Unfortunately for the Blu-ray camp, Paramount’s announcement effectively blocked any chance of a quick victory, and opened up an opportunity for Toshiba and its allies to launch a counterattack against the Sony-backed format. Whether or not Toshiba will capitalize on this opportunity remains to be seen. But what does all this format warring mean for the game industry? And does the struggle between the Blu-ray camp and the HD DVD camp shed any light on the intentions and strategies of Sony and Microsoft in the current console war?
As a matter of fact, the console war and the format war are closely related, and by no means accidentally. Sony’s intention from the outset was to win both wars, and its strategy was to put its full weight behind the symbiotic expansion of Blu-ray and the Playstation 3. The plan was to allow the PS3 to stimulate rapid growth of Blu-ray’s install base, and once Blu-ray became the next-generation home video industry’s standard, the format would in turn drive sales of Playstation 3 as consumers came to realize the tremendous value of a game console and high-definition DVD player bundled into one electronic device. Thus, the future success of the Playstation 3 depends in large part upon the ability of Blu-ray to defeat HD DVD. As long as there is no standard format in the high-definition DVD industry, the value proposition of the Playstation 3 remains unfulfilled because consumers continue to wonder: “why spend $499 on a game console which mandatorily includes a disc drive of an unproven format?”
Hence, for Sony, Blu-ray is an all-or-nothing gamble. If the format succeeds, Sony reaps all the benefits from its research, development, and marketing investments, and fulfills the value proposition of the Playstation 3. If the format fails, it will be the Betamax nightmare all over again, albeit with an added crippling effect—Sony will have to support an expensive-to-produce disc drive that will keep the price of Playstation 3 higher than its competition without providing the promised value of high-definition DVD playback. Hence, it is imperative for Sony that Blu-ray overpowers HD DVD, and does so relatively quickly.
On the other hand, Microsoft has been backing HD DVD since September 2005. The company’s official reasons for supporting the format are that it is cheaper to produce and that it allows consumers to copy data from the disc.[1] But is Microsoft supporting Toshiba’s disc because it honestlybelieves that the format is going to win? In my view, no. As opposed to Sony, Microsoft has played it relatively safe in regard to the format war. Whereas Sony built a Blu-ray drive into every Playstation 3, Microsoft chose to release a peripheral HD DVD player for the Xbox 360. This way, if the HD DVD ship sinks, Microsoft can just cut the ropes and float to safety. Ex-Microsoft Corporate Vice President Peter Moore once even mentioned the possibility of releasing an add-on Blu-ray player in the event that Blu-ray emerges the victor, although this is unlikely given that Sony is the primary developer and owner of the format.[2]
[2] Microsoft and Sony do cooperate in some business ventures, but only when it is profitable for both corporations and harmful to neither. An Xbox 360 add-on Blu-ray player would compete directly against Playstation 3’s built-in drive, so Sony faces strong economic disincentive to allow Microsoft to develop such a device.
Video Game Reviews 
