Is this a blockbuster decision, or not?

Implications: Blockbuster has announced that it will offer all new high definition DVDs in the Blu Ray format on an exclusive basis. Whether or not this is a blockbuster decision by Blockbuster as it relates to the Sony led format remains to be seen. And this will not necessarily spell the doom of the Toshiba led HD DVD system. Time will tell as the market decides. The reason that this may not be a fait accompli is due to the fact that it is still very early in this format war. This may be a battle won, but it is not a turning point in the war. Also, there are other major competitors to Blockbuster in terms of DVDs. What if, for example, Wal Mart, Target and Best Buy, the three market share leaders in the important sell through market, decide to carry both formats or if any one or all three offered only the HD DVD? What if Net Flix made a similar decision? Hollywood Video?

Analysis:  

Blockbuster’s decision will cause the industry to pause and for the other players along the entire pipeline to re-consider and re-evaluate their options. It is not a decisive victory for Blu Ray, momentous as it is.

This announcement has been timed no doubt for the opening of the Supply Chain Management conference being held in LA this week.

The format battle will continue for the foreseeable future. Both sides have invested inordinate sums of money in developing their formats. The timing is such that the installed base of HDTVs is still relatively small, notwithstanding the February 17, 2009 date looming with the end of analog transmission. For those that have taken the leap into the world of the HDTV, watching a standard definition DVD on the HD monitor is significantly better than what they had previously.

Having spent a couple of thousand dollars on that HD set, how many of the average consumers can realistically spend for the recently reduced price for a Toshiba HD DVD player at $399 or $299 with rebate? Sony’s players are still significantly more expensive.

Furthermore, the studios have often said that they took a lesson from the music industry in the way they approached DRM. Another lesson related to the music industry is that while iTunes and the iPod have done sensational business, this has not precluded Microsoft’s Zune and mp3 players from iRiver, Samsung, LG and others from offering competing products. Those other companies are still in the marketplace and they are not going to move out just because Apple for the time being is dominant.

While Sony Pictures controls more titles than any other studio, they are a separate profit center and it would seem that they would offer both formats, sometime in the future, if the market so dictates. If HD DVD was leading at the time Spider Man 3, the leading box office champ so far in 2007 ready for DVD, would they not release in both formats?

There cannot be a clear winner in this whole format war until the price of the players drops to at least the $250 range. That price range will get the not so well-to-do early adopters and others. Further drops in prices to the $200 range will begin to bring in some of the mass market, creating momentum.

Yes, this is a blockbuster decision by Blockbuster, but the war will wage on.