Netflix to cease offering HD DVD movie rentals

In a win for Blu-ray and a loss for consumer choice, Netflix said Monday it will no longer be stocking new HD DVD movies for its subscribers to rent.

The leading online movie rental company cited "a clear signal from the industry" for deciding to go Blu-ray only, noting that four of the six major Hollywood studios are backing Sony's format. Universal and Paramount are the two studios supporting HD DVD exclusively.

Netflix began stocking both HD DVD and Blu-ray movies in 2006, offering its customers the ability to receive their films in either high-definition format for a minor surcharge. But with the momentum swinging toward Blu-ray, Netflix -- which is already struggling financially -- likely was wary of continuing to invest in HD DVD discs.

Brick-and-mortar movie rental company Blockbuster has also decided to go Blu-ray only in many stores where it says there is not enough shelf space to also stock HD DVD.

Starting now, Netflix will no longer purchase new HD DVD discs. By the end of the year, it will phase out offering HD DVD entirely. The company says it believes all studios will eventual publish in Sony's Blu-ray format, and picking a side is the only way to settle on a physical disc standard that will succeed DVD.

"The prolonged period of competition between two formats has prevented clear communication to the consumer regarding the richness of the high-def experience versus standard definition," remarked Ted Sarandos, chief content officer for Netflix. "We're now at the point where the industry can pursue the migration to a single format, bring clarity to the consumer and accelerate the adoption of high-def."

Netflix has reason to worry about confusion in the marketplace, because the longer a next-generation format war drags on, the more likely digital distribution will take over. While Netflix has dabbled in delivering movies over the Internet, the company's core business is and will continue to be physical disc rentals.

Only a small portion of Netflix subscribers have chosen to receive movies in high-definition, and the majority selected Blu-ray, the company said. In turn, it wasn't financially beneficial for Netflix to keep buying two HD formats, which cost quite a bit more than standard DVDs.

Netflix will begin taking its HD DVD movies out of circulation in the coming months, which could provide HD DVD player owners a chance to buy them at a discount. Netflix typically sells its used DVD movies for a fraction of their retail cost.

Update ribbon (small)

February 11, 2007 3:00pm ET: The HD DVD Promotional Group sent BetaNews the following statement on the news from Netflix:

"We have long held the belief that HD DVD is the best format for consumers based on quality and value, and with more than 1 million HD DVD players on the market, it's unfortunate to see Netflix make the decision to only stock Blu-ray titles going forward."

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