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That was the news – Week 7, 2008: Death of HD-DVD leaves way open for explosive PS3 sales in late 2008

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Hindsight’s a beautiful thing. We all said CES was terrible for gaming this year, and we were right in part. Microsoft decided to stay away, not even showing Xbox 360 on its stand, and PS3 was virtually non-existent. One of the big stories of the show, however is likely to have a huge impact on how this console generation plays out, even if most of us didn’t realise it at the time: just before the Las Vegas expo, Warner Bros. dropped HD-DVD.

The scene in the Convention Center was embarrassing. The HD-DVD stand stood right next to the Blu-ray booth on the showfloor, and to say the Blu-ray exhibition staff were “milking the news was a bit of an understatement. Demonstrations on the packed Blu-ray stand proclaimed “the format war as “over, with all amps turned up to 11. The HD-DVD booth, a red and black necropolis, was quiet like the grave. The guys dressed in their Toshiba t-shirts looked as though they wanted the earth to swallow them up. Business can be ugly, and Blu-ray’s showboating was as grim as it gets.

Shut the door on your way out

The Warner Bros. decision was a hefty nail in HD-DVD’s already splintering coffin, and it signaled the beginning of a chain of events that culminated on Saturday in Toshiba’s decision to pull out of the next gen media disc race altogether. The Japanese firm is expected to formally announce the format's cancellation in the coming days.

The final kick in the teeth also came last week, as US retail giant Wal-Mart dropped the format. Toshiba was left with no choice but to throw in the towel. The Wal-Mart move followed a similar announcements from Netflix and BestBuy.

The impact Toshiba’s failure will have on gaming’s console arms race between Microsoft and Sony will be profound. Blu-ray, the PS3 addition that seemed like an insane gamble back in 2006 is now a real USP and is likely to give a heavy push to helping the console achieve astronomical sales at the end of this year across all territories.

J Allard – a man before his time

HDTV take-up in the US is now at 28 percent and accelerating, with those already in J Allard's HD Era spending an average of $1,300 on a set. When Sony first announced that Blu-ray would be installed in PS3, it was met with screams of “Who cares? The answer now is, “Millions of Americans and Europeans. People want HD movies now, and if they don’t already they certainly will when then eventually take the plunge and invest in HDTV, as many will this Christmas. And the chances are they’re going to at least consider buying a PS3 as a Blu-ray player when they do.

Why? Two reasons: price and Blu-ray exclusivity.

Sony will almost certainly make a heavy price cut to the machine later this year. If it doesn’t hit the magic £199 in the UK, it’s likely to come close at €299 (£225) across Europe. The Blu-ray lasers that made PS3 so expensive in the first place have now dropped in price due to an increase in supply, and a drastic cut in the cost of manufacturing Cell means the price of creating a PS3 is down to £200. Sony can afford to make the drop.

In addition, PS3 is now not only the only out-of-the-box HD movie player, but the only games console on the market that plays Blu-ray discs at all. Microsoft’s HD-DVD add-on for Xbox 360 isn’t worth its weight in salt any more (although a standalone Xbox 360 Blu-ray player is already being rumoured).

That, coupled with a realistic price point later this year, will cause an surge in PS3 sales in the third and fourth quarters as the southern European markets of Spain and Italy – to whom “Xbox is something to be spat at until the next PlayStation arrives – are “switched on to the machine, and the millions who haven’t bought into Xbox 360 in the US and northern European territories accept an offer they can’t refuse.

Obviously, this argument doesn’t even take software into account. PS3’s heavy hitters are being queued up for the end of this year. FFXIII, GT5 and Killzone 2 are all likely to hit in Q4 2008 and Q1 2009, territorial discrepancies allowing. That’s an awful lot of game you can’t get on an Xbox 360, price cut and Blu-ray inclusion aside.

The beginning of the end?

Toshiba’s decision to cancel the HD-DVD project was forced, and is a drop in the ocean of consumer electronics, but to Sony it could be one of the most important announcements this year. For many, the first experience of owning a DVD player was with PS2, and the machine’s DVD drive was a serious incentive to buyers at the time. Sony’s gamble has paid off. The step up in movie media is Blu-ray. The question of whether or not people actually want those contentious drives is now, “If they don’t now, they will at the end of 2008." Sony will be smiling this morning.

Watch those hardware figures in the final quarter, stats fans. Can’t say we’d like to be in Microsoft’s shoes right now.

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