BLOCKBUSTER PICKS BLU-RAY IN DVD WAR CONSUMERS WAIT TO SEE FATE OF HD.

Byline: GREG HERNANDEZ

Staff Writer

Blockbuster Inc. has taken a very public side in the high-definition DVD format war by announcing Monday that it will only stock Blu-ray format inventory along with standard DVDs in its 1,700 corporate-owned stores beginning next month.

This means rival format HDDVD has all but been frozen out except for through Blockbuster's online rental service. There are also more than 900 franchise-operated stores that will make their own decisions about which format to carry.

"We will continue to closely monitor customer rental patterns both at our stores and online so we can adjust our inventory mix accordingly," said Matthew Smith, Blockbuster's senior vice president of merchandising.

The two formats, which are incompatible with each other, have been slugging it out since they made their retail debuts last year. The industry wants the high-def technology to eventually replace standard DVD with the upsides being sharper picture and sound and far more room for games and other interactive features.

Standard DVDs can be played on either player, but many consumers have been holding out to see which format comes out ahead.

Blockbuster had been renting Blu-ray and HD DVD titles in 250 of its stores but is expanding to 1,450 more locations with only Blu-ray. The company insists that the move is not a format endorsement but simply a reflection of the preference of customers (70percent to 30percent) of Blu-ray over HD DVD.

Smith said "it is still too early to say" which high-definition format will become the industry standard.

But some industry observers see Blockbuster's decision as a major boost for Blu-ray, a format in which all but one major studio releases titles. The Walt Disney Co. only releases its titles in HD DVD.

"It's a tremendous change in the playing field in one weekend," said Richard Dougherty, president of the research company The Envisioneering Group. "This means it will be Blu-ray in front of people this summer, and it could change things forever."

But Dougherty said he does not think this means the end for HD DVD, which Universal Studios supports exclusively. Warner Bros. and Paramount Pictures release films in both next-generation formats.

He noted that in the format war of the 1980s between Beta and VHS, Beta was out of the gate first with an early lead but VHS caught up and surpassed it because it had more playing time and cost less.

"The HD DVD costs less, but the Blu-ray holds more," Doherty said. "It's not quite 'game over' yet. We believe (HD DVD) will try and do their own niche deal with a retailer."

Ken Graffeo, speaking on behalf of the North American HD DVD Promotional Group, said his camp first got wind of Blockbuster's plans at the end of last week.

"What this is right now really is a nonevent," said Graffeo, vice president of high-def strategic marketing for Universal Home Entertainment. "They are keeping both formats in the online store and keeping it in the 250 test stores. Rental is not where the business is right now. People who are buying their players are primarily purchasing titles."

Gaining an edge in the format war is becoming increasingly important as the retail price for disc players continues to drop and more consumers start to buy them. An HD DVD player, from Toshiba Corp., can be bought for as low as $299 after a $200 rebate. The Sony Corp.-backed Blu-ray has become far more affordable with its price slashed to $499 after initially retailing for $1,000. Sony's even less expensive PlayStation3 game console also comes with a Blu-ray drive.

greg.hernandez(at)dailynews.com

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