Article and Commentary: DVD Fight Intensifies: Microsoft and Intel to Back Toshiba Format

I, Mark Pearson, posted this to the discussion board in September (before you'd announced that we should submit our stories to the drop box). This submission into the drop box is nearly identical to the posting, just slightly elaborated.

The copy of the article below (after the commentary) comes from
http://www.newscoast.com/apps/pbcs.dll/article?AID=/20050927/ZNYT05/509270704/-1/API
The original article was at
http://www.nytimes.com/2005/09/27/technology/27dvds.html
(I had forgotten to save the article before it was removed from the free part of the New York Times web site. Luckily, I found someone reposted it elsewhere.)

Commentary:

The New York Times today:
"DVD Fight Intensifies: Microsoft and Intel to Back Toshiba Format"
http://www.nytimes.com/2005/09/27/technology/27dvds.html
reports how the fight over the format of the next generation of DVDs is turning out.

One feature of the article that struck me was the importance of perception and indeed self-fulfilling prophecies. "But [Microsoft is] convinced that as of now, the HD-DVD format discs can be produced more cheaply and more quickly than the Blu-ray discs, and are therefore likely to become the dominant technology." In choosing this standard, Microsoft is helping to insure it becomes the dominant one. (The dominant one will, in turn, have larger economies of scale and therefore lower costs. So standards-selection can really be a self-fulfilling prophecy.)

The other feature that struck me was that it's not entirely clear why, after Microsoft stood neutral on the format for so long, it decided to come out in favor of a standard now. The article briefly hints that Microsoft is choosing a side because it's looking for more income, because an accepted standard for high definition DVD will sell more DVD players and software and thereby help Microsoft's sales. But why did they decide now, as opposed to six months ago or a year from now? Deciding six months ago may have helped new DVDs and players to come to market even earlier, further accelerating adoption (and profit).

Another question about Microsoft's decision on HD-DVD versus Blu-ray was whether it was a technical one -they liked the features better- or a strategic one -HP and Dell back Blu-ray. I'm tempted to claim it is more of the latter. If it was the former, Microsoft would likely have been able to choose and would publicly have chosen the standard much earlier (see above). In waiting to choose, Microsoft saw how other companies lined up and made a business decision about who they would like to harm and who they would like to help. (Competitors that have already invested a lot in a particular standard have a lot to lose if Microsoft can tip the balance to make the opposing standard the dominant one.)

Article published Sep 27, 2005
DVD Fight Intensifies: Microsoft and Intel to Back Toshiba Format

By KEN BELSON
New York Times

Microsoft and Intel are throwing their full weight behind one side in the long-running battle over the format for the next generation of high-definition DVD's.
Today, the two companies will announce that they are backing the HD-DVD format developed by Toshiba over the Blu-ray standard championed by Sony, Matsushita Electric, Samsung and others. Microsoft announced in June that it would work with Toshiba to develop high-definition DVD players. Now, Microsoft and Intel say they will develop software and chips that will allow personal computers to play the next-generation DVD's from Toshiba.
The companies said they had not ruled out incorporating Blu-ray technology in their operating systems and on their chips in the future. But they are convinced that as of now, the HD-DVD format discs can be produced more cheaply and more quickly than the Blu-ray discs, and are therefore likely to become the dominant technology.
For the last two years, Microsoft and Intel have been careful not to alienate either camp in the format battle because they sell software and components to companies on each side. They also hoped that the electronics makers and Hollywood studios developing the formats would reach a compromise.
But the major Hollywood studios are now split between the formats, and electronics companies on both sides plan to start selling next-generation DVD players as early as Christmas. Sony also plans to include Blu-ray technology in its new PlayStation 3 game console to be released next spring.
As the format standoff has deepened, demand for the current generation of DVD's and DVD players has slowed, alarming Hollywood studios, which have come to depend heavily on disc sales. The studios, as well as electronics makers and computer manufacturers, expect high-definition discs to restart sales growth. But the lack of a resolution over the future format has slowed the changeover.
"We were neutral for a long time," Jordi Ribas, the director of technical strategy for Windows at Microsoft, said. "But we're approaching the time when this has to come to market and from our standpoint, the earlier the better."
As early as last year, however, some industry executives said that Microsoft was likely to side with the Toshiba camp.
Though Microsoft and Intel do not make DVD machines, they benefit from the sale of next-generation discs because consumers will also want to play the new discs on their PC's. That means that the computer operating system will have to be designed to read those discs.
Microsoft and Intel say that Toshiba has proven that its discs can be copied onto hard drives and home servers and sent over home networks. The companies also favor the "hybrid" disc developed by Toshiba that includes a standard definition version of a movie on one side and a high-definition version on the other side.
Their decision to support Toshiba's HD-DVD format also creates another fissure in the tug of war between the companies backing the two formats.
For instance, Dell and Hewlett-Packard, two of the world's largest PC makers, are part of the Blu-ray group. Their computers, assuming they include Microsoft and Intel products, will be capable of playing HD-DVD discs. But if they want their machines to play Blu-ray discs, they may have to find a third-party to design software for them.
In addition to developing software to play HD-DVD discs on PC's, Microsoft may also create software so its new Xbox game console, which will be released later this year, will be able to play HD-DVD discs.