Published as part of our sister-site GamesIndustry.biz' widely-read weekly newsletter, the GamesIndustry.biz Editorial offers analysis of one of the issues weighing on the minds of the people at the top of the games business. It appears on Eurogamer after it goes out to GI.biz newsletter subscribers.
It's been a long time since any industry pundit was willing to bet on the success of Toshiba's HD-DVD, but the protracted war over the future of high-definition content delivery continued regardless. Staggering and limping its way through a litany of awful sales figures and high-profile studio defections, HD-DVD was the zombie format - struck with lethal blows from all sides, but refusing to fall down and stop twitching all the same.
This week brought merciful respite, and the end, when it came, was swift. Months of horrible news for HD-DVD snowballed into an unstoppable force after its studio support crumbled just before January's Consumer Entertainment Show. A month and a half later, Toshiba has finally pulled the plug - cutting the format's life support and consigning it to history's gallery of noble technological failures.
The reason for HD-DVD's continued staggering across the battlefield, mortal wounds notwithstanding, has been well aired by now. Although ostensibly a Toshiba-backed format, HD-DVD's most staunch ally in the past year has been Microsoft. Its HD-DVD add-on for the Xbox 360 accounts for around a third of total sales of HD-DVD players, and there have been credible reports that the format's studio support was being propped up by co-marketing deals funded from Microsoft's expansive purse.
Microsoft's objective in all of this was simply to prolong the agony of the high-definition format war. Divide and conquer has been a strategy that has served Microsoft well over the years, and its ambitions with regard to high definition content are very clear. Although it sells technology used by both the Blu-Ray and HD-DVD formats, Microsoft's hope is that consumers will ultimately spurn both formats in favour of downloading HD content - preferably through Microsoft's own services, like Xbox Live. If achieving that means fermenting a format war that damages consumer confidence in both sides, so be it.
So just how much damage has HD-DVD's zombie act done to the prospects for high definition disc formats? Has it bought enough time for HD downloads to become a realistic prospect for consumers, or even for the concept to start to take root in their imaginations?
I'm not convinced that it has. Blu-Ray's victory comes early enough not to be a pyrrhic one - and there are strong signs to suggest that although downloads are beginning to earn their place in the HD content market, there will be at least another healthy generation of disc-based distribution before the world is ready to go entirely digital.
The problem which HD downloads face is simply that the market is not yet ready for them. Broadband connections even in relatively developed countries like the United Kingdom simply aren't up to the speeds required for multi-gigabyte downloads of movie content. Although speeds of 25 and even 50 megabits are advertised by some providers, the reality for UK consumers is that their broadband probably runs at somewhere between 2 and 5 megabits - and much, much lower in certain areas. With some notable exceptions, much of the rest of the world is in the same boat; the reality of broadband lags behind its promise.
Consumers, too, aren't quite ready for download content. I don't doubt that they will be, and sooner than many pundits believe - the attachment to physical products is not remotely as strong as some high street retailers and content publishers would like to think, as the incredibly fast transition from CD to music downloads is proving. However, we're simply not quite there yet, and it certainly doesn't help that few consumers are sporting home networks and properly configured media servers, replete with large hard drives, in their living rooms. Equally, it doesn't help that while consumers may be prepared to shed their attachment to physical products, they're still not going to give much ground on the question of ownership - and rental models where movies "time out" after a certain period, or can only be watched a certain number of times, are likely to prove to have very narrow appeal.
This isn't to say that HD downloads won't form a part of the video content market going forward - indeed, I suspect that the landscape of the next ten years will be much more varied than the DVD-dominated market of the last decade. Downloads, existing DVDs and Blu-Ray will all have roles to play in this market - but the important news for Sony, and arguably for the games industry as a whole, is that Blu-Ray certainly does have a role in this landscape, and a very important one at that.
Challenges remain, of course; Blu-Ray's prices need to come down, both for hardware and software, before it can seriously start challenging sales of DVDs, but already figures for the uptake of key Blu-Ray titles are encouraging. Most of all, it's clear that Sony's "trojan horse" strategy has worked. With over ten million PS3s sold through, Blu-Ray's installed base from that console alone was more than ten times the total HD-DVD installed base - and even if many of those users don't buy too many Blu-Ray films, it still represents a very healthy potential market for the format.
It's not fair, perhaps, to say that Microsoft's gambit has failed. If Blu-Ray had become established a year earlier, it would have been a serious blow to the Xbox 360, and to Microsoft's ambitions both in downloads and in videogames. On the other hand, Sony can heave a sigh of relief that the damage done has been fairly limited - and can undoubtedly expect a major boost both for PS3 sales and for its share price off the back of Toshiba's capitulation.
It's also worth noting that for the media market as a whole - from consumer electronics through movies to games - the final end of HD-DVD means the end of a major source of confusion over high definition. Spurred on by strong sales of HD television, 2008 can at last become what every year since 2005 has been predicted to be by various analysts and commentators; the long-delayed year when high definition finally takes its place at the head of the table.
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