DVD decision may mean new format war

Toshiba and NEC may have won the support of the DVD Forum for their proposed new HD DVD video format, but industry observers warn of a new format war looming.

The losers in the standards contest — a consortium of the world’s largest electronics makers, including Sony, Matsushita and Philips — are not expected to roll over and give up the potentially huge revenue stream that will come to the creators of the next major home video format.

In today’s low margin consumer electronics industry, licensing fees represent a major source of income. Reports are that Philips, a pioneering company that helped develop the original CD and DVD formats, has an official target to double its two percent to 2.5 percent profit margins with income from patent royalties.

The only certainty in the DVD contest is that — in the United States at least — the current red-laser DVD system is eventually going to give way to higher capacity blue-laser technology. A blue-laser disc can store about five times more information than red-laser discs — which includes up to three hours of high-definition video.

Blue laser is the underlying technology of both the newly approved HD DVD standard from Toshiba and NEC and the other side’s Blu-Ray technology. Players for both blue-laser formats will play conventional DVDs.

A wild card in the upcoming DVD format contest comes from Chinese electronics makers who make most of the world’s DVD players, but have chafed at having to pay DVD royalty payments that can be as much as $10 per device. In reaction, China has developed its own DVD technology, called EVD, which might become a Chinese standard. However, China is unlikely to gain international support for its technology from Sony and Matshushita, owners of the world’s top DVD brands.

The DVD Forum, an industry association of about 220 electronics and media companies, has said it will endorse only one DVD technology. Now that choice has been made. Ultimately, those who may actually determine the next successful format are the motion picture studios in Hollywood who distribute films and the consumers who buy their product.

For more information read DVD Forum selects NEC & Toshiba for HD DVD.

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