DVDs: Battle Of Blue Lasers

Lasers may be the weapon of choice for sci-fi movie heroes when the fate of the galaxy hangs in the balance. But back here on Planet Earth, lasers are at the center of a movie battle of another kind: the one among Japan's giant electronics manufacturers over the next generation of DVD technology. The winners will get to set the course of the home-video entertainment industry for perhaps the next decade or longer and reap billions in licensing royalties in the process.

With the convergence of the TV and the PC finally becoming a reality, the technical specifications of tomorrow's DVDs have the potential to affect the development of not just movies but also console video games like the Xbox and PlayStation, the operating systems of Macintosh and Windows computers and a host of other interactive technologies. And Sony's recent successful bid for MGM Studios (and its rich backlist of classic films) underscored just how crucial DVDs are in the entertainment and electronics businesses. The current scuffle might not be settled before two competing (and incompatible) standards reach stores, potentially blossoming into a confusing standards war like the VHS-vs.-Betamax videotape clash of the late 1970s and early '80s.

At issue are two blue-laser technologies that will drive tomorrow's DVD players. Both formats enable far more information to be packed onto discs the same size as traditional DVDs (which are read by red lasers). The two new varieties also offer strong copyright protection and far greater picture clarity, making them well suited to high-definition television as well as to computer screens. Beyond that, there are differences in price, storage capacity and other technical details.

Spearheading one camp is Sony, which is promoting a technology it calls Blu-ray. Sony quickly enlisted Matsushita, Philips and Pioneer, among others, as allies in its cause. All was going well in this spirit of selfless cooperation, Sony claims, until Toshiba decided to ruin the party. "We have had many, many meetings with Toshiba," says project director Kiyoshi Nishitani. But when it came to explaining the benefits of joining the alliance, he adds with a shake of his head, "we could not get them to understand."

Toshiba's DVD executives cheerfully avow that they spurned the Blu-ray consortium's advances, deciding to develop their own HD-DVD technology instead. The proud victor over Sony in setting the standards for the first generation of DVDs in the 1990s, Toshiba is in no mood to concede its lead. Toshiba team leader Hisashi Yamada, a key player in the first DVD war, seems to delight in playing the role of the spoiler yet again in the face of what many at Toshiba perceive as Sony's arrogance. "The way of Sony is very simple," says Yamada. "'Our format is best,' they say. 'You should adopt it,' they say. Only that. No compromise." But, he adds with a mischievous grin, "we did not think Sony's is the right technology at the right time. We think ours is better."

Both companies claim they have attracted a critical mass of supporters. Sony has enlisted Hitachi, Samsung, Sharp, LG and Dell, among others. Toshiba trumpets the fact that Microsoft has pledged that its next Windows operating system will be compatible with HD-DVD.

There is one thing that everyone agrees is essential to victory: Hollywood support. "The vote is in Hollywood's hands," says Warren Lieberfarb, a former head of Warner Home Video and currently a consultant for Toshiba. Home rentals and sales can generate as much as 50% of a film's revenue, and in the DVD-format wars, the studios all want to bet on a winner.