Yesterday Paramount and Dreamworks announced they were going to exclusively support HD-DVD. There is also speculation that this move comes with some very big promotional consideration backed by Toshiba and Microsoft (the two primary backers of the HD-DVD format). Some people even think this is a ploy by Microsoft to get more content on XBOX Live Marketplace for download.

Before I continue, let me disclose I own an HD-DVD player and I own an XBOX 360. I am also not an industry insider, but an avid reader on this subject. These are my personal opinions and nothing more. I do, however, agree that a continued format war only hurts the consumer.

Right now, this “format war” is really nothing. When you talk about the number of units either format is shipping, we are talking about hundreds of thousands, not hundreds of millions like DVD. Currently both players are out of the reach of the impulse buy. HD-DVD players are getting close, and there are rumors that Wal-Mart is pushing for sub $200 players for this holiday season. That would get HD-DVD into the range of the impulse buy before Blu-Ray. If this rumor does become reality and HD-DVD does not make significant gains with Wal-Mart pushing low-price players, I think that is a significant blow to the fate of HD-DVD.

However, lets remember who pulled out of the HD consortium and formed camp Blu-Ray. It was Sony. Sony had an unfair advantage in forming camp Blu-Ray. They own controlling interest in two major movie studios. So from the instant there was a split in the HD disc development, Sony had two studios HD-DVD would never have a chance at getting. Sony also has very deep pockets for “promotional considerations”. This is extremely evident by the fact they are losing money hand over fist in pushing the Playstation 3, which features a Blu-Ray drive. It is also worth noting that the Playstation 3 is also the most affordable Blu-Ray player on the market. It just so happens the gaming community has been alive with criticism about the soft game line-up for the Playstation 3. This also leads to increased Blu-Ray sales, as someone who dropped $600 on a “gaming console” isn’t going to let it sit there and collect dust. If they can’t play games, they will probably use it to play Blu-Ray. It is also worth noting that a recent report indicated most people were not aware of the Blu-Ray capabilities of the console, but I’m not so sure how accurate that report is.

That brings up another interesting point about this whole “format war”. I am not convinced the general public is ready to give up on DVD. My fiancee says she cannot tell a difference between an HD-DVD and a regular DVD. Most people who have HDTVs have them hooked to standard definition cable sources. Most people don’t know that you need HD content to notice a difference. I don’t think most people care about this so-called “format war”. Microsoft might be hedging their bets and hoping an extended format war allows digital distribution to develop a user-base. I prefer, as I think most consumers do, a physical media tied to my movies. I have used the movie rental service on XBOX Live, but I prefer to use my Blockbuster total access account.

Blockbuster also recently announced that company owned stores would only rent Blu-Ray movies. Franchise stores can still rent either format of their choosing, or like my local franchise neither at all. Blockbuster on-line is still renting both formats. This is indeed interesting, because if Blockbuster was picking Blu-Ray based on performance, they would have dropped HD-DVD from the on-line and franchise stores as well. This makes you believe that they had to receive some “promotional consideration” money from Sony to make this decision. Just as Target received to sell the BDP400 Blu-Ray player as the exclusive HD player for this coming holiday season.

Calling the format war over and giving it to Blu-Ray is a bad decision in my mind. Blu-Ray isn’t a finished specification. Current Blu-Ray players will not be compatible with the final specifications additional features. Right now this is where HD-DVD is king, the features. HD-DVDs specification is complete and all players currently produced will be able to play all these features. Sony again ships a product that is behind its competitor with promises to fix it after it hits market. Just like the Playstation Online experience is behind XBOX Live, Blu-Ray’s feature-set is behind HD-DVD.

Who will win this “war”? Only time will tell. I’m pulling for HD-DVD, however, I think both products are still searching for their market. I don’t think consumers are ready to give up DVD. Also we are seeing a lot of posturing by both sides because the numbers are so close. Yes Blu-Ray has “outsold” HD-DVD by 2:1 at points during this year. However, we are not talking about 20 million units vs. 10 million units, we are talking about 500,000 units vs. 250,000 units. We are talking about peanuts in a market worth much more than that. Also throw download services like those offered by Netflix, Amazon, and even XBOX Live and you have even more competition for HD content hungry consumers. HD movie discs need one format. The excuse that three different gaming disc formats exist with each other doesn’t fly here. Most consumers do not own each gaming console. Most blockbuster gaming titles come to each format. Continuing this artificial split of the movie studios is short-sighted and will cause both formats to fail if a prolonged war continues.