Feb. 19 (Bloomberg) -- Toshiba Corp. abandoned its HD DVD technology, surrendering the high-definition video market to Sony Corp.'s Blu-ray in the entertainment industry's largest format war since VHS beat Betamax in the 1980s.
Toshiba, the leading promoter of HD DVD, will scrap the development, manufacture and sale of players and recorders based on the format, the Tokyo-based company said today. The company plans to close the business by the end of March.
Sony's victory may stoke sales of high-definition discs, which offer clearer pictures than traditional DVDs, after shoppers held back purchases because of uncertainty over which technology would prevail. U.S. retailers decided to stop sales of HD DVD products after Warner Bros. Entertainment, the largest DVD publisher, said last month it would release films only on Blu-ray.
``With a single format, consumers may be more willing to buy high-definition DVD players, helping the market grow,'' Akio Mizutani, a Tokyo-based researcher at Mizuho Corporate Bank Ltd., said by telephone before the announcement. ``Demand for high- definition products including televisions and cameras, is picking up, but will take time to reach its peak.''
Toshiba's format is backed by 135 companies, including Microsoft Corp., Viacom Inc.'s Paramount Pictures and General Electric Co.'s Universal Pictures, according to the HD DVD Promotion Group's Web site. Sony counts Samsung Electronics Co., Matsu****a Electric Industrial Co. and Walt Disney Co. among 176 members, according to the Blu-ray Disc Association's Web site.
``We will wait until we hear from Toshiba before announcing any specific plans around the Xbox 360 HD DVD player,'' Microsoft said in a statement yesterday.
After Warner's Decision
Toshiba pulled out of the business because of Warner's defection and is calculating the cost of ending the operations, President Atsutoshi Nishida said at a briefing in Tokyo. The company doesn't plan to make or sell Blu-ray players, he said.
Lehman Brothers Holdings Inc. yesterday projected Toshiba will book charges of as much as 51 billion yen ($474 million) from the closure.
Toshiba's withdrawal from the unprofitable business may add as much as 50 billion yen to earnings next fiscal year, Nikko Citigroup Ltd. estimated.
Shares of Toshiba rose 5.7 percent yesterday after reports of its withdrawal spurred speculation that the move will limit losses from a prolonged battle with Sony and help the company focus on its larger semiconductor business.
Toshiba, Japan's biggest chipmaker, said today it will spend more than 1.7 trillion yen with SanDisk Corp. to build two chip factories that make flash memory to store data in consumer electronics.
Unified Standard
A unified standard benefits both consumers and the industry, Shigenori Yoshida, a Sony spokesman, said after Toshiba's announcement.
Samsung and LG Electronics Inc., which both make players that support the two standards, plan to continue production of the machines, the companies said separately today.
A Blu-ray disc player sells for at least $399.99 while an HD DVD version retails for as low as $149.99, according to the Web site of Best Buy Co., the largest U.S. consumer-electronics chain.
``For makers of next-generation DVD players and recorders, lowering prices to a level acceptable to customers is a must-do to stoke demand,'' Mizuho Corporate's Mizutani said. ``There is no clear winner yet in the Blu-ray camp, and real competition among members, including South Korean makers, will start now.''
An HD DVD can store up to 30 gigabytes of data, or six times more than conventional DVDs, less than the 50 gigabytes for Blu- ray discs, according to the Web sites of the two video standards.
U.S. Retailers
Wal-Mart Stores Inc., the world's largest retailer, on Feb. 15 said it will phase out Toshiba's standard because customers prefer Blu-ray. Netflix Inc. and Best Buy said this month they would also stop selling movies using HD DVD.
Time Warner, which been releasing movies in both formats, on Jan. 4 said it will drop HD DVD at the end of May, a decision that Macquarie Group Ltd. analyst David Gibson described at the time as ``game over'' for HD DVD.
Sony's triumph is a reversal of its defeat two decades ago, when the company's Betamax video tapes succumbed to competition from Victor Co. of Japan Ltd.'s VHS-based systems.
Matsu****a Electric and Sony, leaders of the Blu-ray association, and the Toshiba-backed HD DVD group had been in talks to unify their formats since the beginning of 2005. Negotiations broke down by May that year, with officials from both sides saying a unified standard was unlikely.
The groups highlighted the problems in creating a unified standard for the discs, which use a blue laser to read and record information.
Toshiba got a head start by selling HD DVD players from March 2006, almost three months earlier than the first Blu-ray machine.
