In the battle for the high-definition DVD storage format of the future, two camps are fighting for leadership in the converged home. Although some believe there is room for both formats, there is also the likelihood that one may win out ultimately, much as VHS prevailed over Betamax.

In one corner: proponents of the HD DVD format, the brainchild of the DVD Forum, founded by Hitachi, Matsushita (Panasonic), Pioneer Electronics, Philips, Sony, Thomson, Time Warner, Toshiba and Victor, along with its accompanying HD DVD Promotion Group arm.

In the other corner: supporters of the Blu-ray format, backed by the Blu-ray Disc Association and its board of directors: Hitachi, Pioneer, Philips, Sony, Thomson, Apple, Dell, HP, LG Electronics, Mitsubishi Electric, Panasonic, Samsung, Sharp, TDK, 20th Century Fox, Walt Disney and Warner Brothers. Many of the companies are in both camps and the technologies are similar in some ways. Christopher Crotty, senior analyst for consumer electronics at market research firm iSuppli points out, for instance, that both standards arebackward-compatible and they use the same wavelength of blue laser, the same size and 1.2-millimeter thickness as current DVD discs, similar video encoding, basic copy protection features through the Advanced Access Content System (AACS) and 36-Mbps transfer speed.

Technologically, the standards call for different physical disc structures. Blu-ray discs have a 1.1-mm-thick substrate, upon which a layer of data is added, followed by more substrate and finished with a hard coating developed by TDK. In an HD DVD disc, data is sandwiched between two layers of substrate, each 0.6 mm thick.

"This fundamental difference in how they are put together affects the scaling capabilities," explains Adrienne Downey, senior analyst at Semico Research. "HD DVD is limited to three layers on each side-so it will top out at 90 gigabytes on read-only discs, because the manufacturers are using dual-sided, triple-layer discs. Blu-ray can be scaled up to eight layers, to reach 200 GB of capacity."

Another difference lies in the interactive software layer, Crotty observes. HD DVD uses a platform called iHD, developed by Microsoft, Toshiba and Disney, whereas Blu-ray uses Blu Disc-Java (BD-J), developed by Sun Microsystems.

"The software is a key difference, because it is what allows the disc to be interactive so you can select chapters, special features and games," Crotty says. "Supposedly a lot of the Blu-ray companies prefer iHD, so there have been some discussions about the possibility that Blu-ray may use that software as well."

Another issue in this hotly debated market is in the manufacturing of Blu-ray discs, which some say illustrates more than technical differences.

"Manufacturing is another important element," says Mark Knox, adviser to the Toshiba HD DVD promotion division, "and frankly it is indicative of the difference in thought process between the two groups as they went about trying to create the next-generation DVD."

The HD DVD camp says that the Blu-ray disc structure requires all-new manufacturing facilities whereas only minor modifications are needed to current DVD production lines to produce HD DVD discs.

However, these assertions are simply not true, says Andy Parsons, spokesman for the Blu-ray Disc Association and senior vice president of advanced product development for Pioneer.

"Initially some companies thought there would be a huge difference in manufacturing cost between an HD DVD disc and a Blu-ray disc. A mistaken assumption was that when we first launched, we would have the same kinds of volumes from day one as we do with standard DVDs, which is not going to happen. We're going to need to build this up over time," he says.

As a result, Parsons continues, "when you are talking about relatively low volumes, any big bill-of-materials advantage you expected may not be so big after all, because if the number of discs you are making is relatively small, you can easily absorb the cost. And frankly, the cost differences between making a Blu-ray disc and making an HD DVD disc aren't that significant anyway."

"Basically, you have molding machines that are very similar to what is used to make CDs. The actual disc is almost exactly like a CD in terms of thickness. The mastering process is indeed different, but it's also different for HD DVD. They are also using blue-laser-type resolution, so they're not going to be able to just plug it in to the existing mastering system," Parsons says, referring to the fact that the manufacturing process for HD DVD discs will need some adjustments since it is moving from red to blue lasers.

Knox says HD DVD proponents considered the Blu-ray approach as well, because Toshiba has been working on this technology for many years. Even in 1997, when DVD was introduced in the United States and the vast majority of makers were in Blu-ray and HD DVD, Toshiba knew DVD would eventually need to be enhanced to handle the extra requirements of high definition.

"We went through this thought process: If we change the laser, we will automatically get some lift in capacity just by virtue of the change in wavelength. So by changing from a red laser to a blue laser and by making a minor change in the optical pickup design, you triple the actual data capacity," he explains.

Still, Parsons maintains that just as with HD DVD, existing molding equipment can be repurposed to make Blu-ray discs without much difficulty. In fact, Panasonic currently has a production line running in Southern California that is making Blu-ray discs, he points out.

Software platforms, scaled-up capabilities and manufacturing processes aside, everyone knows that one true test of what is going to make or break a product in the consumer market is its price point.

Toshiba is leaning on consumer familiarity between the next-generation blue-laser technology and standard red-laser DVD technology to market its HD DVD players on a 40-city road tour that began in late February 2006.

Given that it is the first to market with its blue-laser DVD technology, Toshiba has the lead currently, with pricing starting at $499. Other consumer electronics providers, including Philips and Sony, have said they would ship products in the second half of 2006.

Pioneer has said that its BDP-HD1 Blu-ray Disc player will be available in June for $1,800.

Although the first Blu-ray market entry price may cause many consumers to gasp, some speculate that Toshiba will take a bath on the pricing and subsidize the product in order to win the market.

As part of a marketing strategy, Parsons says, certain companies such as Toshiba say, "'Even though it costs us this much money to make this product, we're going to price it lower, even if it's below our factory cost, because taking that kind of loss up front might help to get the market populated with our product and help accelerate adoption.' That kind of thinking is generally not very successful, because it ignores one very important element: You have to build awareness for the new technology before you can assume that price is an important or overriding factor."

"If you've got a relatively small population of people who even know what the fundamental technology is, how are you going to say, 'I'm going to now accelerate demand for a new product that addresses that fundamental technology. I'm going to lower the price to create demand.' It doesn't seem like it follows. If people don't know why it's important to them, why should they care what the price is?"

"This is why we have a natural curve with an early-adopter group of people who are very focused on technology and performance," he explains. "Right now in this space, the big buzzword is 1080P progressive scan, 24 frames per second, full-resolution HD TV-this is the Holy Grail, because it's the closest you can get to a theater experience in terms of frame rates, and a hot button for people who are following this story at the consumer level."

Parsons adds that consumers interested in buying technology that gives them the best display or audio quality won't balk at the price. "This is why our player is $1,800. We focused on getting 1080P, because that is something we knew would resonate with the initial target market, whereas the $499 strategy is probably going off in the wrong direction, because the folks who are really paying attention to this right now want the highest resolution," Parsons says.

Although it will likely take at least a few years to see who is winning in this contest, Semico's Downey says Blu-ray has quite a bit of momentum behind it.

"The big question is when Sony's PlayStation 3 is going to come out, because if Sony can get millions of Blu-ray players into homes via the video console, that would be a considerable market share," she says. Sony Computer Entertainment announced on March 15, 2006, that it would delay the launch of its PlayStation 3 until early November for a simultaneous rollout in Japan, North America and Europe.

Studio support is a big part of Blu-ray's perceived strength.

"It's a practical reality: If you want to watch Disney films or Fox films or Sony Pictures films, or Lions Gate, or MGM in high definition, you can do that only with Blu-ray." —Andy Parsons, spokesman for the Blu-ray Disc Association and senior vice president, advanced product development, Pioneer

"When you go into a retail store and see a huge array of products for Blu-ray and then there's this other format with discs from only one studio, it's going to seem pretty clear to consumers that the risks are much lower for the Blu-ray side, because you've got such a huge buy-in from all these companies," Pioneer's Parsons says.

"The bottom line is about watching movies-you can get movies from only three studios from one format [HD DVD], but you can get movies from seven studios in the other [Blu-ray]. I think that's also going to be a very powerful incentive in terms of what consumers want," Parsons adds. "It's a practical reality: If you want to watch Disney films or Fox films or Sony Pictures films, or Lions Gate, or MGM in high definition, you can do that only with Blu-ray."

Toshiba's Knox agrees that in the early stages of HD discs, content is a driver. "Consumers will ask what movies are available and what player they need in order to play them, and ultimately you're going to see more and more companies offer combination players."

For the first year or 18 months, Knox believes, there will be few-if any-dual-format players on the market, and if one is available in 18 months, it will be pricier than $500. During this early market time, the amount of content that will play on which format will rule.

"If you look at what products are available from Paramount and Universal and the various pieces of Warner instead of counting the logos, you'll see that those studios still own the top blockbusters from the past couple of years and more than half of the International Film Institute's Top 100 movies of all time," he says.

Another factor to consider is that people have started getting very excited about the bonus features we take for granted on DVDs now, to the point that it has taken on a life of its own, Parsons says.

In fact, many "A-list" titles that are being released on DVD now have two discs in the set-one for the movie and the other for the bonus features, on two dual-layer discs. "We outgrew DVD very rapidly and have learned from that experience to not accept a trade-off and try to squeeze the most we can out of mid-'90s technology, which is what the HD DVD guys have done."

Parsons says he believes that the HD DVD camp is asking consumers to give up 10 gigabytes per layer to be able to take advantage of existing manufacturing lines, which is not a consumer-value equation. Consumers don't care how easy it is to make something-they want something that's going to give them perceived value.

Eventually, as HD DVD proponent Knox says, the vast majority of players-just like DVD burners today-will likely be multiformat. When that is the case, many content providers are going to see that the vast majority of players are compatible with both standards, and they will choose the standard that is less expensive for manufacturing, he says.