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By Susanne Ault -- Video Business, 2/22/2008

FEB. 22 | Retail reaction to Toshiba's formal abandonment of the HD DVD format was swift, as those stores that had not already done so last week moved to de-emphasize and in many cases, liquidate, HD DVD products.

Toshiba, Warner Home Video and Universal Studios Home Entertainment all are offering incentives for retailers to discount and sell-off HD DVD products as the stores turn to marketing and merchandising Blu-ray Disc as the sole high-definition home entertainment format.

Stores can return Toshiba HD DVD set-tops and recoup certain costs, retailers said. The manufacturer also was granting price credits for stores to sell the players on clearance.

Amazon.com and Circuit City were among retailers advertising Toshiba's HD-A3 for $99 last week, marking the second $50 reduction in recent weeks on the originally priced $199 model.

Toshiba marketing VP Jodi Sally acknowledged that the company was working with retailers but declined to provide specifics.

However, Ultimate Electronics had few outstanding HD DVD players on shelves by February, as the chain stopped ordering new models just after Warner's January announcement.

Additionally, a number of indie software rentailers, including Washington's DVD Now and Massachusetts's Video Zone, immediately marked HD DVD rental stock as discounted sale items near Warner's bow out.

"When Warner went Blu-ray, we had an obligation to tell our customers as soon as possible that we would stop offering HD DVD," DVD Now owner Tom Paine said. "We canceled all existing HD DVD orders and put all of our HD DVD stock up for sale."

Following Warner's January announcement, regional sell-through chain Newbury Comics was already significantly reducing the depth of HD DVD orders. Now, it will return much of its new release HD DVD stock, including Universal's Elizabeth: The Golden Age, chain executives said.

Newbury also will take advantage of a Warner rebate program, running Feb. 17 to April 12, that gives stores incentives to mark down about 40 featured studio HD DVD titles by $5 to $10.

Online retailers Amazon.com, DVDEmpire.com, DeepDiscount.com and DVDPlanet.com are among retailers that had been format neutral but will now throw their marketing and merchandising muscle completely behind Blu-ray, even though they will continue to carry HD DVD in anticipation of some lingering demand. More than 1 million pieces of HD DVD hardware are in homes.

"Our customers have clearly voiced their support for the Blu-ray format. Blu-ray titles have increased from just over half of our high-definition sales to over three-quarters of our high-definition sales since early January," said Peter Faricy, VP of movies and music at Amazon.

Amazon.com's High Def 101 section will soon switch to a Blu-ray exclusive primer on adopting next-generation technology, said Faricy. Also the site is discussing offering coupons to HD DVD owners to help them make the transition to adopting Blu-ray hardware and software.

Similarly, DVD Empire also is being accommodating to consumers who have found themselves on the losing end of the stick.

"DVDEmpire.com will now be putting its support behind the Blu-ray format," said Shannon Nutt, the site's editorial director. "However, we want those who own HD DVD players to know that for the time being, we will continue to fill orders and provide HD DVD titles for those who wish to buy them."

Using Universal incentives, DeepDiscount and DVDPlanet have slashed prices by as much as 59% in recent days on about 100 participating HD DVD titles. Universal's The 40-Year-Old Virgin and The Fast and the Furious were among HD DVDs going for $12.20 at DeepDiscount. On Thursday, all of DeepDiscount's top-selling 20 high-def titles were in the HD DVD format.

"Blu-ray will start taking up more and more of [the high-def] section," said David Barker, VP of ecommerce marketing for DeepDiscount/DVDPlanet parent Infinity Resources. "But people have paid for [HD DVD] players, and if you already own one, you might as well get some of these titles at great prices."

In one of the more innovative Toshiba reactions, Texas electronics store Bjorn's is allowing people to return HD DVD players they bought in store for credit toward the purchase of a new Blu-ray set-top. Customers must also hand back any free-with-purchase HD DVD titles. Bjorn's will then independently close-out these discarded products.

Retailers largely believe consumer interest in high-def should grow now that BD is the only choice to be had. But the dust from the format war is far from settled.

Outside of the major chains, there are few retailers that have carved out significant high-def sections.

"There's not much of the retail rank and file that have been stocking up on Blu-ray or HD DVD. There's just a small base that have it," said Bob Geistman, senior VP of sales and marketing at Ingram Entertainment. "We have a large grocery base, and they are not into it yet. Many of the indie video stores haven't gotten into it yet."

"I think the industry's task now is to tell consumers that it's OK to go in the water now," said Andy Parsons, Blu-ray Disc Assn. Promotions Committee chief. "Many in the news media advised consumers to stay away until a clear winner emerged, and this has now happened. We have to deliver the message that discs are the best way to deliver a premium high-def experience and that other distribution channels such as digital downloads are not competitors."

The key retailers that already were merchandising Blu-ray exclusively or in far greater depth than HD DVD prior to Toshiba's move said they will continue as planned.

For the rest of this year, Netflix will continue to carry the HD DVD titles it has, while not purchasing new HD DVD titles.

Blockbuster, which carries HD DVD in about 250 stores and Blu-ray in about 1,700, has no plans to drop HD DVD entirely "so long as there's demand," said Karen Raskopf, senior VP.

"There's really no change in plans," Best Buy spokesman Brian Lucas said. "Toshiba's announcement may just speed them up a bit."

Best Buy said a week earlier that it would merchandise Blu-ray as the "preferred" high-def format.

Wal-Mart's decision to carry Blu-ray as its only high-def format by June was the final, insurmountable obstacle for Toshiba and the HD DVD camp.

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