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Sony’s Disky Business

The buzz in Tokyo is that Sony is close to abandoning its digital videodisc format and will back the rival format advanced by Toshiba and Time Warner.

Sources within the Matsushita-led alliance of consumer electronics companies and Hollywood studios that’s competing with Sony on the format front say high-level meetings have been going on between the two camps and that an announcement from Sony concerning the format-squashing is imminent.

In addition, sources within Toshiba say that Philips Electronics, Sony’s sole ally on its DVD format, is signaling its readiness to negotiate on certain patents it holds on disc technology.

A defeat in the DVD format wars would be embarrassing in the short term for Sony, but the decision to cut its losses now would save the electronics giant from the kind of setback it suffered as the loser of the Beta-VHS videocassette format wars.

A senior analyst at a U.S. securities firm in Tokyo said, “If Sony seriously suggested it was going ahead with its format, you would see a huge number of sell orders.” In fact, since the announcement of the Toshiba-Time Warner format and the alliance that’s supporting it, Sony’s stock price has fallen by 12%.

Toshiba and Time Warner have lined up support from several studios – including MGM/UA, Turner Home Entertainment, Paramount and Universal – for their format.

Sony, with its ally Philips Electronics, has only its own studio backing its rival format.

Key player Disney Studios could have made Sony’s format viable, since Disney homevid product leads the market. But Disney’s refusal to endorse either format has hurt Sony, and is perhaps forcing the radical decision by Sony.

The one wild card, Microsoft, might have swung the balance in Sony’s favor by endorsing the format for use in multimedia. But the software giant also has remained silent.

Consumer electronics industry observers in Tokyo also say Sony engineers are indicating it will take longer than expected to achieve a recording capability for its DVD, a feature with which Sony might have gained an edge over the Toshiba/Time Warner format.

Sony Corp. spokesmen in New York on Feb. 16 steadfastly denied any change in the company’s plans for DVD. A spokesman for Philips Electronics in Holland, which backs the Sony format, also denied any change in position.

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