DVD format war ends as Toshiba surrenders

TOKYO — The biggest consumer-electronics format war in a generation is officially over.

Toshiba threw in the towel on its HD DVD technology Tuesday, announcing that it would no longer develop, produce or market disc players for the format.

In doing so, the Japanese electronics giant ceded victory to Sony's rival Blu-ray format, which looks set to become the global standard for high-definition DVDs.

In a pitched two-year battle, Sony and Toshiba tried to woo Hollywood studios to release movies in their formats and to persuade makers of computers and game consoles to use their disc drives.

The struggle was reminiscent of the 1980s battle between the VHS format of Matsushita and the Betamax format of Sony to become the standard for videotape.

Toshiba's chief executive, Atsutoshi Nishida, said the death blow for HD DVD came in January, when movie studio Warner Bros., a unit of Time Warner, decided to drop the format in favor of Blu-ray.

He also cited last week's decision by Wal-Mart not to stock discs and players using the Toshiba format.

"The sudden change by Warner Bros. was like a bolt from the blue," Nishida said at a news conference at Toshiba's headquarters in Tokyo. "We had no more prospect of winning this competition."

He said Toshiba had already informed two of its biggest HD DVD partners, Universal and Paramount studios, of its decision. Other partners included Intel and Microsoft, which sold HD DVD drives for its Xbox 360 game consoles.

Nishida said Toshiba would halt all production by the end of March, though it would continue offering customer support for several more years. The company has no plans to produce Blu-ray players.

The CEO refused to say how much money Toshiba stood to lose from dropping HD DVD, though analysts had said the cost could be in the hundreds of millions of dollars. That would be far from a fatal blow for Toshiba, which had $60.3 billion in sales last year.

In fact, Toshiba's shares jumped 5.7 percent Monday after the Wal-Mart decision fed speculation the costly format war would end. Toshiba's announcement Tuesday came after Tokyo markets closed.

Toshiba said it had sold about 1 million HD DVD players, about 600,000 of those in the United States.

Analysts have said Sony and its partners, including Samsung and Panasonic, have sold an equal or slightly smaller number of Blu-ray players, and 3 million more Blu-ray drives as part of Sony's PlayStation 3 game console. Those sales are tiny compared with the 100 million video players sold globally last year that used the current DVD format.

The companies are betting sales of the next generation of DVD players will rise with the popularity of high-definition televisions, whose sharper images require the greater storage of the new discs.

The format battle often drew yawns from analysts and consumers. Many believe the new disc format will be leapfrogged quickly by Internet-based movie downloads, just as music discs have been increasingly replaced by digital files.

Some industry executives and analysts worried that the DVD war was making consumers reluctant to buy either format. Tuesday, Nishida said he hoped Toshiba's decision would help the high-definition DVD market develop.

During the news conference, Nishida showed flashes of anger at Warner Bros., a rare display of emotion for one of Japan's usually reserved corporate chiefs.

He said the two formats were about even in sales until Warner Bros. decided to join the Blu-ray camp, which also includes Walt Disney and 20th Century Fox studios.

Nishida said that with recent global economic uncertainty and a slowdown in the U.S. market, Toshiba decided it could no longer risk money on the HD DVD format.

He said the company would refocus its resources on more profitable products, such as laptops and flash-memory computer chips. He said Toshiba and an American partner, SanDisk, would spend at least $16 billion to build two flash-memory plants in Japan.