A Clear View of Blu-ray's Victory

After a speculation-filled weekend, Japanese consumer-electronics giant Toshiba announced today that it will drop its support for the HD-DVD next-generation DVD format, handing victory to the competing Blu-ray format. Blogs and tech sites were lit up with discussions over the death of HD-DVD over the past couple of days, and with Toshiba's decision now official, it's time to dig further into Blu-ray and talk about related stocks, and whether it even matters.

First of all, what is Blu-ray? Basically, Blu-ray is a newer format of DVD with superior visual quality and storage space compared with standard DVDs. Blu-ray players are also fairly expensive, running from about $400 on up, and the discs themselves cost $25 or more but can sometimes be found cheaper on sites such as Amazon(AMZN Quote). Blu-ray is also the storage format for the Sony(SNE Quote) PlayStation 3 video-game console.

The main question investors need to ask is whether Blu-ray even matters. The answer, for me, is no, since Blu-ray is going to have an awfully tough time becoming a mass-market technology. There is no denying that Blu-ray's picture quality is phenomenal. However, there are several obstacles, even aside from the prime premium relative to standard DVD, to Blu-ray really hitting the big time.

The first is that with a decent DVD player and television, standard DVDs, especially newer ones, look good enough to the average person. That person is probably pretty unlikely to be willing to shell out for a Blu-ray player until the price premium shrinks significantly.

In addition, many consumers are generally confused about HD in general and often don't even know that buying an HDTV doesn't automatically mean they're watching HD content. Just last weekend, The New York Times quoted statistics from the Leichtman Research Group showing that 50% of HDTV owners don't watch any HD shows, but 25% of them think they are. So while Blu-ray isn't a tough sell to home-theater nerds and technophiles, it is a tough sell to the casual folk.