Toshiba Quits HD DVD, Surrenders in Format War

Japan's Toshiba waved the white flag in the home movie war, giving up on its HD DVD format
after losing the support of key studios and retailers to Blu-ray technology backed by Sony.

The decision ends a war between rival consortiums led by Toshiba and Sony vying to set the standard high-definition movies on DVDs, and which has stalled a shift to the new technology in the $24 billion home DVD market.

Toshiba, which had hoped HD DVD would become a growth driver for its consumer electronics business, said it would start reducing shipments of HD DVD players and recorders and aim to
close out the business by the end of next month.

"We carefully assessed the long-term impact of continuing the so-called 'next-generation format war' and concluded that a swift decision will best help the market develop," Toshiba President and CEO Atsutoshi Nishida said in a statement.

The electronics conglomerate said it would continue to provide service for all owners of HD DVD products, and that it was still calculating how much shutting down the business would impact its earnings.

The Blu-ray win means consumers no longer have to choose between rival incompatible formats and run the risk of being stuck with a 21st century equivalent of Betamax -- Sony's videotape technology that lost out to VHS in the 1980s.

Toshiba has agreements with studios including GE's Universal Pictures, Viacom's

Paramount Pictures and DreamWorks Animation SKG, which support HD-DVD. (CNBC is part of NBC Universal.)


The tide turned against HD-DVD after the defection last month by Time Warner's Warner Bros studio to Blu-ray. Other U.S. retailers soon followed, such as Wal-Mart Stores , Best Buy and online video rental company Netflix .

Blu-ray supporters include News Corp's 20th Century Fox, Walt Disney and Lions Gate Entertainment Sony's PlayStation 3 game console also plays Blu-ray films.

Toshiba, which began sales of HD DVD players in March 2006, has sold 1 million units of its HD DVD players and recorders worldwide, including sales of drives for Microsoft Corp's XBox 360 game console.

If Toshiba can clear hurdles to design software for Blu-ray, it could use a joint venture with Samsung Electronics Co Ltd on optical disks to make Blu-ray players, analysts said.

Toshiba can also enter into an OEM deal with Blu-ray supporters Sony or Matsushita Electric Industrial Co to procure Blu-ray products.

Shares of Toshiba closed down 0.6 percent at 824 yen, compared with the benchmark Nikkei average, which rose 0.9 percent.