DVD Format Fight Looms
Toshiba and NEC DVD technologies may have won a round in the fight to standardise the DVD format, but the real battle remains - and that's convincing consumers and Hollywood.
Last year, both companies stacked their version of a blue-laser DVD player against that of a consortium including Japan's Sony Corp and Matsushita and Dutch firm Philips, says Lucas van Grinsven in a Reuters report here.
Last month Toshiba and NEC won support from the DVD Forum - an industry group of 220 electronics and media companies - "but it was only over the weekend that the news spread into the public domain".
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A blue-laser disc stores around five times more information than red-laser discs and blue-laser DVD players will replace the current generation of red-laser DVD players in a few years time and, "The electronics industry expects that over the next few years high definition TV will at last reach a critical mass, which in its turn will push the need for higher quality DVDs," says van Grinsven.
However, the DVD Forum will endorse only one technology and by backing the so-called HD DVD standard from Toshiba and NEC, "a new format war is looming".
The last format war over recordable DVD discs is still being waged in the market, van Grinsven, points out, and although the DVD Forum didn't approve DVD+RW recordable technology developed by Sony and Philips, it nonetheless has a significant chunk of the market and, "Its inventors even claim that it is the dominant standard."
His report goes on, "Financial analysts said the DVD Forum's choice does not mean Sony and its consortium partners will miss out on the next stream of technology licensing income, which is what the struggle is really all about. Licensing fees have become a substantial income source for the notoriously low-margin electronics industry. Philips, for instance, has an official target to double its two to 2.5 percent profit margins with royalty income - it has a strong patent pool as it has helped invent the CD and the DVD."
And there's another factor. China plans to replace DVDs with a home-developed next-generation disc format called EVD (enhanced versatile disc) which could challenge Blue Ray.
In the meanwhile, the support of Japanese giants Sony and Matshushita, with Panasonic and JVC, is crucial, said investment bank J.P. Morgan in a research note, states Reuters: "Only with their support will there be sufficient products in the shops." And the two companies can still push their own 'Blu-Ray' technology - both blue-laser formats will play old DVDs.
However, adds van Grinsven, "The electronics makers need the full support of the movie industry to supply films on pre-recorded DVD discs. The DVD Forum appears to have the ear of the media industry, and industry analysts have said it is unlikely Hollywood will back two different blue-laser formats."
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