A Blue Victory?

It seems that the next generation of DVD formats has been won by Blu-Ray, with HD-DVD failing to win this format war:

It had a green ogre and gang of huge shape-shifting robots on its side—but that was not enough to ensure victory for HD DVD, one of two rival high-definition video-disc formats fighting to become the successor to the DVD. On January 4th Warner Bros, a big Hollywood studio that had backed both HD DVD and the rival standard, Blu-ray, said it would drop its support for HD DVD from June 1st. This tips the balance decisively in favour of the Blu-ray camp (see chart). “Game over,” said one analyst; HD DVD would now “die a quick death”, predicted another. Blu-ray's triumph seems almost inevitable.

Way back in April 2006, I made a possible prediction about this format war. Entitled "Winner may lose next generation DVD battle", I put forward the idea that the owners of the losing format's patent had a "Kamikaze option" whereby they can launch an all-out final attack that would destroy both themselves and their competitors. The attack would be simple - open the patent into the public domain.

Both Sony's Blu-Ray technology and Toshiba's HD-DVD technology are patented. Every time one of these disks is manufactured, a license fee is paid to Toshiba or Sony. Thus, while any respectable media company can produce HD-DVD or Blu-Ray DVDs, part of their production cost will be paying these patent holders. If the losing format opened its patent into the public domain, then media companies will not have to pay patent fees, thus making the losing format cheaper to produce. Moreover it would also allow smaller entities the ability to produce these free patent DVDs at a lower rate as well. Eventually the losing format would gain a new foothold and dominate the industry over time.

With Toshiba's HD-DVD now on the ropes, and with Sony's Blu-Ray now looking increasingly victorious, Toshiba could launch such a Kamikaze attack (Toshiba essentially has nothing to lose). It would result in billions of dollars of lost revenue for both companies, while it would (arguably) result in billions more in savings around the world. In other words, the revenue lost by Toshiba and Sony as a result of a free HD-DVD patent will be more than made up by savings for consumers and companies world-wide who would use it.

Of course, Sony could prevent such an event occurring by granting Toshiba equal ownership of the Blu-Ray patent. This would result in both companies "winning" and more than make up for the amount of money Toshiba lost in developing HD-DVD. Granting equal ownership of the Blu-Ray patent would keep Toshiba's Kamikaze attack from happening.