Considering the steel-cage death match being waged by the competing high-definition DVD formats, a single disc that combines both the HD-DVD and Blu-ray formats would seem like a major breakthrough. At least, that's what Warner Brothers, the Time Warner (NYSE:TWX) subsidiary, is hoping.
Engineers at the studio have filed a patent for a triple-layer disc that would house not only the competing hi-def formats, but a regular DVD track as well. While consumers patiently wait for a standard to emerge -- or more affordable players and discs, at least -- the rapid pace of technology only increases the chances that new developments will make the current competing standards of hi-def disc obsolete.
Another problem facing Warner Brothers' proposed triple-layer disc is that it would undoubtedly be more expensive than the already cost-heavy Blu-ray or HD-DVD disc, since it would have to pay royalties to both formats for inclusion. Cost is one of the factors holding back development of these next-generation DVD formats.
Given the corporate prestige that Sony (NYSE:SNE), Disney (NYSE:DIS), and virtually every consumer electronics company have imparted on the Blu-ray side of things, with the equal weight of NEC, Toshiba, and Viacom's (NYSE:VIA) Paramount on the HD-DVD side, you have the makings of an internecine war with a take-no-prisoners attitude.
Movies are increasingly shot in a high-definition format, and many new televisions today come with integrated hi-def tuners. Come March 2007, the FCC has mandated that all televisions must contain the-next generation ATSE tuner, which will supplant the previous NTSC tuners. That means the need for DVDs may quickly be supplanted by cable-based video-on-demand services.
For companies like recent Motley Fool Stock Advisor pick Dolby Labs (NYSE:DLB), this is a dual-edged sword. Currently, the leading name in digital surround sound makes most of its money from licensing its technology to manufacturers of DVD players and recorders. Its technology is mandated for the new ATSE tuners, and it is a standard for both the HD-DVD and Blu-ray formats. The proliferation of either --or both -- formats would obviously be a boon to it.
DVDs are a mature market, no longer expected to enjoy their previous exponential growth. The new technology, though comparatively expensive, could help boost sales of new equipment, which would go right to the top line of Dolby and competitors like DTS (NASDAQ:DTSI). Delays can only hamper that. But as on-demand movie downloads become the preferred way of watching movies, Dolby can profit there as well, since its digital technology is incorporated into the movie itself, as well as the hi-def TV tuners. The revenues might not be as large as they once were, but they won't vanish entirely.
Whether we'll actually ever see mass production of either high-definition format, or whether one of the formats becomes this generation's Betamax, some companies will still earn a profit from it all. They're the ones at which investors should probably look more closely.
Further highly defined Foolishness:
- More Delay for Blu-ray
- Are You Ready for High-Definition?
- Will Blu-ray Prove Red-Hot?
- HD-DVD Gets a Boost
Dolby Labs, Time Warner, and Disney are recommendations of Motley Fool Stock Advisor. A 30-day guest pass gets you a high-resolution view of all the selections, which are currently beating the market by 40 percentage points!
Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
