But Toshiba moved quickly to deny speculation that a deal was close, stating, “The indications that a unification agreement is imminent is unfounded and erroneous.”
Jupiter Research Vice President Michael Gartenberg said of the impasse, "I'm sure everyone wants to work together as long as working together means, ‘You support my format.’ Both companies understand the importance of being able to control the standard."
On the bright side, however, Toshiba said that negotiations will continue throughout the week and a joint platform is still within reach, possibly in time for a key meeting of electronics manufacturers taking place on May 16.
Sony and Toshiba have been battling for control of the next-gen DVD market for three years, with each side trying to persuade the other to drop its preferred format.
Toshiba has championed hi-def DVD, which is easier to read and write, cheaper to produce and offers better copyright protection.
Content providers, including a number of adult movie studios, have rallied behind hi-def. Digital Playground, Cherry Boxxx and Lurid Entertainment’s new division, Lurid Hardcore, among others, have invested heavily in the format.
"In the end, that’s more of a problem for Blu-ray," Yankee Group analyst Mike Goodman said. "Content wins in the end."
Historically, the adult entertainment industry sets the tone for the electronics industry as a whole by being the first to offer content on new formats, thereby making hardware sales profitable.
But Sony has effectively slowed production of next-gen hi-def DVD players by aggressively touting the larger disc capacity of its Blu-ray structure to hardware manufacturers.
Toshiba, however, may pour water on Sony’s fire by introducing a hi-def disc capable of storing 45 gigabytes of data, or around 12 hours of content. The high-capacity disc, which the company will unveil at Wednesday’s Media-Tech Expo in Las Vegas, is on par with Blu-ray and has enough storage space to store extras such as trailers, outtakes and interactive features.
Both companies are keenly aware of the risks involved with attempting to roll out rival formats and appear increasingly willing to compromise in order to tap into the potential licensing fees a joint platform would generate.
On the other hand, Goodman said, if the two sides don’t find a middle ground, they both stand to lose billions because consumers simply won’t buy players until one format emerges as the clear winner.
Such was the case in the 1980s, when protracted wrangling over VHS and Betamax tape formats stifled the growth of both and cost manufacturers millions.
Despite consumer uncertainty, Toshiba plans to hit the market with hi-def players in time for Christmas. Sony said it will have machines available for consumer use by the middle of 2006.
