Microsoft is dealing with Sony about the possibility of adding Blu-ray technology to the Xbox, according to The Financial Times. Sony Electronics U.S. President Stan Glasgow talks with both Microsoft and Apple about adding Blu-ray drives to their hardware. Microsoft and Apple have been pushing the digital-distribution model, which analysts believe will eventually trump Blu-ray’s recent format victory.For Microsoft, HD DVD was always a delaying action. Microsoft doesn’t believe in Blu-ray and it never believed in HD DVD, said Mike Goodman. “Microsoft believes in digital distribution. Still, Microsoft wants to give the customers the option.”

Sony’s discussions with Microsoft are very interesting because it would put the Xbox 360 on a more level playing field with Sony’s Playstation 3, which has a Blu-ray drive.

“The decision is sort of a Catch-22 for Sony. Bu-ray is a competitive advantage for the Playstation 3,” Goodman said. “On the flip side, not licensing the technology to Microsoft would be somewhat detrimental to Sony because Sony needs and wants to increase Blu-ray penetration as quickly as possible.”

At the end of the day, Goodman suspects Sony is more intent on extracting as much value out of Blu-ray as it can in the shortest timeline. Sony is predicting it will sell 100 million-plus units of the Playstation 3, Goodman said, regardless of how the Xbox 360 performs.

Is there a long future for Blu-ray?

Sony’s moves point to its realization of another battle brewing “broadband Internet and video on demand (VOD)” to deliver programming and movies into the home. VOD pioneer Studio 4 Networks reports a 300 percent increase in program views and 158 percent growth of views per VOD-enabled household.

With VOD and Internet broadcasting taking hold, Sony could feel a sense of urgency to drive revenues with Blu-ray while it can. VHS and DVD have 95 percent penetration of TV households and analysts don’t expect Blu-ray to enjoy the life span that VHS and DVD did. That’s because Blu-ray is competing with a different distribution model, Goodman said, that will not be easily beaten back.

“It’s not going to happen tomorrow, but we are heading down the path to digital distribution. VOD is going to take a huge chunk out of the rental market, in particular. If you take away the rental market, you are going to take away a lot of people who are going to buy Blu-ray players,” Goodman said. “When revenue potential is restricted, it starts to restrict studio support.”

(source www.yahoo.com) 

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