Xbox to stop making HD DVD add-on

About 300,000 of the HD DVD add-ons have been sold

Microsoft has decided to stop making the HD DVD add-on for its Xbox 360 games console after Toshiba abandoned the high definition DVD format.

Toshiba estimated last week that about 300,000 of the add-ons had been sold.

Microsoft was one of the key backers for the HD DVD format, competing with Blu-ray, which was the format available in Sony's rival PlayStation 3 console.

Microsoft said it would continue to provide warranty support for the $130 (£115 in the UK) HD DVD add-on.

Last week, Toshiba said it would stop production of HD DVD players and recorders after major film studios decided to back Sony's Blu-ray format instead.

Toshiba said the tipping point came last month when Warner Brothers decided to release its movies only in Blu-ray.

The Xbox add-ons sold represented 30% of the one million HD DVD devices that were sold worldwide.

That compares unfavourably with the 10.5 million PS3s sold by Sony, which come with a built-in Blu-ray drive.

Gaming's future 'on the network'

The gaming luminaries span the games industry

The future of the games industry lies with the internet and content delivered from central servers, a panel of game luminaries has predicted.

"Everything is moving towards the network," said Neil Young, general manager of EA Los Angeles.

Phil Harrison, Sony's head of worldwide studios, said: "Public utility computing is absolutely the future of the games industry."

The panel was assembled by developer Dave Perry to discuss industry issues.

The panel included online gaming pioneer Raph Koster, Fable creator Peter Molyneux and Dungeon Siege creator Chris Taylor.

"A huge game changer for our industry is for there not to be a requirement for there to be a machine in the home," said Mr Young.

"[Instead] the game is playing as an instance on a Google server farm in Oregon, for it to be rendered, sent down the pipe and shown on a television that you paid an extra five or 10 dollars to your cable company to guarantee you had good enough bandwidth for gaming.

"That to me seems inevitable."

Flash is pointing the way to the future more so than the current generations of hardware Raph Koster

Mr Koster added: "The games will be playing off the same back end, and will be serving different heads of the game on different devices."

Mr Harrison pointed out there would always be an issue with delivering gaming content to players from servers due to the "speed of light".

Data sent over fibre optic networks is subject to the limitations of the speed of light, which means interactivity between the server and gamer will never have a latency below 70 milliseconds.

That could impact the kinds of experiences it was possible to offer people in the future because data could not move back and forth fast enough.

In the short term, Mr Young, said different devices, from consoles to the web and PCs, would co-exist in the home.

"For content creators your canvas just got bigger," he said.

Raph Koster, who was the lead designer on Ultima Online and Star Wars Galaxies, said the console industry was already being beaten by the web.

"Overall if you look at audience reach, quantity of games made and for that matter, although its difficult to measure, creativity, the web is kicking the console industry's ass in a major way."

He said Flash was the next big platform.

Are the days of the console numbered?

"It's pointing the way to the future more so than the current generations of hardware precisely because it is well on its way to becoming completely ubiquitous."

He said advances in the graphic possibilities of Flash in the coming year would further challenge the console business.

But he admitted that no-one was making money from Flash games at the moment.

Mr Harrison, who oversees the software line-up for the PlayStation 3, said: "In our proprietary view of a platform, it is a combination of technology, business model and consumer experience.

"The web, with Flash, is missing the business model aspect and consistency of consumer experience.

"Once it has figured it out then what you [Raph Koster] have said will become absolutely true."

Toshiba drops out of HD DVD war

There is no way of winning the competition Atsutoshi Nishida Toshiba president

Toshiba has said it will stop making its high definition DVDs, ending a battle with rival format Blu-ray over which would be the industry standard.

Following a review of its business, Toshiba said it would stop production of HD DVD players and recorders.

The HD DVD format has suffered as major US film studios backed the Blu-ray format, which is being developed by electronics firm Sony and partners.

Analysts said the move would allow Toshiba to focus on other products.

"It was an agonising decision for me, but I thought if we kept running this business it would have grave ramifications for the management of our company," Toshiba president Atsutoshi Nishida said.

"We made a quick decision, judging that there is no way of winning the competition," he said.

Tipping point

Toshiba said the tipping point came last month when Warner Bros' followed a number of other film studios in deciding to release its movies only in the Blu-ray format.

"It shows what a highly competitive market it is. When it comes to video, it is the person with the most content that wins," Gartner analyst Paul O'Donovan said.

FOR BLU-RAY Sony Matsushita (Panasonic) Warner Bros Wal-Mart Walt Disney 20th Century Fox Blockbuster Netflix

Warner Bros' decision means an estimated three quarters of new film releases will be available on Blu-ray discs. Other major studios backing Blu-ray include 20th Century Fox, Walt Disney and MGM.

Last week, Wal-Mart, the world's largest retailer, announced it would sell high-definition discs only in the Blu-ray format at its 4,000 US stores.

In the UK, DSGI, which owns the Currys chain, said it would stop selling HD DVD players after Toshiba's announcement.

Video rental firms Blockbusters and Netflix will also offer customers only Blu-ray.

Universal, Paramount and DreamWorks studios signed up to produce movies in HD DVD, but Toshiba's withdrawal is expected to significantly reduce the number of films available in the format.

Industry boost

The end of the battle is expected to give the industry a boost, as it removes uncertainty for consumers over which format to buy.

"The industry can now focus on getting the right product to the consumer, at the right price and in the volumes required," Paul O'Donovan said.

FOR HD DVD Universal Studios Paramount Pictures DreamWorks Animation Intel Microsoft HP

Toshiba will continue to supply retailers with HD DVD machines until the end of March this year.

After that, Toshiba will provide technical support to the estimated one million people worldwide who own HD DVD devices.

Microsoft offers an HD DVD drive with the Xbox 360 games console. The company told the BBC it did not believe the apparent end of the format would have an impact on Xbox sales.

"It is games that sell the consoles and the Xbox has the largest next-gen games library," a Microsoft spokesperson said.

Toshiba also makes HD DVD drives for PCs and laptop computers.

The HD DVD versus Blu-ray battle has been likened to the VHS versus Betamax war of the 1980s.

Sony offers cut-price PlayStation

A cut price PlayStation 3 (PS3) with a smaller hard drive and no backwards compatibility with previous consoles goes on sale later this month.

The £299 PS3 has a 40-gigabyte hard disk and will be released in Europe, Middle East, Australia and New Zealand.

Sony has also slashed the price of the 60GB model from £425 to £349, as it hopes to ignite sales.

Ray Maguire, head of PlayStation UK, said he expected the PS3 user base to double by Christmas.

Mr Maguire said the release of the 40GB PS3 was a "strategic decision" and not the result of lower-than-expected sales of the PlayStation 3.

"We have done market research, looked at fans' forums and the feedback from consumers is that they are anxious to get into PlayStation 3 but it is too expensive," he told BBC News.

Sony was the market leader in the previous two generations of console releases. However, Nintendo is now in pole position closely followed by Microsoft's Xbox 360.

We want to get the console to the next level; we have re-engineered the machine to bring the price down Ray Maguire, Sony

More than 5.5 million PlayStation 3 consoles have been shipped worldwide, compared with more than 10 million each of the Wii and Xbox 360.

He said he expected some existing PS3 owners to feel frustrated at the price cut for the 60GB model coming just six months after the machine was first launched.

The new PS3 will be unable to play PlayStation 1 and 2 games, has a reduced number of USB ports, from four to two connections, and no slots for memory cards. It goes on sale from 10 October.

"The cost of peripherals for adding USB connections and memory stick options is low," said Mr Maguire explaining the alterations.

He added: "Backwards compatibility was reasonably expensive for us to implement and taking it out enabled us to reduce the price."

The entry-level PS3 is now the same price as an Xbox 360 Elite, which has a 120GB hard drive.

Extra expense

However, the PS3 has built-in wi-fi connectivity and a high definition Blu-ray DVD player.

An add-on HD-DVD drive and wi-fi peripheral are available to Xbox 360 owners at extra expense.

The Nintendo Wii costs £179 but does not have high definition graphics or DVD playback, and relies instead on an innovative motion-sensitive control system.

There is no confirmation on the launch of the 40GB PS3 in North America and Japan, which have their own divergent models and price points.

Mr Maguire said: "The people who want to get into new technology early are prepared to pay a premium.

"We want to get the console to the next level; we have re-engineered the machine to bring the price down."

He added: "We have invested a lot of money in reaching this price point."

Sony is still losing money on each console sold, said Mr Maguire, but would lose less money on the 40GB machine.

"We are in an investment phase," he said.

Sony was criticised last year when it unveiled its £425 price point for the PlayStation 3 with many analysts saying the firm would struggle to win over gamers.

"It has taken us that long to get the cost down, it's as simple as that," said Mr Maguire.