Format war over! Blu-ray wins as Toshiba abandons HD DVD

Toshiba Corp. today announced it is abandoning its next-generation high-definition disc format known as HD DVD, saying it will no longer make and market players and recorders.

The announcement followed a series of retail defections, including Friday’s decision by the nation’s largest retailer, Wal-Mart Stores Inc., which said it would stop selling HD DVD hardware and movies and devote its shelves exclusively to Sony Corp.’s rival format, Blu-ray.

Toshiba President and Chief Executive Atsutoshi Nishida told a packed news conference on the 39th floor of the company’s Tokyo headquarters that continuing the fight against the Sony-backed Blu-ray format for control of the high-definition home video market “would have created problems for consumers, and we simply had no chance to win. Although this is a bitter decision, there would have been a greater impact on our business if we had continued any longer,” he said. “We needed to take swift measures.”

With that, Nishida ended a battle between rival formats that has confused consumers, split the Hollywood studios, and retarded the growth of a potentially lucrative new market for movies and the games and extras that come with them.

The HD DVD format has been losing momentum since January, when the last major studio to support both formats, Time Warner Inc.’s Warner Bros., announced that it would sell its high-definition movies exclusively on Blu-ray discs. The shift gave the Blu-ray camp about 70% of the home video market, with Warner Bros., Walt Disney Co., 20th Century Fox, Lions Gate Entertainment Corp. and Sony Pictures all backing the format.

Until Warner Bros.’ Jan. 4 announcement, Blu-ray and HD DVD each accounted for an equal share of dedicated high-definition movie players, according to sales data tracked by NPD Group, a market research company. In the week following the Warner Bros. announcement, Blu-ray sales skyrocketed – grabbing 90% of all next-generation hardware purchased, according to NPD.

Movie sales also tilted heavily in favor of Blu-ray. The latest Nielsen VideoScan First Alert sales data show that Blu-ray represented 81% of all high-definition discs sold in the week ended Sunday.

Wal-Mart’s decision to sell only Blu-ray hardware and discs in its 4,000 discount stores and Sam’s Clubs represented the final, fatal blow to Toshiba’s embattled HD DVD format, and ended a format war that has been likened to the epic Betamax-VHS videocassette battle of the 1980s.

Toshiba’s format suffered from the lack of broad studio support. It secured exclusive deals only with Universal Pictures and Paramount Pictures and DreamWorks Animation SKG Inc., and also offered movies from Warner Bros., which were available on both formats.

Toshiba’s studio partners today sought to make the best of the format’s demise, saying it would ultimately serve consumers.

“The emergence of a single, high-definition format is cause for consumers, as well as the entire entertainment industry, to celebrate,” said Craig Kornblau, president, Universal Studios Home Entertainment. “While Universal values the close partnership we have shared with Toshiba, it is time to turn our focus to releasing new and catalog titles on Blu-ray.”

Sony Corp. said its ability to secure broad studio and hardware support for Blu-ray was pivotal in its victory. Sony also relied on its traditionally strong-selling game console to help give its Blu-ray format a boost. It bet that sales of the PlayStation 3 would not only establish Blu-ray as the default standard for high-definition video, but also pay off more broadly for Sony Corp., boosting sales of the movie discs sold by Sony Pictures and its Bravia brand television sets made by its consumer electronics group.

“Overwhelming support from all the relevant industries, including Hollywood studios, consumer electronics and IT companies, retailers and video rental stores is clear proof that consumers have chosen Blu-ray as the next generation optical disc format,” Sony said in a statement. “We believe that a single format will benefit both consumers and the industry, and will accelerate the expansion of the market.”

Toshiba’s formal announcement of surrender had yet to be made but, on the floor of one of Tokyo’s cacophonous electronics stores on Tuesday, the war for control over the next generation of high-definition video players was clearly over.

The price of Toshiba’s HD DVD players had already been slashed, bright red stickers announcing a “Surprise Discount.” A customer who had recently bought a Toshiba high-definition player drifted in, wondering if he could get his money back – though the retailer was having none of that. And up on the fifth floor, in the section set aside for the sale of used electronics, the offering price for a second-hand Toshiba HD player was already tumbling, and surely headed further south the salesman said.

“Only maniacs will buy one now,” he said, unable to keep a straight face.

bruce.wallace@latimes.com

dawn.chmielewski@latimes.com