Monday, July 11, 2005

The Future of DVD Is Being Fought Right Now

(nb: i have included news link since writing this at the bottom of this article)

So, the fun and games are hitting an unfunny and ungamelike state in the DVD market. The new technology that killed the video star now faces an evolution point that is being publicly and privately fought in Hollywood.

It comes down to two sides. Blu-Ray vs HD DVD.

(note that so you can impress your friends)

Sony’s movie studio and Disney with 39% of the market back Blu-Ray group which would be produced by Panasonic, HP, Sony and others.

Warner, Universal and Paramount with 43% of the market, back HD DVD which would be developed by Toshiba and NEC.

Fox, MGM, Lion’s Gate and others who control the remaining 18% of the DVD market have yet to declare their allegiance.

As you can see, the battle lines have been drawn. As you could imagine, whom ever wins from a producer point of view stands to win big.

The big pros and cons.

The discs are pretty much incompatible – so its not like there could be one type of DVD player that could play both. So its one way or the other here.

The Blu-Ray discs hold a lot more information – so future enhancements like 3-D television would need this space. Studios like this because then people will be more likely to buy DVD’s – that market is shrinking big time because of things like Digital Video Recorders (DVR’s, PVR’s or Tivo – call it what you want).

HD DVD is a much easier and quicker upgrade from current DVD format. It means we can all swap over to higher resolution visuals and sound as quick as this Christmas. It also means there will not be a huge jump in price of DVD’s because Toshiba said they can make the discs for only a few cents more. So studios wont need to invest a whole lot more in production.

Blu-Ray players will cost around $1,000. They say that the added features will be a huge reason why people will want to buy them. This also means that studios will have to pay more to produce those features so logically prices will go up – especially now that the economic model for a lot of films is to try and break even at box office and then hit profit in DVD sales.

It is very interesting to look at the upcoming Xbox 360 and Playstation 3 releases as well. These boxes really drove DVD as they were shipped with DVD players... remember how everyone was talking about that ? "dude, get an Xbox - its a DVD player as well!". So, they both have not made a definite call. But as recent as 2 weeks ago, Bill Gates was in Tokyo with Panasonic and hinted that Xbox might ship an updated version of the Xbox 360 that has a HD DVD drive. He didnt make a definitive call about going with HD DVD or Blu-Ray. So they could even ship a Blu-Ray box as well.... oh, see how ugly this could all be... Even Microsoft dont know which way this is going to go... not even Sony because if they were so confident about Blu-Ray being the default they would just come out and say Playstation 3 is a Blu-Ray only player - but they are obviously not because they wouldnt want to say that now and tie the PS 3 to Blu-Ray and have that format lose and hurt the PS 3.


My opinion… Even though Blu-Ray sounds like an awesome innovation, I think market forces will see HD DVD win this battle. The Warner, Universal, Paramount camp are going to release 89 films on HD DVD this year. The reality is, people are just not sold on “extra features” on a DVD because essentially the “extra features” to date are pretty boring – they seem to be low budget things that are slapped together most of the time. Definitely not enough incentive to go and buy a $1000 player.

You guys (studios) have done the bare minimum when it comes to “extra features” and now this will come back to bite you because people see it as kind of cool but you have decided to skimp on it to keep a few hundred thousand dollars in your pockets. I think everyone knows what I mean – most DVD “extra features” sound a lot better on the package than they turn out to be. I know I am not sold on them like I used to be.

These studios are now run pressured by Wall St for returns and the analysts will not wait for this Blu-Ray market to form. They will tell the Disney, Sony camp to get their films out on the HD DVD market that will quickly form to skim profit from standard DVD and HD DVD’s (which I am sure will have a higher price and profit in Year 1 or 2)

So, we will see.. but I think the Blu-Ray side do not have enough pro’s to get people to buy $1000 machines. Sure it would be great to have all this space on a disc etc. But that is nirvana. It would be cool if everyone had 50MB pipes into their houses too. But it doesn’t happen.

I think the quick release and obvious extra marketing money that Warners, Universal and Paramount will spend on these first 89 releases will be a critical first mover advantage in this case. At this stage, I am calling it HD DVD.


Added July 12: Great entry in Engadget with great comments in this article Toshiba’s HD-DVD players will do high-def only via HDMI

Added August 17: Lions Gate Expected To Choose Blu-Ray

Added August 24 Toshiba president: Two DVD formats staying

2 Comments:

Blogger Chad said...

a very nice survey of the situation mr. benton. if i may add a rant, i'd like to see the studios begin to invest upfront, during the production process, to create content that enhances the value of home video.

recently, some studios have upped the ante with the "added features," for example, the dvd for "the hulk" includes an xbox game demo along with some other footage that has appeal to sci-fi and comic book enthuhsiasts.

i would also like to see "added value" go beyond the movie's trailer and television spot. why can't we see the other marketing programs brought back to life..for example, does the A.I. dvd provide any sort of overview on the arg that they created? im assuming not.

im getting off my soapbox now..

11:28 AM  
Blogger lynchseattle said...

Ah Troy, you spoke too soon :)

There's no proof of $1000 BDROM players. In fact, with the PS3 being bundled with Blu-Ray, there's a lot more force behind that than not. It will not be selling for $1K. Further, the PS2 was one of the best selling DVD players worldwide.

With the X360 not shipping at start on HD-DVD and the delay in getting boxes out in 2005, HD-DVD is losing more and more force. The benefits behind BDROM are much larger, have better long term capacity, arguably better interactive features (at least probably better xplatform for computers), and also the same studios (or more). The endorsement from wIntel to HD-DVD means little since MSFT has never shipped native DVD support in any OS.

The theoretical maximum size of a HD-DVD is far less than the 200GB of a BDROM. Given that 1080p res video takes 1Gb/sec, which format would you choose for the long term?

Blue-Ray, from where I'm sitting, has the major advantage. A lot of studios, PS3, and more capacity today and tomorrow.

11:03 PM  

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