Was HD-DVD done in by a dirty deed?

By Megan McArdle

A casualty of the DVD wars has written up his experience for Slate.

While I freely admit my moronitude, I still believe the HD-DVD owner is an unfairly maligned creature. It wasn't dumb to jump on the HD-DVD bandwagon: Toshiba's technology was cheaper and more consumer-friendly than Sony's. It was dumb, though, to assume that the forces of good would triumph. In the end, the fight between Sony and Toshiba played out like some kind of bizarro sports movie: The bad guy won at the end by clocking the lovable underdog in the crotch with a baseball bat.

. . .

On the eve of January's Consumer Electronics Show, Warner Bros., which has the largest library of any home-video retailer, signed an exclusive pact with Blu-ray. With disc sales declining, Warner's president said, the company needed to "erase consumer and retailer confusion over dueling DVD formats." Warner's defection put five of the seven major Hollywood studios on Team Blu-ray. Just like that, nobody seemed to care that HD-DVD and Blu-ray movies looked and sounded pretty much the same or that Toshiba's players were way cheaper than their Sony counterparts. No, this war ended in the most annoying way possible—with a bunch of mega-corporations telling gadget buyers they didn't care which format was better. They just wanted it to be over.

At this point, Toshiba turned to a strategy that industry experts call "denial." After admitting he was "disappointed" with the Warner Bros. announcement, a Toshiba exec added, "Sales of HD-DVD were very good last year." This was a bit like the scene in The Naked Gun where Lt. Frank Drebin stands before an exploding fireworks factory and shouts, "Nothing to see here!" In the succeeding weeks, every entity that's capable of writing up a press release—Netflix, Best Buy, Wal-Mart, Sam's Club, the nomadic tribesmen of Outer Mongolia—announced it was going Blu.

As these HD-DVD disavowals hit the Web, I got sad ("This blows"), then mad. ("This blows!") All of these companies had been too lily-livered to pick between HD-DVD and Blu-ray when it could've made a difference; instead of having the guts to make up their own minds, they let Warner Bros. tell them what to do. Even worse, the Pittsburgh Post-Gazette and BusinessWeek reported that Sony, perhaps having learned its lesson from the Betamax debacle, paid Warner Bros. between $400 million and $500 million to go with Blu-ray. Sony hadn't won because it offered the HD-buying public any other tangible advantage. It took down Toshiba because it knew whom to pay off.

Every time there's a format war, the losers complain that the inferior product won through nefarious methods. During the Microsoft antitrust wars, Apple and Netscape dutifully trotted out the Betamax VCR and the QWERTY keyboard as examples of the way that network effects and switching costs could lock in an inferior format. This was always mostly myth, particularly in the case of Sony's Betamax format, which came out well before the VHS format that ultimately won. As with Microsoft, while Betamax may have pleased technophiles, for ordinary users it had serious drawbacks.

In the case of Blu-Ray, the "Sony paid off Warner!" story may have a pleasingly nefarious ring, but that's not quite the whole story. HD-DVD was already losing the format wars, as the author himself admits:

After three minutes of research on Engadget and Gizmodo, I decided this was clearly going to be a war of attrition. While Sony had the lead in disc sales, Paramount and DreamWorks had both announced they would release titles only on HD-DVD. Since a) neither side looked ready to budge, and b) I have no impulse control, it was time to make a decision. Blu-ray discs can hold more data than HD-DVDs, and more studios were behind Sony's format. [Emphasis mine] Still, Sony never had a chance to get my business. Wasn't it my duty as a shopper to back the cheapest option? For the $377 that Circuit City was charging for a Blu-ray machine, I could've bought two of Toshiba's players (14 free discs!) and had enough money left over to buy a Walkman and a rotary phone. I was casting my lot with HD-DVD. What could possibly go wrong?

Even before Warner made its announcement, Blu-Ray was already outselling HD-DVD. Warner may have delivered the killing blow, but it's very likely that all it did was alter the timing, not the final outcome. One could argue that it was a mercy killing, preventing more people from investing in a dead-end format.

What this really, shows, I think, is that storage is king. VHS beat Betamax, not because it made some shady deals, but because its discs could hold more. Blu-Ray players may be more expensive now, but when you're committing to a format for your movie library, you need to think long term. And if history is any guide, what we'll most care about in the future is more space.

Update Tom Lee respectfully disagrees:
Megan's right that I and a lot of my fellow nerds aren't very happy about this outcome, but she's wrong to say that "[e]very time there's a format war, the losers complain that the inferior product won through nefarious methods." I'm not sure that's a fair characterization. In this case I can admit that Blu-Ray is the technically superior standard. Many technologists didn't like it because it seemed a bit more DRM-laden, because it didn't seem worth the price premium, and because Sony has behaved very badly with respect to proprietary media formats in the past (Redbook/CD excepted, but of course that was a joint venture with Philips). I should say that I don't really have a dog in this fight — I don't own a drive from either camp, and tend to think that we'll only get halfway through this generation of tech before network delivery of video consigns Blu-Ray to a CD-like role (except less useful due to the aforementinoed DRM). But that doesn't mean I'm happy with the way things turned out for HD-DVD. It's not so much that I think there were dirty tricks involved (although there may have been). It's just that it's frustratingly obvious that the factors determining a technology's success frequently have little to do with its capabilities, price, performance or other innate attributes. Rather, they're the result of quirks of the business environment into which the technology is born.
Further update Ryan Avent weighs in:
I understand what Tom’s saying, but I think he’s missing some key points. He wants to judge a technology in a “pure” world, outside the presence of the market conditions in which it will be sold and used, but you can’t do that. The utility of a technology is inextricably connected to the market conditions in which it will be sold and used. A Beta videotape might clearly be superior on most quality variables, but if a VHS tape is long enough to hold a full-length movie and Beta isn’t, well that’s important. Saying that length shouldn’t be as important as other variables is pointless; the market didn’t just want “Quality,” it wanted a certain quality.

This article available online at:

http://www.theatlantic.com/business/archive/2008/02/was-hd-dvd-done-in-by-a-dirty-deed/2855/