Warner paid big for Blu-ray exclusivity?

Last week Warner Warner Bros. studios made the decision to drop HD-DVD support (starting this May) and support Blu-ray exclusively. The announcement, which was made just days ahead of CES, came as a major shock to the HD-DVD promotional group and HD-DVD fans and supporters. During CES, Toshiba let on to the media that they were blindsided by the agreement and didn’t expect Warner to pick a side at this point in the format war. An official release issued by Toshiba said,

TOKYO, Jan. 4 /PRNewswire/ — Toshiba is quite surprised by Warner Bros.’ decision to abandon HD DVD in favor of Blu-ray, despite the fact that there are various contracts in place between our companies concerning the support of HD DVD. As central members of the DVD Forum, we have long maintained a close partnership with Warner Bros. We worked closely together to help standardize the first-generation DVD format as well as to define and shape HD DVD as its next-generation successor.

We were particularly disappointed that this decision was made in spite of the significant momentum HD DVD has gained in the US market as well as other regions in 2007. HD DVD players and PCs have outsold Blu-ray in the US market in 2007. We will assess the potential impact of this announcement with the other HD DVD partner companies and evaluate potential next steps. We remain firm in our belief that HD DVD is the format best suited to the wants and needs of the consumer.

Also, according to insider reports, it seems that Sony dished out upwards of $450 million to secure Warner’s loyalty, a much higher figure that was offered to Paramount ($180 million) to side with HD-DVD. So what does all this mean? Well, it basically means that this war is being decided by the studios and CE producers, not by consumers. Yes, Blu-ray was pulling ahead in sales, but one has to wonder how things would have played out if exclusivity had never been a factor from the get go. It seems that exclusivity is what saved Blu-ray from HD-DVDs lower prices, more fully realized specs, and slightly early launch.

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