The stupid fight between Blu-ray and HD-DVD shows no sign of abating, but there may finally be a player with enough clout to decide the issue after the movie studios, Sony, Apple, Microsoft and HP couldn’t break the log jam. The tie-breaker: pornography. And Playstation 3.

All this according to a Computerworld article Porn industry may decide battle between Blu-ray, HD-DVD. I don’t care which format wins, but it is instructive to students of technology diffusion.

Follow The Money
The porn industry has been a major driver of internet technology since it has always had a product that people are willing to pay big bucks for. Looking at Playboy’s (the only public adult entertainment company I’m aware of) latest 10-K report, for example, we see that their domestic TV revenues are flat, publishing revenue dropped 12%, while domestic internet revenue climbed 22% and their e-commerce site grew almost as fast. As the song at the hit Broadway musical Avenue Q goes “the internet is for porn” [hilarious, but not for the easily offended].

Storage vs Bandwidth
The article’s money quote:

Porn studio Digital Playground Inc., which claims to have produced the largest number of high-definition movies in the industry over the past three years, said it is choosing Blu-ray Disc for all of its “interactive” videos because of its greater capacity. It also selected Blue-ray because Sony chose the format for its PlayStation 3 (PS3) box, due out in November.

As I’ve noted before, storage and bandwidth are largely substitutes for each other. Before broadband, CD-based magazines enjoyed some popularity because they could ship you several hundred megabytes much more easily than you could download it. With Blu-ray, a vendor can ship 50 GB of content for a couple of bucks, while it would take it would 14 hours to download that amount over a one MB/sec link, which few Americans have.

So Digital Playground is betting on four trends: HD movies; interactive video; widespread PS3 adoption; and little improvement in American broadband speed. Other than the PS3 those all seem like pretty safe bets.

Critical Success Factors
Although the VHS/Betamax story is often told as the victory of “open” over a superior proprietary format, I don’t recall most folks in those days really cared about either the quality or the standard. Each produced an acceptable picture that was usually better than what people saw on broadcast TV. Pricing may have been a factor – porn producer Steve Hirsch is quoted in the article noting that VHS tapes were $5 cheaper, which lead his company to push VHS – and certainly Matsushita, the biggest backer of VHS, is usually the consumer electronics industry’s low-cost producer.

Yet the winning factor for VHS was recording time. Betamax had a one hour tape when VHS had a four hour tape. Tapes weren’t cheap and thrifty consumers voted with their dollars for VHS. By the time Sony got its act together the market had shifted decisively to VHS. Score one for better marketing.

Dual-layer Blu-ray holds 50 GB vs HD-DVD’s 30 GB. Assuming dual-layer Blu-ray disks are price competitive, I think that difference will win over consumers who want the HDTV movie and HDTV features. Shooting digital HDTV doesn’t cost much more, so producer’s will likely spring for the whole package and I think customers accustomed to HDTV will respond.

The Real Problem
Is consumer uptake of either format. High-quality upsampling DVD players are pretty good, and I’m certainly not going to be in any rush to replace my 600 DVD collection. To get the full effect of either format requires 1080p screens and those are still costly and rare. Perhaps HD porn will be the killer app that drives volumes to Blu-ray. Yet even without the format war this will be a longer transition than proponents imagine.

Trivia: Hugh Hefner, Playboy’s founder and controlling stockholder, pays about $100,000 a month for rent, meals and services for his private quarters and his guests in the 29 room Playboy Mansion.

So what do you think? Comments always welcome.