Toshiba Drops HD DVD Format, Ending Sony Fight

Toshiba announces on Tuesday that it is abandoning its HD DVD format. The capitulation comes after a protracted and costly battle with rival Sony, developer of the Blu-Ray DVD format.

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RENEE MONTAGNE, host:

NPR's business news starts with Toshiba waving the white flag.

(Soundbite of music)

STEVEN INSKEEP, host:

Toshiba has officially given up its effort to make its next-generation DVD technology the industry standard. Today in Tokyo, the company announced it will no longer manufacture DVD players or recorders using the HD DVD format. The winner in the struggle to supply technology to the $24 billion home video market goes to Sony's Blu-ray technology.

And from Tokyo, Lucy Craft has more.

LUCY CRAFT: The war between Toshiba and Sony for control of the next- generation DVD format was protracted, fierce and costly. Observers estimate that each side spent hundreds of millions of dollars in recent years to gain allies in Hollywood, to win over electronics chains, and to woo consumers. The industry hasn't seen an all-out struggle like this since Sony's Betamax format went up against Matshita's VHS in the 1980s.

Martin Schultz, with Fujitsu Research Institute, says Sony's Betamax defeat stiffened its resolve to ensure that its Blu-ray format prevailed.

Mr. MARTIN SCHULTZ (Fujitsu Research Institute): So they didn't want to see another embarrassment like the Betamax problem.

CRAFT: But the battle between Sony's Blu-ray and Toshiba's HD DVD formats was not déjà vu. For one thing, Sony allied with its former VHS archrival Matshita, also known as Panasonic. And while Betamax's defeat to VHS was mourned as a triumph of marketing over superior technology, this time around the technical merits of the competing formats were closely matched, says David Rubenstein of the brokerage Jefferies Japan.

Mr. DAVID RUBENSTEIN (Jeffries Japan): The technology is, you know, it's debatable which one's better. You know, Sony had the alliance with Matshita, it had the Sony studio in Hollywood, and it had the PS3.

CRAFT: In other words, Sony's PlayStation 3 video game console. As part of its efforts to make Blu-ray the standard, it installed Blu-ray technology into its videogame consoles, reaching a huge base of consumers. Analysts say that business strategy was one of the decisive factors in Sony's favor.

For NPR News, this is Lucy Craft in Tokyo.

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