings movies, commentaries and video games. The format has the backing of Dell and Hewlett-Packard, the world's two biggest PC makers. Toshiba, meanwhile, is allied with NEC and Sanyo, and claims cheaper production costs as HD DVD's main advantage. Because the discs are the same physically as existing DVDs, manufacturers will be able to use much of the same tools to press batches of the latest blockbuster.

But it seems the deciding factor will not be manufacturers, or even consumers, but Hollywood. Conventional wisdom suggests the format with the most movie titles will appeal to the most buyers and win the fight. "Momentum has been shifting back and forth," says Eddie Chan, an IDC Canada analyst. "For a while it looked as though HD DVD had the edge, but now it's balanced again." The only major studio left uncommitted is 20th Century Fox. Still, none of the agreements are binding, and the studios could switch allegiance at any time.

The worst case scenario, says Yankee's Goodman, is if both formats hang around for years. Buyers would be reluctant to invest in a technology that could become obsolete soon. "That will slow down adoption, and the economies of scale won't kick in because sales are split," he says. "That means higher prices longer."

Eventually, though, one format will come out on top, says Goodman, relegating its rival to the pile of obsolete technology. Until that winner emerges, however, you'd be smart to stick with conventional DVDs.

THE RIVALS' VITAL STATISTICS

BLU-RAY HD DVD

CAPACITY: 25-50 GB 15-30 GB

HOLLYWOOD SUPPORT: Disney, Columbia, MGM Paramount, Universal,

Warner, New Line

ETA: 2006 late 2005

ADVANTAGE: Computer industry fave Lower production costs

Maclean's January 10, 2005