HD-DVD's Xbox 360 strategy

Let's get this straight from the start: This isn't a column about how Toshiba is working with Microsoft to implement HD-DVD drives in the next rev of the Xbox 360. And yes, theoretically there's some sort of newfangled external HD-DVD player in the works for Xbox 360. But this column isn't about that either.

It's about how Toshiba hopes that, by being first to market and pricing its next-generation, high-def DVD players lower than the Sony-backed Blu-ray players from assorted manufacturers, it will gain the upper hand in the next-generation DVD war. If you're hearing echoes of Microsoft's strategy for defeating Sony's PlayStation 3--getting to market earlier and cheaper--then the column's title should make more sense.

Now that we've gotten that out of the way, cut to Toshiba's ongoing HD-DVD road show, which made a stop last week in New York at a regional electronics chain called PC Richard and Sons on Manhattan's Upper West Side. The usual cadre of grubby tech journalists attended the short press conference, where Toshiba officially trotted out its in-store displays and demos for HD-DVD. It promises crystal-clear video that should--and damn well better--trump the HD picture that you get from your cable or satellite provider, and even over-the-air transmissions, which often suffer from overly aggressive digital compression, as anyone whose watched NBC's artifact-laden Winter Olympics coverage can attest. HD-DVD players and movie discs aren't due in stores for another few weeks--"by the first week of April"--but the promotions are in full swing and preorders are being taken.

As part of the demo, Toshiba showed trailers for The 40-Year-Old Virgin and Peter Jackson's King Kong on a Toshiba 56-inch DLP rear-projection HDTV, and not surprisingly, the images we saw looked really good. The company has two players launching: the $800 HD-XA1 will be available first, followed by the $500 HD-A1 a few weeks thereafter. Aside from the beefier build, the more luxurious styling, and the motorized flip-down access door of the HD-XA1, both models are all but identical from a features standpoint. Each, for instance, offers network connections that will allow for firmware upgrades and possibly downloads--of what, we don't know because they lack any sizable storage capabilities or flash-memory slots. Given the similarities, we assume that the less-expensive HD-A1 will be the one that will interest most early adopters. But both models are priced at hundreds less than the upcoming Blu-ray players, and Toshiba can gradually lower its prices as the year progresses, possibly hitting the $399 or even the $299 mark by the holiday season. In theory, that would put it in a position to capture more market share more quickly than Blu-ray, once both are in the marketplace.

After the demo, Toshiba opened up for a short Q&A. There were several technical questions--more on that in a minute--but one of the more telling questions was directed at a representative from the hosting retailer, PC Richard and Sons, rather than at Toshiba: What would happen when Blu-ray arrived a few months after HD-DVD--would the store market both formats side by side?

Yep, it would, the rep said. And he seemed to indicate that PC Richard and Sons wasn't going to favor one format over the other. It would simply "let the consumer decide." Still, one would have to assume that salespeople would have to say something, and since the two formats are very similar yet highly complex, they'd try to keep things as simple as possible and stick to pointing out the two formats' minor--yet arguably key--differences. I imagine the conversation would go something like this:

Consumer: Why is HD-DVD better than Blu-ray?
Salesperson: It's cheaper. And oh, it's got a better name. You hear HD-DVD, you know what it is.
Consumer: That's it?
Salesperson: That's it.
Consumer: And they're both backward compatible--they can play my existing DVDs?
Salesperson: Yep.
Consumer: So, what's better about Blu-ray?
Salesperson: The discs have a larger theoretical storage capacity (50GB compared to 30GB to 45GB). And there should be more Blu-ray movies because Sony owns several movie studios and it'll never make HD-DVD discs. Also, Blu-ray players can output in 1080p while HD-DVD players currently output in 1080i and 720p.
Consumer: What's 1080p?
Salesperson: I suggest you read David Carnoy's column on it. Here's a link for you.

Yes, scratch the surface, and things quickly get confusing. I can sit here and tell you that it's pretty difficult for the average person to tell the difference between a 1080p TV showing a native 1080p signal coming from a Blu-ray player and a 1080p TV showing an upconverted 1080i or 720p signal from a HD-DVD player. But Sony will certainly make native 1080p resolution a selling point--the company was already touting its 1080p displays as higher-definition TVs at January's Consumer Electronics Show--even if only a tiny percentage of consumers currently have TVs capable of displaying a native 1080p signal. And fewer still own the 1080p TVs big enough (50 inches or larger) to let you really start to see the difference between a DVD and a high-def disc--be it HD-DVD or Blu-ray.

It gets progressively worse as you dig into the real nitty-gritty. At the press conference, Toshiba got to field questions such as these:

Q: Will the player's HDCP-enabled HDMI output work with TVs that have HDCP-enabled DVI inputs?
A: (Toshiba needed to get back to us on that one, but we're betting TVs with HDCP-enabled DVI inputs will work fine in conjunction with an affordable adapter.)

Q: What's the native resolution of HD-DVD movies?
A: Apparently, movie studios can choose to encode movies on the discs at 720p, 1080i, or 1080p--but the current players' high-def output will be limited to the first two resolutions.

Q: Will the player's analog high-definition jacks (component-video) output HD, or does everything get downconverted to DVD resolution?
A: The players are capable of downconverting analog output to 960x540--better than DVD but only a quarter of the best HD--but it's up to the individual studios to enable that limitation on a disc-by-disc basis.

Home-theater aficionados love to discuss these fine points, and while the nuances of exciting new technologies--especially competing ones--help drive traffic to sites such as CNET.com, I'm not sure it helps companies sell product. Sony can expect a similar grilling in mid-March when it offers final pricing and specs on its Blu-ray player at its line show in Las Vegas (we'll have full coverage). But like my imaginary electronics store salesperson, I expect the folks at Sony will try to keep their message simple and stay on it. Over and over, you're going to hear from the Blu-ray camp: More movies, more storage capacity, native 1080p resolution--and oh, by the way, we're going to be in the PlayStation 3--whenever it eventually comes out and however much it costs.

As for Team Toshiba, it just has to go out there and say, "We do the same thing, and we're cheaper." The only problem, of course, is that it won't get the same head-start on Blu-ray that the Xbox 360 has on the PS3--HD-DVD has only a two- or three-month lead time. And I think Toshiba's going to have to get to $299 faster than it might like--by early fall--to really make the inroads it needs to make for HD-DVD to survive.

Of course, even at any price, the big question is: why rush? This format war is going to last a couple of years at a minimum, and the most compelling products have yet to be seen. Why buy a $300 HD-DVD player before you know exactly when the Blu-ray-ified PlayStation 3 will be available and how much it will cost? Why not wait to see the HD-DVD and Blu-ray recorders that will likely be debuting at next year's CES? Or hold out to see if a combo Blu-ray/HD-DVD player sees the light of day? For now, I'm on the fence. Even if I do buy a player, I won't be buying any movies. With Netflix carrying both new formats, I'll be sticking to rentals--because I refuse to have a shelf full of movies recorded in a dead-end, Beta-style standard.

How 'bout you?