Another Hit on Blu-ray: Toshiba Backs Movies on Memory Cards

Loser to Sony's high-definition format is backing an alternative to disks

NCR already sells kiosks that dispense DVDs

Next week should see the launch of a new media delivery system, this one using kiosks that download music and flicks to memory cards. The kiosks will start with single music tracks and then DVD-quality movies, but will eventually dump HD-quality films onto SD cards that can be plugged into set-top players or even TVs.

It seems no coincidence that Toshiba is a major backer of the kiosks. Its HD-DVD lost the format war with Sony's Blu-ray over the replacement for DVDs. Toshiba now seems to be doing what it can to undermine Blu-ray's success.

Toshiba has already rolled out an upscaling DVD player that does the best job yet of turning standard DVDs into near-HD fare. At the time, Toshiba pleaded that it shouldn't be seen as trying to compete with Blu-ray.

But the new kiosks are a direct shot at Blu-ray and other disks. They will have numerous advantages, including being more portable and playable on decks that should cost considerably less than Blu-ray players. Oh, by the way, Toshiba will demonstrate prototype players next week at the Consumer Electronics Show in Las Vegas.

The concept was developed by Mod Systems, which has had trial runs of kiosks at Starbucks and electronics stores. The company seemed to gain new momentum when Toshiba and NCR, which makes the kiosks themselves, invested a combined $35 million a few months ago.

Nobody expects memory cards to take over the market, including Mod Systems CEO Mark Phillips. "We view it as a big world, with people getting their content in a variety of ways," he said in an interview.

The company also has to win the cooperation of other electronics companies to put SD readers in their products. Or software updates must be loaded onto devices like mobile handsets that already have card slots.

Consumers must be sold on yet another format. They'll be asked to load a $20 movie onto a memory card that they also must buy, and that might appear small and frail next to proven disk technology. Only a few of the big studios, meanwhile, have signed on to sell movies that can be downloaded to the memory cards. Mod Systems has competitors in other companies also developing digital kiosks.

SanDisk, the original developer of SD cards, is selling MP3 music albums on the cards that it calls slotMusic. Phillips said Mod Systems will concentrate on dispensing single MP3 tracks from major studios. "We'll enable consumers to cherry pick which songs they want," he said.

As to movies, he said the kiosks will have at least 1,000 titles available for download. They will be copy protected, which is why existing SD devices will need updated software. Mod Systems will reveal which studios and some of the titles next week. Phillips promised the library will include major hits that will make his system competitive with online sellers like iTunes, at least in blockbusters if not in total number of choices.

Mod Systems also must convince retailers to embrace the kiosks. The alernative is to continue losing business to Internet video streaming and downloads. Studios, meanwhile, know that retailers still sell the vast majority of their disks. They might be inclined to for now keep the store chains happy, which they aren't with digital downloads.

Mod Systems also has Toshiba, which not only is smarting from losing HD DVD but is a partner in manufacturing SD cards. Toshiba is also a major maker TVs and media players, and probably wouldn't be pushing a competitor to disks if its HD DVD had survived. By by the time of its investment in Mod Systems, Toshiba said the kiosks were a "key component of our new media strategy for migrating consumers to digital."

And away from Blu-ray.