Another Format War is Over

After two years of battle between Sony's Blueray and Toshiba's HD-DVD technology, the High Definition format war is finally over.

Now that all 6 major movie studios have backed Blueray, Toshiba has been left with no choice but to discontinue production of the HD-DVD disks. As with the previous format wars (between Betamax and VHS) this is likely to be held up as a case study in business and marketing courses for years to come.

VHS vs Betamax

It seems Sony has learnt a thing or two from the defeat of their Betamax format. I remember finding the VHS/Betamax format war fascinating when I studied it in an Open University course I took a few years ago.

Many factors played a part in the final dominance of VHS, but arguably the main reason for the victory was simply because in the early years, Betamax could only record for 1 hour and VHS could record for 2. Sony failed to do proper market research and wrongly believed that customers would prefer to go for the technically superior Betamax. Sony were also slow to licence their technology to other manufacturers. By the time Sony realised what was happening and reacted to market conditions, it was already too late.

VHS dominated the market by a) producing what the consumer wanted - a cassette capable of recording a full film, and b) enabling large scale production of cheap VHS players.

The Thorn-EMI group backed VHS and flooded their many high-street TV rental shops with low-cost VHS machines. Alternatively, Sony were concentrating on quality, so Betamax became a format to buy while VHS was the format to rent. Unfortunately for Sony, most people preferred to rent at the time, particularly when the simplest machine cost around £700 (equivalent to over £2000 today). This process was then self-reinforcing, because the presence of two formats made people reluctant to commit to one and risk picking the eventual loser - and so they rented and waited to see what would happen. By 1980, out of an estimated 100,000 homes with VCRs, 70% were rented.

Then came the explosion in the early 80's of video tape rental - another factor that led to the demise of Betamax. The Betamax suppliers were slow off the mark, and released less films on the format. As more people bought or rented video players and started to rent tapes, the greater choice was with VHS, which reinforced the reason for customers to purchase VHS players rather than Betamax.

And that was the end of Betamax, with the exception of Japan where the standard remained popular.

Was it Worth It?

Sony has won the HD-DVD battle and people will argue about how they did it for years to come. It wasn't as straight forward as the VHS/Betamax battle. What were the real reasons for the movie studios backing Blueray instead of HD-DVD? The fact that Sony Pictures is one of the major movie studios probably had something to do with it.

The question you've got to ask though, is how relevant is Blueray given the move to downloadable content from the Internet. Itunes, Amazon, Lovefilm and many others are now already offering downloadable movies. High volume disk storage is becoming ridiculously cheap; internet bandwidth is increasing at a tremendous rate; and most DVD players now come with many options, including DIVX - the format of choice for peer-to-peer downloaded content.

Seriously, on-demand video is now a reality. In a few years time the average home will get most of their TV and video content delivered by the Internet, and if we want to store and keep it, we'll save it on a hard drive (or maybe even flash drive). The Writers Guild of America know this, which is one of the reasons for the recent Hollywood writers strike, which ended with the movie studios finally agreeing to pay residuals for online content.

I'm holding out on Blueray for this very reason, unless of course I can talk Rach into agreeing to get a PS3 which comes with a Blueray player. But given we've already got a Wii I don't think that will be an option.