Blockbuster: Hooray for Blu-ray

Maybe Sony (NYSE: SNE  ) won't have to live its Betamax mistake all over again with its high-definition Blu-ray disc format. Rental giant Blockbuster (NYSE: BBI  ) announced that it would begin stocking Blu-ray discs at 1,700 company-owned stores this summer.

The company has been testing both of the next-generation optical disc formats -- Blu-ray and HD-DVD -- at 250 of its stores since November of last year. Those locations will continue to stock both high-def platforms, but the company's move to expand only its Blu-ray offerings will send ripple effects through the movie industry.

Blockbuster's online rental store will continue to offer both Blu-ray and HD-DVD. It doesn't have a choice there, since market leader Netflix (Nasdaq: NFLX  ) offers Blu-ray, HD-DVD, and conventional DVD rentals.

However, it can march to its own beat in the brick-and-mortar world. Most of its competition comes from mom-and-pop chains or Movie Gallery (Nasdaq: MOVI  ) , which all have limited stocking space. Maintaining in-stock inventory levels is always a challenge, and most rivals can't afford to gamble by overstocking their shelves with discs that are still early in the adoption cycle. It's a problem compounded by the relatively short life of a "new release" title before surplus copies need to be sold off to make room for the next wave of blockbusters.

Sony has been struggling in championing Blu-ray as the next standard. Sony's format boasts generally healthier specs than HD-DVD, but it's also slightly more expensive. Sony thought it could ram the format down consumers' throats by making its PS3 gaming console capable of Blu-ray playback. But that plan has backfired, since the pricey video game systems have been slow sellers.

This morning's announcement by Blockbuster could change things, though. This is no longer about movie studios or hardware makers picking sides. Consumers walking into any of those 1,700 Blockbuster locations will see Blu-ray as the supported platform, which might influence their optical-disc upgrading decisions. For once, we're seeing one platform making a serious move to pull ahead of the other.

Your move, HD-DVD.

A little more Blu-ray color:

Netflix is a recommendation for Motley Fool Stock Advisor newsletter subscribers. Find out why with a 30-day free trial subscription.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber -- and shareholder -- since 2002. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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