Video War II

The home video business needs a third act. Videotapes are passe, and DVD sales are flattening. Meanwhile, a growing percentage of U.S. consumers are outfitting their homes with high-definition TV screens, which can display more richly detailed pictures than a DVD provides.

Unfortunately for Hollywood, there is no clear successor to the DVD. The consumer electronics industry has split between two incompatible versions of high-def discs -- Blu-ray and HD DVD -- and appears to be settling in for a lengthy format war. On Monday, the HD DVD lineup got a boost when Paramount Pictures and DreamWorks Animation SKG Inc. announced that they would back HD DVD exclusively. Previously, only Universal Studios had been supporting that format exclusively, while Paramount and Warner Bros. had been releasing films in both formats. Blu-ray’s lineup is still deeper, with video from Sony Pictures, Walt Disney Studios, 20th Century Fox and MGM as well. But now, several of the year’s biggest hits will be available only on HD DVD.

It’s sad but not surprising that consumer-electronics companies couldn’t settle on a single product. The market for home video is so large, the inventor of any successful format stands to reap a fortune in patent licensing fees. Hollywood had the chance to avert the war, but the studios’ diverging agendas kept them from unifying behind Blu-ray or HD DVD. Paramount and DreamWorks have since turned the split into a revenue opportunity, extracting cash and marketing in exchange for committing to HD DVD.

There’s no point in hoping that peace will somehow magically break out. Instead, Hollywood needs to let consumers and the market pick a winner, just as they did with Betamax and VHS. And consumers can’t do that unless all the studios release their movies in both formats. Yes, there are some costs and risks associated with doubling up, but the market is small enough now to minimize them. At the same time, studios that turn their backs on a format are selling to only a portion of the audience, which means they’re leaving money on the table.

Blu-ray and HD DVD are essentially the same when it comes to picture and sound quality. The main differences are in cost, capacity and anti-piracy safeguards. There’s no way of telling what those differences mean to consumers if they’re not given the chance to compare. After all, what Disney or Universal think is critical to sales may not matter much to those who have to pay for their movies.