Blu-Ray the Winner? - UPDATED from CES (again)

I've been continually covering the battle for the the next generation video format - HD-DVD vs. Blu-Ray since April 2006 here and here.  My original call was that HD-DVD would win, and since my original post the two sides have been basically even in console and disc sales.

But last week many analysts predicted that Warner's decision to back Blu-Ray exclusively ended the war for good.  Warner was the last big studio to pick its horse, and with its large catalog of movies it could tip the scales Blu-Ray's way.

However I'm not ready to concede that my prediction is incorrect.  First, the war is still not over.   Many months and years are ahead for this market and the HD-DVD crowd has too much at stake to give up.  Second, the story here is not necessarily HD-DVD vs. Blu-Ray but rather "next generation discs" video versus current DVDs and other new formats.  And while Blu-Ray may win in the format contest, it could be a Pyhrric victory.  Both formats are far from hitting critical mass of consumer interest and console sales.  The players are expensive and the difference in quality can be difficult to notice.  Further, consumers have just spent the past decade building up their traditional DVD collections - and I don't think they are ready to scrap these discs and start over for a small improvement or more bonus features. 

I think the main argument in favor of a new disc format is that many people are buying HDTVs, and want to enjoy content in this higher quality format.  Count me as one of those.  However a disc is no longer the only answer.  I have downloaded HD-quality movies to my TV using Xbox Live.  For a few bucks and a few hours of download time, I'm able to watch an HD movie without upgrading to a HD-DVD or Blu-Ray player.  That's possible today - now push forward a few years as more people have one of the many ways of downloading content directly to a game system, cable box or laptop.  Amazon launched a system for this a few months ago, and Netflix is partnering with LG to download directly to a TV set.

Getting back to HD-DVD vs. Blu-Ray, I think the industry has made a collective bad call by going for Blu-Ray.  It's more expensive, more confusing, and has more usage restrictions.  It was built to make money and lock down content for Sony and the entertainment industry, rather than being built for consumer preference. 

UPDATE: I should have waited just a day or two to write this post, as I am now in Las Vegas for the annual Consumer Electronics Show, and can give a better update.  First, the WSJ has now covered the issue and has an article here that mirrors many of my points above.

Second, in seeing the future of electronics myself, as well as the booths for both HD-DVD and Blu-Ray, let me throw out a few related observations:

• There is zero difference in the quality of the two pictures.  HD is HD. 
• Blu-Ray was touting some extra content that could be fit onto a disk.  One showed a video game layered over the movie Alien vs. Predator in which you can shoot the aliens for points.  Interesting.
• "HD" itself is just another step in the progression.  Players are coming that will be even higher quality pictures.  This will necessitate new TVs, new players, and of course new movie disc collections.  This will further frighten consumers to sit this one out.
• Downloading is going to grow faster than I thought.  Above I mention that the Xbox is already an HD player when you download a HD movie over Xbox Live.  This week Bill Gates announced that ABC is making its shows available for download in HD.  Again, why invest in a new $300 player?
• There is other sexy stuff for consumers to spend money on.  The competition for Blu-Ray extends to the plethora of other cool gadgets that will attract consumers' dollars.  There are cool 3-D displays from Texas Instruments, Microsoft's Surface computing platform, and slick new designs galore. 

So, a little bit wiser from my trip to CES, I'm sticking to my guns.  You'll continue to read more here.

UPDATE 2: I just saw news this week that some recently-added features to Blu-Ray - like picture-in-picture, which was added to help defeat HD-DVD - will be inaccessible for people who bought Blu-Ray players early on.  The new software cannot be updated, leaving those most loyal, most vocal early adopters out in the cold.  It's another way in which the pseudo-monopoly of Sony and a handful of movie studios failed to keep the consumer in mind.