The battle for the next generation of optical discs is over. Toshiba threw in its tattered towel today, pulling the plug on its HD-DVD format and ceding the high-def disc standart war to Sony's (NYSE: SNE) Blu-ray.
Toshiba will no longer make or market HD-DVD players, giving Blu-ray clear access to pitch itself as the DVD of the future.
This really wasn't Toshiba's decision. As studios began gravitating toward Blu-ray, retailers started following suit. Over just the past few days, Wal-Mart (NYSE: WMT), Netflix (Nasdaq: NFLX), and Best Buy (NYSE: BBY) had committed to phasing out their HD-DVD offerings.
The battle is eerily similar to VHS and Betamax's fight to become the videocassette format of choice. But this time, Sony -- the loser that backed Betamax -- gets to take a victory lap.
Sony's win should also trickle down to benefit its PlayStation 3 console. The video game system had struggled to win an audience until recent price cuts made it competitive with the Nintendo (OTCBB: NTDOY.PK) Wii and Microsoft's (Nasdaq: MSFT) Xbox 360. The PS3 remains a distant third-place player, but now that everyone can rally around Blu-ray as the battlefield survivor, the PS3's ability to play Blu-ray discs will make it a more compelling purchase.
Toshiba won't be the only loser here. Microsoft is also left smarting. The company has been selling an HD-DVD drive as a peripheral accessory to Xbox 360s. With no new titles coming out on the platform, owners will feel slighted in owning a relic. They may be able to get sweet deals on existing flicks, but it's bound to leave a bad taste in the mouth of its supporters.
Don't spend too much time mourning for the losers, though. The industry needed this. Consumers were reluctant to upgrade their DVD players until one of the two next-generation platforms finally won out. Studios will now be able to make more money off the pricier Blu-ray discs. Consumer-electronics superstores will have a clear marketing push, once they clear out their now-obsolete HD-DVD players. Consumers will get sharper-looking discs relative to their current DVD collection, without the fear of near-term obsolescence.
Everybody wins. In time, even Microsoft and Toshiba will lick their wounds and cash in on the Blu-ray bandwagon. It's inevitable, and now it's in brilliant high-def.
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