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Double vision in high definition

Bd_1 Angelenos with a craving (and budget) for new TV gadgetry have been snapping up Blu-ray high-definition disc players, according to a story today by the Times' Rachel Abramowitz. That's welcome news to Hollywood, which has been alarmed by the flattening sales of conventional DVDs. But early adopters will buy anything in small quantities; the real question is how long the format war between Blu-ray and a competing high-def format, HD DVD, keeps the masses on the sidelines. So far, the signs aren't good.

The first problem is the limited penetration of large digital sets capable of displaying HDTV. Unlike VCRs and DVDs, whose benefits could be appreciated by consumers with any type of TV, it's hard to see the brilliance of Blu-ray and HD DVD unless you have a big set with full HDTV resolution. Although sales of digital TV products have been strong for the past few years (more than 35 million sold since 1998 -- 3.4 million in the first three months of this year), and the plummeting price of flat-panel digital TVs has led consumers to indulge in bigger displays, many of these sets aren't able to show a high-def picture. In fact, in the popular 42" plasma category, "enhanced definition" sets capable only of a DVD-quality picture outsold high-def sets globally until this summer. So we're talking about a subset of the subset of U.S. homes having any reason to be interested in high-def discs.

Hd_dvdThe format war dims those buyers' interest by threatening to make the new disc player they buy obsolete. How can people not be confused? The formats have virtually identical specs! For all intents and purposes, they deliver the same picture. Some early adopters are avoiding the problem by buying both types of player, but that's not exactly mainstream behavior when prices start at $500 (for HD DVD) to $1,000  (for Blu-ray). There seems to be no real hope of a compromise between the two camps of manufacturers, especially with the Blu-ray side still clinging to the hope that Sony will deliver an early knock-out punch with the new, Blu-ray equipped PlayStation 3. That punch has been delayed -- the PS3 is now due in November, and some skepticism remains about Sony hitting that target -- and its force has been weakened a bit by the higher-than-fantasized-for selling price ($500 for the entry-level model). Meanwhile, the HD DVD camp is counting on Microsoft to parry Sony's blow with a comparatively cheap HD DVD add-on drive for the XBox 360.

There are some analysts predicting both formats will survive, despite the strong desire by studios and retailers for a single winner. As long as much of the public stays on the sidelines, there's no reason for either side to give up the fight. My hunch, though, is that Sony's PS3 will drive so much Blu-ray volume -- the company expects to make and sell 6 million units globally in the first five or six months, or six times the number of standalone high-def disc players projected to be sold in the U.S. in all of 2007 -- that it will eat into HD DVD's one advantage, which is lower manufacturing costs. At the same price, Blu-ray kills HD DVD. It has more manufacturers (including Dell and Apple, who could drive more sales in the early years than most consumer-electronics brands) and, critically, more studios (Sony, Fox, Disney, MGM and Lions Gate have all signed up for just Blu-ray at this point, with Warner Bros. in both camps and Universal lined up with HD DVD initially). But if the price gap remains wide, consumers are likely to hold onto their money.

If you'd like something close to play-by-play commentary on the competition between the formats, check out this site, which monitors the availability of high-def titles and players at Amazon.com.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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