I hear a lot of talk about how Sony is trying to win ‘the HD format war’. At this point in the game it seems that there will be no winner. VHS was a poor technology that had long outlived its usefulness, and DVDs are vast improvements over VHS tapes. Having a DVD player is downright obvious at this point. But who needs either an HD-DVD or BluRay player? Other than audiophiles with $10,000+ home theatres, do you know anyone who feels that DVDs are in any way inadequate? There seems to be this assumption that one of the two will be crowned king of the movie market and the public will en masse gather behind the new king and stop buying DVDs. See, that’s just crap analysis. The only thing HD-DVD or BluRay has over DVD is higher expense, better picture, and more onerous copy-protection. DVD over VHS has chapter select, extras, better picture, similar cost and a smaller form factor and even then it took five years before the market had predominantly switched to DVD. So hear me now. Both HD-DVD and BluRay are doomed to obscurity, right alongside laser disc, mini disc, SACD, dvd-audio, and all the rest of the formats that weren’t vast improvements over the previous generation.

Five years from now they’ll put HD video on something like a minidisc and then that might become popular if readers and writers are cheap enough and the format natively supports both rewriting for data and DRM lockdown for the studio-produced discs. Plays on your 10th generation iPod (with 20 hr life playing hd video) or pop it into your Xbox 4ever and play away. But this? This is not a winning product. Neither HD-DVD nor BluRay has much over previous technology, and so both will rapidly fade into memory, just as UMP already has.

Sony is banking a lot on the notion of BluRay winning massive public support and becoming a de-facto standard. But it’s simply not feasible. In other words, they’re going down. They’ll bring in a butcher as the new CEO in a couple years who will pare everything down to their core profit centers. We may or may not see a PS4. Already Sony is shifting gears to a Japan-centric stance in the console war, regrouping to focus on the one market they know they can win. But can they? Nintendo is huge in Japan, and the DS is the clear winner over the PSP when it comes to both market share and profits. Sony may make good money with the PSP in Japan, but Nintendo is especially poised to dominate the video game market of Japan right now (as well as the world at large, to be honest). Half the cost counts for a lot in Japan’s dull economy, not to mention Nintendo’s efforts to expand the video game market past the hardcore Famitsu-reading fans will likely reap huge windfalls of new players. Sony will make good profits and push many units out the door, but in terms of market share they stand to lose in this generation.

The fate of Sony hinges primarily on the Cell processor coming down in price, up in yields, and being used across the brand for the next decade. While they are weak now, if Sony can push through the rough spot without falling down, and get even one major consumer electronics hit on their hands based on that new tech, then they could well see the land of rising profits once again. The PS3 may or may not become profitable in the US market– at this point it’s a crap shoot. But we do know that Sony’s dominace is over– they will have to play much better than they have in the past or they may be forced to walk Sega’s unenviable path. The PS3 may be Sony’s Saturn. I do believe that they could well rise again to the global market dominance they have enjoyed up until now, but it will most assuredly be a long, dangerous road for the corporate behemoth.