PriceSCAN Blog

First, a format-neutral method of obtaining content could dampen the ability of either standard to drive the other out of existence, that being downloadable video purchased online. During the videocassette recorder battle, home movie viewers were obtaining their movies from video rental stores, especially big chains like Blockbuster and Hollywood Video. Shelf space was and is at a premium in those stores, and thus they were heavily incentivized to see a single standard picked by the market, thus avoiding the need to carry duplicate inventory. Today, however, many cable services offer video on demand, and some have begun offering HD-VOD. If these offerings become as broad as the inventory of the video rental stores, than recorders with either the HD-DVD or Blu-ray standard might be used by the consumer. I say might because DRM issues remain to be worked out. But if the implementation of the HDCP DRM standard allows recording of HD-VOD (and this could entail single-player and/or single copy rules for burning disks) then your cable, satellite or phone company becomes your video store, the format for transfer works with either standard, and the lock-in effect driven by physical video sales and rentals goes away. This could also be true if video downloads with secure DRM become available along the iTunes model in music. Carrying multiple standards would become a matter of a little more server disk space, and while even a small difference in marginal cost could have an effect, it might not be enough to motivate online video stores drop a standard if each of these achieves significant market share early on.
Of course, the other side of the coin here is that cable companies are already offering Tivo-like HD-DVR recorders. You can't burn disks with them, but if the DRM associated with Blu-ray and HD-DVD should prevent the recording of VOD anyway, than the incentive to buy these new machines versus using HD-DVR is reduced significantly. Difficulties using these devices with much of the existing installed base of HDTV sets (they require a DVI or HDMI connection to facilitate HDCP, and many of the sets sold to date simply don’t accommodate this) already present impediments to a rapid acceptance of these new technologies. Toshiba and Sony may find that DRM issues, compatibility issues and competing technologies make their new products irrelevant in much of the market place.
On the other hand, maybe the DRM issues get worked out in such a way that cable, phone and satellite firms can support HD-DVR devices with Blu-ray or HD-DVD burners. Then those content conduits could take the place of the video stores of the VHS war, proving decisive in determining which standard survives. And of course there's always the possibility that the technical superiority of one format over the other could prove crucial: for example, there have been claims that Blu-ray disks are less durable than their HD-DVD counterparts. Add to this mix the distinct possibility that Congress and the courts could ounce again wade into the DRM debate, and you can appreciate how difficult it is to predict how all this will play out. With all this uncertainty swirling about Blu-ray and HD-DVD, don't be surprised if the initial rollouts of these technologies are met by a relatively small set of early adopters, and many consumers choose to simply sit on their hand and wait for greater clarity. After all, these machines are supposed to burn disks, not their owners.