A couple of recent developments seem to demonstrate how Team Blu-ray follows in the business footsteps of HD DVD, and maybe HD DVD has done (or needs to do more) things similar to Blu-ray. My point isn’t to ding Blu-ray as a disc format, but to show that its promoters are finally coming around to realizing that victory is not their birthright.

The first news item is just like a page out of a business textbook, and it’s an example of Team Blu doing something right that I hope HD DVD is already working on.

Hastings Entertainment, a small video rental chain in Texas, announced they’d be taking advantage of the Blu-ray profit-sharing program that puts more Blu-ray discs on their shelves. Specific terms of the deal were not disclosed by Sony or Hastings, but Hastings video category manager Mason Goodfellow candidly revealed:

“It basically helped us to spread [Blu-ray] to all of our stores and not have to make that much of a financial investment. We might be able to get in as many as 8 to 10 copies per title [in one store]. Without revenue-sharing, that might have been three to four copies.”

Proving that all Sony execs have to memorize the following statement: “[loosely related event or statistic] demonstrates that consumers have chosen [Sony product],” Marshall Forster, Sony senior executive VP of North America, said of the Hastings deal, “Naturally, SPHE is delighted about this since Hastings obviously acknowledges the fact that consumers have voted for Blu-ray as the high-definition format of the future.”

This rental profit-sharing plan is a great idea. It’s just like procuring retail space in Target stores, and it’s in the same strategic vein as the Paramount/Dreamworks deal for HD DVD. In the end, it’s all about looking out for your own business interests.

The other noteworthy news item is a recent Forrester report pointing out that Blu-ray needs to remain vigilant by dropping hardware prices, or risk an embarassing defeat to HD DVD.

Forrester Research predicted a Blu-ray victory, but analyst J.P. Gownder now warns that Blu-ray has failed to land the knock-out punch in the format war, and thus things shall remain deadlocked well into 2009. Gownder suggests that the Blu-ray manufacturers must cut prices and come up with player for $250 or less by this Christmas. (Read the entire PDF of the Forrester report at the end of this article at Digital Journal).

And it turns out that Team Blu is listening to this advice, because Blu-ray spokesperson Andy Parsons finally had to admit that HD DVD got it right with China.

Last month, we heard that the new Chinese HD standard was pretty much HD DVD with a Chinese flavor. Weeks prior to that we heard about the possibility of a Chinese made $199 HD DVD player showing up on American retail shelves. Blu-ray spinners were busy downplaying the importance of these events, even discrediting the quality of goods made in China, but guess what October brings?

The Blu-ray camp is finally acknowledging that they can’t ignore China on two fronts:

1. They need to make cheaper players and China is the key
2. They can’t let the Chinese market go to HD DVD

Parsons says:

“We would have been foolish to think that limiting the involvement of Chinese manufacturers is something that could be sustained for a long time. Initially it made sense to keep margins high to recoup some of the investment that went into the format, but we always knew that as we got into more competitive price points we would have to look for ways to take some of the costs out.”

This isn’t the first time that Blu-ray officials have openly admitted that their prices are high. In fact, they seem downright proud about it. Last month, right after IFA, Don Eklund, executive vice president of advanced technologies at Sony Pictures said, “We believe consumers are smart enough to realize the benefits and pay the extra accordingly.”

I think Eklund is just saying what anybody would say if they had to be in his shoes and support a silly policy or position. The luxury pricing business model might work for cars and furniture, but in the world of consumer electronics, it’s all about things becoming temptingly inexpensive. At $600, the 8GB iPhone was expensive, but at $399, that same device starts to become very attractive.

Price and performance also explain why second-tier brands like Vizio and Westinghouse are doing so well in the HDTV world. These may not be as good as some models from Pioneer or Sharp, but they’re good enough and affordable enough to satisfy a lot of people. Likewise, most people can’t tell Blu-ray and HD DVD apart, which ends up making a $250 HD DVD player a better deal than a $450 Blu-ray model.

Of course the downside to Blu-ray and HD DVD copying pages from each other’s books is that it prolongs the format war. It’s unreasonable to expect either side to budge because there are billions of dollars in patents and royalties at stake, and it’s not in their best interests to back down.

If you’ve already chosen a side, then just stick with it and ride it out. The video game world has prospered for all these years with multiple incompatible formats, and maybe we’re all about to learn a lesson from them.

• Hastings incentive at Video Business
• Forrester’s report at Digital Journal
• Blu-ray eyeing China at Content Agenda