The last hold-out for HD exclusivity has apparently joined the Blu-Ray team, as reported by the USA Today.  Many blogs and pundits were predicting the largest seller of DVDs would announce its exclusivity at next week’s Consumer Electronics Show.  With Blu-Ray discs outselling HD-DVD more than 2 to 1, Warner Brothers’ move is likely to expedite an end to the high-def format war with Blu-Ray as the winner.

In August, Paramount went HD-DVD exclusive even though Blu-Ray had a small lead, prolonging the format war.

The announcement makes me wonder about another prediction spreading around the internet about an Ultimate Xbox 360 to be announced by Bill Gates’ keynote at CES.  The Ultimate 360 sounds like a geek wet dream with improved hardware, silent fan, built-in WiFi, IPTV service, 320 GB hard drive and a built-in HD-DVD drive.  The IPTV is probably happening (screen shots have already been leaked) but how embarrassing would the HD-DVD drive be should the format fail. As exciting as the prospect could be, the truth is the next week would be all about bashing Microsoft desperately jumping on some anti-Sony bandwagon.  It also lends credence to director Michael Bay’s theory that Microsoft wants the format war to continue so it can bolster its video download service.

Also, if Microsoft decided to include the HD-DVD drive, what happens to game makers?  Can they make games using the HD-DVD discs?  If so, that means Microsoft single-handled spreads the format war into video games where no format war (except consoles themselves) existed.  And that’s just mean. 

This is of course total speculation and quite a segue from the subject of this post, so just consider this my pre-CES posting.  Go Gears of War 2 announcement!

Like Leonardo DiCaprio running to the doomed Titanic, Paramount has gone HD DVD exclusive. They cite HD DVD’s lower cost and market ready technology, both reasonable criticisms of the Blu-Ray format, if it weren’t for the fact that Blu-Ray players out sell HD DVD players 2 to 1 and Blu-Rays sells as many discs. Blockbuster and BJ’s Wholesale are Blu-Ray exclusive while Target only stocks Blu-Ray standalone players (Target continues to sell HD DVD discs).

The worst part of this, as many commentators have recognized, is now the format war will continue longer (Paramount is committed to HD DVD for 18 months).

Personally I only own a Blu-Ray player (in my PS3) though I have yet to buy any Blu-Ray discs and refuse to spend extra money on the 360 HD DVD attachment. Even with a Blu-Ray player I am hesitant to buy discs at the premium prices. It’s more cost effective to pay for premium movie channels and on demand.

Movie companies are forgetting they aren’t just competing with two HD formats for consumer money and attention. I can continue buying regular DVDs or rent from Netflix. On Demand offers a growing list with a developing HD niche. And, of course, there’s always piracy.

Now that’s the question in front of movie companies. This HD format war can continue because DVDs still sell enough to make everyone tons of money. But eventually HDTVs will spread and consumers will demand a format winner. If the movie companies haven’t settled down with one format or the other, consumers will find alternatives. And not all of those choices will make movie companies happy.

As part of the movie industry’s flawless strategy to combat piracy, the Advanced Access Content System provides encryption data for HD DVDs and Blu-Ray discs.  After their spotless record of never being able to stop the copying of DVDs, the same song is being sung for HD DVDs.  Hackers posted the encryption key used to prevent the copying of HD DVDs.  AACS sent DMCA warnings to websites with the key claiming copyright infringement.  This action sparked more publicity for the encryption key, including high popularity on the social bookmarking site Digg.

But HD DVD sponsors Digg.  So Digg removed the link to the encryption key even though it looked to be one of the most popular links on the site.  This has lead to a mini-revolt of bloggers and hackers who have united to spread the encryption key and force its placement to the top of Digg’s popular links.  The first four pages have been dominated by web pages with the encryption key, often in the title, or at least talking about the story. 

Why the AACS and media companies believed their new fanged encryption software would be any more challenging for hackers remains a mystery.  The entertainment industry used the same tactics and even the same organization to protect its next-gen discs after watching simply software allow anyone with a computer to copy DVDs.  And by resorting to DMCA threats, the AACS has only brought more attention to its failure.  Media companies keep wanting to blame YouTube, BitTorrent, and KaZaa for failure to police or stop piracy when these media companies can’t even do it themselves.