Blockbuster favors Blu-ray DVDs to HD DVD

A Blockbuster location in an undated photo courtesy of the company. The video rental chain on Monday said more customers prefer Sony's Blu-ray DVD format to its rival HD DVD, and it will expand its inventory of the high definition discs to a total of 1,700 stores up from 250.

NEW YORK (Reuters) - U.S. video rental chain Blockbuster Inc. BBI.N on Monday said more customers prefer Sony Corp.'s Blu-ray DVD format to its rival HD DVD, and it will expand its inventory of the high definition discs to a total of 1,700 stores up from 250.

Blockbuster's move signaled another blow to the HD DVD camp, the competing format backed by Toshiba Corp. (6502.T), in the battle over next-generation DVD, after Toshiba slashed its 2007 North American sales target last week to 1 million from 1.8 million, on disappointing U.S. sales.

Blockbuster said customers have shown more interest in Blu-ray than HD DVD. Blockbuster, which has about 8,000 stores worldwide, will expand its Blu-ray disc rental inventory to its corporate-owned stores by mid-July. The company will continue to offer both Blu-ray and rival HD-DVD titles through its online rental service.

Some 250 stores will carry both formats. Blu-ray rentals are "significantly outpacing HD DVD rentals," the company said in a statement.

Blu-ray's high-definition digital technology, backed by Sony (6758.T) (SNE.N), offers crisper pictures and more room for special features than current DVDs. HD DVD offers somewhat lower storage capacity, but claims cheaper production of players, burners and discs.

HD DVD discs are still available in a wide assortment of locations, including leading electronics stores and retailers such as Best Buy, Amazon and Wal-Mart Stores. Blockbuster rivals such as Movie Gallery Inc. MOVI.O and Netflix Inc. (NFLX.O) also offer both Blu-ray and HD DVD.

Hollywood and electronics manufacturers hope new high-definition DVDs, with better picture quality and more capacity, will rejuvenate the slowing $24 billion home DVD market.

Still, the battle between HD DVD and Blu-ray -- also supported by companies such as Samsung (005930.KS), Philips (PHG.AS), Matsushita (6752.T), Apple (AAPL.O) and Dell (DELL.O) -- has curbed adoption of the new formats, amid consumer fears they may end up with an obsolete player.

Measured in the number of players, Blu-ray is well ahead of HD DVD because Sony's PlayStation 3 video game console comes with a built-in Blu-ray player.

Sony shipped 5.5 million PS3s in Sony's fiscal year ended March, of which 3.6 million were sold.

Sterne Agee analyst Arvind Bhatia said Blockbuster's decision to focus on Blu-Ray bodes well for Sony's gaming machine.

"If the hi-def DVD format indeed gets settled in Blu-Ray's favor, it will likely lift sales of the PlayStation 3," he said in a note to the financial services company's clients.

Shares of Blockbuster rose 6 cents, or about 1.3 percent, to $4.64 in afternoon trade on the New York Stock Exchange.