| LAS VEGAS
LAS VEGAS Fears of a deteriorating U.S. economy
and falling DVD industry sales helped drive Warner Bros's
decision to back Sony's Blu-ray next generation DVD format
exclusively, a top executive told Reuters on Monday.
Hollywood's biggest seller of home movies tipped the
balance of power on Friday in favor of Sony in a fight for the
next generation of DVDs between the electronics giant and
Toshiba Corp., developers of the HD DVD format.
"We've typically been recession proof," Warner Bros
Entertainment Group President Kevin Tsujihara said in an
interview at the annual Consumer Electronics Show in Las Vegas.
"But the thing that we saw in the fourth quarter...was gas
prices beginning to affect sales. And since we're considered an
impulse purchase, it's beginning to impact us," he said.
Tsujihara said the company needed to quickly erase consumer
and retailer confusion over dueling DVD formats before economic
Toshiba vowed the format war was not over, but Warner's
move was seen as a major setback, at least, in the race to
develop a potentially multibillion-dollar market for
Warner executives said the consortium of companies backing
Blu-ray, including five of the seven big Hollywood Studios,
could spend more than $50 million in 2008 to convince consumers
to upgrade, or more than the amount spent by the backers of
both HD DVD and Blu-ray in the 2007 holiday season. Budgets
have not been finalized, Warner Bros said.
The movie division of media conglomerate Time Warner Inc,
out of respect for Toshiba, has kept a low profile at the
annual Consumer Electronics Show in Las Vegas, the neon-lit
gambling oasis in the Nevada desert not known for its subtly.
Even Sony Chief Executive Howard Stringer kept his remarks
about Warner brief in public presentations.
Warner's decision is seen cementing Blu-ray's victory in
what could possibly be the last physical format for movies and
TV shows as technology and Internet companies race to build
online distribution channels, according to Citigroup analyst
A 2007 decline in DVD sales, which account for half of
Hollywood's profits, and anticipated further declines in 2008
sped Warner's decision making process.
Merrill Lynch said on Monday the United States had entered
its first full blown recession in 16 years.
The economy had little impact on the fourth quarter's
higher sales of high definition televisions, which in turn
helped boost sales of next generation DVD players, Warner Bros
Home Video President Ron Sanders told Reuters.
But worsening conditions in 2008 could scupper sales of new
players, and movies, even if only one format survived.
"We've hit the first 30 million" households with high
definition televisions, Tsujihara said. "As we go in deeper,
they'll be more cost conscious."