AFI BLOG: Media and Technology

Investors React to DVD War’s Near End - Red Herring

An impending end to a format war over next-generation DVDs boosted shares in both victorious Sony, in the Blu-ray corner, and Toshiba, in the losing HD DVD camp, on Monday as consumers cheered an end to confusion over which discs will carry high-definition movies.

Shares in Toshiba, which a company source said was planning to axe its HD DVD format, jumped nearly 6 percent as analysts praised a move to cut its losses, while Sony shares rose 1 percent.

The Blu-ray win means consumers seeking sharper movies on high-definition DVDs no longer have to choose between rival incompatible formats and run the risk of being stuck with a 21st century equivalent of Betamax — Sony’s videotape technology that lost out to VHS in the 1980s.

Having one format should also help accelerate the shift to the new technology in the $24 billion home DVD market.

“It doesn’t make sense for Toshiba to continue putting effort into this,” said Koichi Ogawa, a chief portfolio manager at Daiwa SB Investments. “It needs to cut its losses and focus its resources on promising businesses.”

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