It may not be exactly possible for high-definition discs to pick up where their lofty goals of 2005 left off. Transmission technology has evolved very rapidly during that time, partly due to the format war's very existence.

In the midst of the spat between different groups of intellectual property holders over extremely esoteric matters, the effect of which was to effectively stall the advancement of high-definition disc technology, telecommunications companies, CATV providers, and a few bold startup companies planned to pick up the pieces of both formats. Their plan is to bypass Blu-ray 2.0's connection to the Internet, and provide "all-on-demand" service for a huge library of movies and recorded shows, apparently for subscription rates.

But is that plan too bold? Will it fall apart before it gets off the ground, or can Blu-ray get its act together in time to pre-empt their move? BetaNews spoke to analyst Carmi Levy.

SCOTT FULTON, BetaNews: One of the reasons why there were two formats duking it out for the longest time, was because of a disagreement between the major players over how to handle the issue of something called managed copy. It involved a player's direct connection to the Internet, and in the future, for those consoles that had burning capabilities, it would presumably enable that Internet connection to be able to download and distribute the movies as well, and you could burn your own Blu-ray or HD DVD copy, depending on how the managed copy was implemented. But at the very least, it would enable somebody who had purchased a disc to maybe make one backup copy, but not two. And that still required an Internet connection because the studio would serve as a broker for that.

But now, we're seeing that direct Internet connection more and more in two other video components: the display itself, and the set-top box, both of which seem to bypass the [high-def] players and use them as peripherals. So I would think that the biggest distinguishing factor, besides maybe a couple of hertz of wavelength on the blue laser, between Blu-ray and HD DVD was how they implemented managed copy, which now appears to not even be necessary.

CARMI LEVY, Senior Vice President, AR Communications: No it's not, because the tech industry has figured out a way to bypass that. What's changed over the last couple of years is that the popularity of flat screens has absolutely exploded, and plasmas and LCDs have moved very quickly toward near-commodity status. So vendors of those screens, which represent the lion's share of the display market, are actively and very aggressively looking for ways to add value and differentiate their offerings from the competition. So a thinner bezel or a colored bezel is no longer enough to set you apart from everyone else. A flat panel is a flat panel is a flat panel.

So we're starting to see rich services laid on, and greater capabilities being built right into the device. Google and Yahoo services delivered right to the panel, without the need for an intermediary computer. IPod docks and iPod syncing capabilities direct to iTunes. For the majority of consumers who are not computer experts, but still want to be able to take advantage of some of these rich, interactive services in the living room, this becomes a much more reasonable way of delivering those services to them than through a separate device, or even through a computer or a player or something else that needs to be connected to their TV. The more value you can build into that screen, the easier it becomes to distribute it to a mainstream audience.

SCOTT FULTON: Well, on Tuesday, we had Comcast's huge announcement of its forthcoming "all-on-demand" service, which would enable customers to purchase on-demand movies in high-def at any time, in full 1080p, from a huge library, presumably through an IPTV service. And then Wednesday morning, we had an announcement from Sony that it's reached a deal with Gemstar, who publishes TV Guide in the US, for an interactive program guide -- exactly the type of IPG that would be necessary to dial up one of these all-on-demand movies or shows from Comcast. And this is going to be embedded in the set. So you don't need a console and you still get the movies.

CARMI LEVY: Certainly, yes, if you are a Comcast subscriber and this service works for you and you feel it's cost-effective, then by all means, you can technically bypass the player and never use it, and have a wonderful life in HD just with your high-bandwidth connection, your Comcast service, and your HD flat panel. But just because a telecommunications company makes an announcement doesn't necessarily make that service mainstream. The truth of the matter is, if everyone today subscribes to a Comcast or a Comcast-like all-HD, all-the-time-type service, it could quite literally blow the Internet to pieces, because the bandwidth simply isn't there for all of us to be downloading high-bandwidth connectivity at the same time.

We've seen precedent for this on college campuses, where students were using peer-to-peer networks to download not just movies initially, they were downloading from Napster and bringing their university networks down. These were not terabyte files for movies, these were multi-megabyte files that were simply MP3s. There's some question as to whether network infrastructure is mature enough at this time to support the kind of scale inherent in a wholesale switchover from disc-based to network-based content consumption. So yes, for those customers who buy into the Comcast model, they can simply leap-frog next-generation DVD and basically drop their discs entirely.

But for everyone to do it, we are looking at, at least, a few more generations of evolution in terms of services, so every service provider will have to have something similar, and [also] in terms of network connectivity, not just at the Internet trunk level but also at your local ISP level, your router level, and every level along the chain so that you're not sitting in the middle of watching a movie, and suddenly it chokes because you run out of bandwidth...which can potentially happen. Given the current state...How many times are you downloading something from a legal storefront? You're downloading a television episode from iTunes. Can you honestly say that that is always a seamless experience? Can you honestly say that when you watch a decidedly low-def YouTube video, that it always loads up perfectly on the first try?

SCOTT FULTON: Never happened yet.

CARMI LEVY: Exactly. People's multimedia Internet experiences to date have been, to put it mildly, letdowns. It is not the rich, immersive, interactive experience that you have when you pop a disc into a player, hit play, and start working your way through the menus. So we do have a ways to go before the online experience matches the disc-based experience, and that window gives Blu-ray an opportunity to build a base of support from end users who are not willing to put up with the intermittent service interruptions introduced by a network-based model.

How Blu-ray should respond to the threat from streaming HD

CARMI LEVY, Senior Vice President, AR Communications: I think there's also a backdrop here that needs to be discussed: In 2007, DVD sales softened significantly. For the first time in a number of years, they flattened and started to go down, which echoes what's been happening with CDs for most of the decade.

Now, there's a big difference between downloading a six-megabyte song from iTunes versus downloading a conventional movie that's about 700 MB, versus an HD movie which is how many gigabytes. So obviously the sense of scale is significantly different between audio and video/movie and high-def content, but there are lessons in the CD and now the DVD experience. DVD is a mature medium. You've pretty much sold as many players to consumers as you're going to sell; what you're selling today are replacement devices. As well as discs, everyone has a fairly sizable collection of DVDs that they've bought over the years, and they don't really see the need to continue to add to that at the same pace that they have in years past because they only have so much shelf space.

And at the same time, the perceived differences between high-def DVDs...Never mind that the format war has caused people to take a wait-and-see attitude, and to hold onto their DVDs longer, but now that we have the DVDs in our library, for most of us, that's good enough. For most of us, an upconverting DVD player, or throwing an old DVD onto a new player, on a high-def set, is good enough for now. We're not willing to spend hundreds of dollars on new players and thousands of dollars to replace our media, simply to get a few extra lines of resolution. The technical quality jump between DVD and Blu-ray is smaller than the technical quality jump was between video cassette and DVD was a decade ago. So there isn't this great, big push to abandon DVDs, but at the same time, consumers are tired of them, and they're starting to winnow down their purchasing patterns.

So it's up to the studios to drive that value proposition and to get them back into a buying mood. You might not be able to get them on additional resolution, because the average eye can only see so much. But they will be challenged to use that newly available space on the high-def disc to add even more value, and that's always been one of the big selling points of DVDs: When you buy the discs as opposed to downloading the movies, you don't just get the movies, you get all the extras. You get those interactive features, the director's commentary, the featurette on how the movie was produced. That's a huge draw.

So imagine if you had so much more space on the disc to add that kind of content, and to enrich and enhance it and connect it in with online services and value-adds? That would really help drive the value proposition for us to consider Blu-ray Discs versus conventional DVDs. If I know that, for a roughly similar price or for a marginally higher price, I can have an enriched entertainment experience, not just because it's a greater resolution but because I can do more and I can get more involved in the content, then perhaps I'd be willing to spend a little bit more to get to that point. But unless the studios and the hardware vendors get together on really articulating that value proposition to the average, mainstream consumer, they're going to do themselves a disservice and slow down the adoption of Blu-ray.