The eventual marketing of video discs and hardware that incorporate both of the industry's two competing high-definition formats would seem to portend an end of the format wars. But it might just be the beginning. As The New York Times recently reported, Warner Bros., a division of Time Warner ( TWX), will announce plans to introduce a "Total HD" disc that will support the Blu-ray and HD-DVD formats at the Consumer Electronics Show in Las Vegas next week. Blu-ray, backed by Sony ( SNE) among others, and HD-DVD, supported by Toshiba ( TOSBF) and Microsoft ( MSFT), have been jockeying for the position of the market leader. Both are looking to replace the current standard DVD disc. In addition, South Korean electronics maker LG recently said it plans to manufacture a DVD player that would play both formats. While the latest moves will be a boon for consumers who have had to make a choice between the dueling formats, it's unlikely to benefit the industry in the long term. "In some ways, products such as Total HD and the dual-format player are prolonging the survival of both camps and working against a knockout," says Ross Rubin, director of industry analysis for NPD. Living with two formats could make it more complicated for disc and player manufacturers. And increased costs could eventually eat into everyone's profit. "This dual-format move may be required given the intractable nature of the format war, but the market overall will suffer," says Ted Schadler, an analyst with Forrester Research. "Markets grow best when there is a single standard, not dual specifications."
Dual-format discs could cost more to produce, and if consumers have to pay more than a 10% premium for the discs, they're unlikely to get the momentum they need, says Wolfgang Schlichting, research director for IDC. As for the dual-format players that LG is planning, those also will likely cost more because of the more sophisticated head as well as dual licensing fees, says Schadler. Plus, there's Sony to reckon with. The Japanese conglomerate will hardly be pleased with any new products that help sustain a rival format, as helpful they may be to consumers. Sony has spent millions trying to build Blu-ray into the industry standard, even going to the extent of tying the fate of its PlayStation 3 gaming console to this move. The company's PS3 console carries the Blu-ray optical drive -- the second-most-expensive single component in the PS3, at a cost of $125 per unit, estimates research firm iSuppli. A 60-gigabyte PS3 model retails at $599, and a 20GB model retails at $499, still way above competitor Nintendo's ( NTDOY) $249 Wii. "The money they spent to try and become the standard may well prove to be unfruitful," says Phil Leigh, founder of Inside Digital Media, an industry analysis firm. Sony, which has seen production delays and much criticism for bundling the Blu-ray into the gaming console, is likely to continue its battle to have Blu-ray emerge as the standard. But it will be another three years before we see how this battle shakes out, says Schlichting. Dual-format discs and players may be introduced this year and will only start gaining traction starting 2008, he says. Warner Bros.' dual-format disc will likely affect retailers more than anyone else. With limited shelf space, retailers won't have to worry about stocking discs of two different formats. As for consumers, it's still not clear if they will be the winners. Their best interests are served when they have access to products at the lowest prices, and a dual format isn't necessarily the best way to get there.