Toshiba scraps HD-DVD business

Toshiba said Tuesday it's getting out of its HD-DVD business, handing a big victory to the Sony-backed Blu-ray format in the format wars over high-def DVDs.  

The company said it will stop making HD-DVD machines by the end of March.

"It was a heartbreaking decision, but we considered the impact of continuing the business on our earnings, the next-generation DVD market and consumers," Toshiba chief executive Atsutoshi Nishida said at a news conference in Tokyo.

He said the turning point was the decision by Warner Bros. Entertainment last month to release films exclusively in the Blu-ray format.

"That had tremendous impact," he said. "If we had continued, that would have created problems for consumers, and we simply had no chance to win."

That left only two of the seven major movie studios, Paramount Pictures and Universal Studios, supporting HD-DVD.

Earlier this month, Best Buy, Netflix and Wal-Mart announced that they would soon offer only Blu-ray DVDs.

Nishida tried to assure the estimated one million people in the world who had already bought HD-DVD machines — either as a stand-alone or as an addition to their Xbox 360 gaming console — by promising the company would continue to provide product support.

Toshiba's decision is widely expected to boost sales in Blu-ray gadgets as consumers have held off in investing in the latest recorders and players because they didn't know which format would win out.

The last thing shoppers wanted to see was a drawn-out repeat of the Betamax-VHS wars that consumed the video cassette industry in the 1980s.

Both HD-DVD and Blu-ray formats provided crisp, high-definition pictures and sound and allowed for much greater storage of information on the discs. But the formats were incompatible with each other and neither format's discs would play on an older DVD player.

Analysts said Toshiba's exit would be good for business. Goldman Sachs had earlier estimated that the move would improve Toshiba's profitability by between $370 million US and $463 million US a year.

Toshiba has been aggressively discounting its HD-DVD players to boost sales, which by some estimates, lagged Blu-ray player sales by a margin of six to one.