In the battle for next-generation DVD formats, in which Sony-backed Blu-Ray will compete with Toshiba's HD-DVD for supremacy, a new deciding factor is emerging in Microsoft. The software giant, which announced its support of HD-DVD earlier this year, is reportedly considering an effort in which it will leverage its dominant Windows operating system to push HD-DVD over Blu-Ray. The decision comes after a failed effort to get the Blu-Ray and HD-DVD camps to work together on a single next-generation DVD standard.

According to a report in the "EE Times," Microsoft is considering two ways in which it will push HD-DVD over Blu-Ray. First, it will support only HD-DVD in its upcoming Windows Vista operating system, which will be installed on hundreds of millions of computers within a year of its release in late 2006. Second, the company is investigating issuing cash credit in the form of coupons for PC makers that choose to install HD-DVD (and not Blu-Ray) hardware on their Vista-based PCs.

There is early evidence that this work is already commencing. In October, Hewlett-Packard (HP), the world's second-largest PC maker, announced that it would support HD-DVD as well as Blu-Ray. HP is on the board of the Blu-Ray Disc Association and was an early backer of the Blu-Ray format. Now, HP--a close Microsoft partner--has joined the HD-DVD Forum as well. This change of alignment might be simple business pragmatism, as it behooves HP to not back only one next-generation DVD format. But the company did reveal that the change of heart came after a series of meetings with Microsoft. The software giant, it seems, was a bit upset that HP had previous said publicly that there would be "legal implications if Microsoft is using its dominance in the operating system market ... to play favorites and hurt the competition."

Though one might debate the technical merits of Blu-Ray and HD-DVD (from what I can see, Blu-Ray is dramatically superior), the cost of HD-DVD hardware is considerably lower, especially for PC makers. HP says that Blu-Ray royalties amount to about $30 per Blu-Ray drive, whereas HD-DVD comes without any royalty costs for the most part. Plus, support for HD-DVD will be integrated into Windows Vista. To support Blu-Ray, PC makers will need to pay for third party software that lets the hardware interact with the operating system.

Also, consider the fact that Microsoft and Sony, which is the primary proponent of Blu-Ray, are competing in the video game space, and that Sony will push Blu-Ray in its upcoming PlayStation 3 video game console. By backing HD-DVD and basically forcing PC makers to use the format, Microsoft is able to harm a competitor in ways that would be impossible if the company simply bundled HD-DVD hardware with Xbox 360 and then supported both HD-DVD and Blu-Ray in Windows. Logically, one might expect an OS maker like Microsoft--and its PC maker partners--to support any desirable optical disk formats in their systems. That Microsoft is not doing that, and shunning Blu-Ray, suggests that the company is more interested in harming a competitor than in helping its customers.

UPDATE
Microsoft tells me that it has "not offered PC \[makers\] special discounts or financial terms related to Windows Vista in exchange for adoption of HD-DVD technology." The "EE Times" report, it seems, was so off-base, Microsoft chose not to respond.

As noted in my original article, Microsoft will not be providing native Blu-Ray compatibility in Windows Vista, but will instead rely on PC makers and other third parties to add that support as needed. However, Microsoft tells me that it is not trying to lock out Blu-Ray from the PC environment. Instead, building native Blu-Ray support into Vista was impossible simply because the Blu-Ray specification wasn't finalized early enough to be included in that version of Windows.