RSSAnalysis on the format war: So is that it?
By Scott M. Fulton, III | Published January 10, 2008, 12:51 AM
One of Las Vegas' most epic battles may be drawing to a close, but the spectators in the high-definition format war are already moving on to the next big technology. Are the spoils for Blu-ray enough to sustain the industry going forward?
What was almost declared a stalemate that could leave the high-definition disc market's prospects unfulfilled, may end up a squeaker of a victory for Blu-ray after all, assuming no further bizarre shift of allegiances takes place between now and next Christmas. If Blu-ray has actually won, then what has it won? Can we all go pick up our Blu-ray Disc players and start buying any recently produced movie we possibly want, regardless of its studio? Or has the public's appetite for the thing waned, perhaps moved onto some other technology with less of a chance of getting bogged down in a years-long dispute?
We've taken the issue to one of our favorite deep thinkers on the subject, AR Communications Senior Vice President Carmi Levy.
SCOTT FULTON, BetaNews: At this time last year, everybody was talking about how great the LG dual-format player was going to be, and how that was going to cure all our ills...This year, unless my sensors are completely out of whack, it doesn't matter any more.
CARMI LEVY, Senior Vice President, AR Communications: No, it doesn't, because we reached the tipping point this week with the Warner decision to back Blu-ray. That decision now means that five out of seven Hollywood studios are firmly in the Blu-ray camp. And #6, Paramount, is rumored to be on the cusp of making a similar move as well, so clearly if you are the odd-man-out studio in this scenario, you risk marginalizing yourself if you don't also very quickly move to Blu-ray. So the format war, from my perspective, is virtually over. All that's left is to count the number of dead, pick up our injured, and move on.
But obviously, this is yesterday's conversation. The future of spinning media clearly lies in Blu-ray.
SCOTT FULTON: But is there a future in that spinning media, at least as much as there was?
CARMI LEVY: I think there is a future; the question is, what will that future look like? How long will it last, and what will ultimately eclipse it? I think it's an easy conclusion to make that the Blu-ray / HD DVD battle will probably represent the last major format war that we will see in technology, if not forever, then certainly for quite some time.
Because the market is obviously moving away from content distributed on printable, physical media, toward a network-delivered model. That doesn't necessarily mean that the market for DVDs and Blu-ray discs is going to evaporate tomorrow, but obviously it's going to be much more affected in the years to come by the growth of network-based distribution mechanisms and capability and capacity, than we have seen over the last ten years.
The network that sustains this kind of data transfer is finally reaching a point of maturity that it can reasonably distribute the large file formats that consumers demand, and the services that will run on top of these networks are starting to shake out and are starting to become tangible and real, and we are starting to see some early success in this regard.
No breakout successes just yet, and certainly we haven't seen the killer app in terms of the online service that makes us forget our DVDs and forget our CDs forever. But the market is inevitably moving in that direction; the only question is, when will we reach that tipping point, to the point where we can comfortably leave our disc-based media behind? And right now, there is no firm answer for that timeline.
SCOTT FULTON: Isn't the country of China really smart here, by having negotiated an agreement with the HD DVD people last year to, in effect, be able to produce a player with the HD DVD mechanics, but without HD DVD's intellectual property? Perhaps people have a limited amount of streaming ability, but they need burning capability to burn the movies that they do download to a high-definition drive. Now they could have one, it could cost sixty bucks...they don't then need either Blu-ray or HD DVD's intellectual property, and they still have their disc library.
CARMI LEVY: I think the problem there is that [CH-DVD] is HD DVD-based, and a lot of people were standing along the sidelines waiting to see the results of the Blu-ray vs. HD DVD battle before they started to buy in. And now that it's clear that HD DVD is not going to win the overall war, I don't really see a viable business case for any HD DVD-based solution, even if it does serve an appropriate role in allowing for some kind of burning capability that addresses that network performance gap that we've been talking about.
SCOTT FULTON: But if consumers are getting the source of their media from the pipeline rather than through the channel, then why does the difference between HD DVD and Blu-ray even matter? They've still got the movie!
CARMI LEVY: Because consumers still don't want to back the wrong horse. They don't want to be buying a piece of hardware that they perceive to be obsolete almost before they get it home and get it installed.
When it was clear that VHS had won the VCR war over Beta, people who had bought Beta VCRs could still use them to tape shows. The fact that you couldn't find a movie out there didn't mean that you couldn't use it for your own personal use, disconnected from anything that the studios might put out. The devices themselves were still usable, and in fact, were technically superior at the time to anything that VHS could muster. It was better picture quality, better sound quality, the cassettes themselves were a little bit smaller and easier to store. That didn't matter. The market for Beta dropped out at that point because nobody wanted them. They had the Scarlet Letter written on them, and that was the end of that as far as consumers were concerned.
It's very difficult to sell the technical benefits of a technology once the market has already perceived and concluded that that technology is at a dead end. And right now, that's where HD DVD finds itself. Whatever the technical benefits of using HD DVD in this capacity are, consumers don't care. They see it as yesterday's news and they don't want it in their house, and they don't want to be spending any money on it because they worry that it will be money that's just literally tossed out the window.
SCOTT FULTON: Okay, so project us out then to the holiday season. Assuming that things go rosily from here on out for Blu-ray, probably by that time, Warner will have stopped its production lines on HD DVD. I would imagine by that time Paramount will have followed. Universal, meanwhile, will have its own brand of HD DVD player, only able to show programs from Universal and NBC.
CARMI LEVY: I think Universal needs to be scratching its head now, as it evaluates its long-term business model. Going it alone has never been an option in this industry, and I think Universal needs to do an about-face, if it hopes to be relevant around this time next year.
SCOTT FULTON: For the Blu-ray manufacturers -- Sony, Panasonic, Pioneer -- does their market look anything close at this point to how they'd dreamed it might look two years ago? Can they salvage enough to be able to make this a worthwhile investment again?
CARMI LEVY: Well, they'll be able to make money at it, that's for sure, but it'll be less money than they could have foreseen or envisioned around this time two years ago, because we're that much closer to the end of the disc-based era. Network delivery of multimedia content has advanced tremendously over the last two years, and most importantly, consumers are much more aware of the alternatives today than they were two years ago.
So there's opportunity, and it's profitable opportunity and it's worthwhile profitable opportunity, for the hardware vendors as well as for the content providers and the studios. But it's not as great as it once was, and that window continues to close, obviously, as time moves on. So they need to move very quickly; they need to consolidate their position now that it seems that HD DVD's death knell has been sounded, they need to aggressively bring consumer-grade, mainstream hardware to market, they need to move very quickly to evolving Blu-ray hardware from a perceived premium product to a perceived mainstream product, so that instead of buying a basic DVD player, by default, you go out and buy a Blu-ray.
And then at the same time, they need to winnow that price differential between conventional DVDs and Blu-ray, so that again when you're at the movie store, out actually buying discs, it becomes a no-brainer. You buy the Blu-ray instead of the DVD because either the DVD isn't available or the price differential between the two is so small that it's not worth going with the cheaper alternative.
So over the next year, everyone needs to really get their game on to shift very, very quickly, both from a hardware and a content perspective, from the DVD economy to the Blu-ray economy, and that's going to involve shifts in pricing models for content as well as rapid migration of the player hardware as well. They need to move fast, because that window will not stay open forever.
SCOTT FULTON: Sony and Panasonic like to think in terms of pricing tiers. They have what they hope will become a mainstream tier, and a premium product. But does that premium product price point now fall below $500 US?
CARMI LEVY: Yea, I think that reasoning, where there is a premium product tier, begins to erode in this day and age. You're not selling consumer products any more, you're selling services, and you're selling experiences. And that appreciation, where you used to sell low-end stereos to everyday folks for their paneled rec rooms, and then you would sell high-end stereos to the audiophiles who would go without food to buy the absolute best of everything for that 10 MHz increase in signal-to-noise ratio, or whatever, those days are over.
The low-end buyer still expects similar levels of performance to the high-end buyer, and certainly you can't build a market until you get that mainstream market behind you. So obviously, there's always going to be room for higher-end offerings from the hardware vendors, but the size of that niche is going to be smaller than it was before because, frankly, consumers are much savvier now than they were 15, 20 years ago. They expect more from their hardware even if they're only spending $150 for the player.
So the first tier is going to be up to and including $200, which is the basic price of a fairly decent DVD player today. You can get a cheapie for $50, I don't think anyone expects that at this point. But certainly at some point, we will expect to see $100 and sub-$100 Blu-ray players as well. And then as you add features onto them, it's not inconceivable that consumers would be willing to pay $300 to $400 for a higher end device, but really that will continue to be a niche.
You've got to move the [majority segment] of the market as fast as possible under that $200 price point, before you and I and everyone else reach the point when we are willing to simply go out and buy one. Most consumers won't even blink. They won't consider replacing their existing DVDs, which they perceive as good enough, until a Blu-ray Disc player comes under $200.
We saw that with HD DVDs, as soon as there were increases in demand, as soon as prices hit the $200 mark or whenever there's a screaming sale for $99, consumers jumped in. They almost didn't care about the format war, they didn't care that HD DVD was losing the format war, they simply saw it as an opportunity to replace their old DVD player for something just as cheap. And let's face it, everybody wants a screaming deal, and Blu-ray's going to have to learn that lesson quickly.
HD DVD is not dead yet. If Toshiba allows its price to reach rock bottom, I'm POSITIVELY sure that they'll sellout everywhere and people will start buying HD DVDs.
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|You are negating reality. Keep dreaming. Toshiba just needs to sell old hardware to prepare for their own Blu-Ray compliant hardware. They might offer units still capable of reading HD-DVD discs just like other manufacturers do but they can't keep pushing HD-DVD anymore, they are seriously risking going bankrupt at this rate and then only Bill Gates would be very happy of buying Toshiba at a discounted price.. Microsoft needs its own manufacturing plants...
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|What is Mr.Levy taking about when he tells that this would be the end of optical disc era ? Really... there is no way that people will start renting or buying DRM encrypted low-quality movies off of the internet. Everyone wants to have the highest quality possible and no DRM stuff, to be able to watch and re-watch any title at any time without having to re-pay for it over and over (read: no one wants to be ripped off).
Also.. internet connections for potential customers won't be fast enough even in a 5-year time from now, and manufacturers and producers can't afford just a few thousands of people worldwide as potential customers.
Sony and other manufacturers have already invested a lot of money on R&D for the next optical format which is the holographic disc, which currently allows for up to 1000GB of storage.
UHDV 32Mpixel resolution should start replacing HDTV during the 2013-2015 period... the H.265 codec should be finalized before 2011-2012. And only holographic discs will provide enough storage space.
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|Everyone wants to have the highest quality possible and no DRM stuff
You just took away damn near every existing form of content distribution. If it's high quality, you can bet it's packed with DRM or illegally obtained. :)
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|The BDA still have a tough road ahead. They need to consider mainstream families with a budget.
a.) They need to formalize 100% of the studios to back their format. It's still not yet formalized..yet.
b.) Once they do this, how fast can they get the HD-DVD exclusives to market? Fence sitters might be watching for that to happen first, before jumping in.
c.) How soon can BDA get 2.0 profile players to the 99-199 price range? HD-DVD has set the bar for the mainstream price. BD is under pressure to get to that pricepoint sooner than later. If the price stays too high for way too long, it could hurt adoption by the mainstream. Or it can be perceived as "eliteist", or "rich man's" HD, like Betamax was. I mean people make lines in the sand for anything, including pricepoint. If hd-dvd is still around, and they market hd-dvd to the poor or mainstream (49-99), it can still be a darkhorse.
d.) If Microsoft/someone comes out with HD on demand, that could change everything. Or maybe a set-top/hd-dvd player with a "valve steam" type of functionality. You go to someone's house with this device, login with a security code, and the movies you "own" are streamed on the fly. Or it can be flat rate per month for any movie you want anytime. No more waiting for disc release dates, everything is available immediately. There is a large archive of movies still on DVD, if it takes 10yrs to migrate that library over, BD may not be needed anymore, or will have to compete with HVD.
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|"Because the market is obviously moving away from content distributed on printable, physical media, toward a network-delivered model."
Hardly, if i am paying for a film or some music i still want the box, the disc and the printed material. Plus with the ISPs imposing download caps and FUPs all over the place downloading HD material is a pipe dream.
Get some £99 players on the market and i might even give Blu-Ray a second look.
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|Pipe dream? I get 30Mb download speeds from verizon...that's hardly a pipe dream.
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|Niro, you are *one* of a *very* limited amount of folks.
Tbe rest of us are stuck at 3-6 Mbps, capped upload speeds under 512KB/sec, and throttled downloading of all audio/video content.
All of that=pipe dream for online media. The only saving grace I can see is, amusingly enough, DivX.
Stage6 is about the *only* place I have ever been able to get quality content at reasonable speeds. How sad is that?
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|This is VERY true indeed.
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|I think Sony and the Blu-ray camp are going to have a lot of explaining to do when consumers realize that the Blu-ray player they bought a year ago for $1,000 now can't support any of the new features of the new Blu-ray discs that are hitting the market now...and there is no way for their players to be updated.
Whatever "political capital" the Blu-ray camp thinks it just earned with the Warner announcement will instantly disapear when the pubic catches wind of what has just been pulled on them.
In a world of Flash memory, bubble memory, NVRAM, BIOS's updates and EEEProms, there is no reason on Earth why Sony and Blu-ray had to do that to their customers. I think those chickens are going to come home to roost very quickly and in a big way, especially when those same consumers relaize that HD DVD players do not suffer from that same problem.
Like the old saying goes, and I think it applies to all those fanatical Blu-ray fans out there that were praying for the HD DVD format to die off: Be careful what you wish for...you might just get it.
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|....WHAAAAAAT!?!?!? are YOU KIDDING ME!!?!?!
"I think Sony and the Blu-ray camp are going to have a lot of explaining to do when consumers realize that the Blu-ray player they bought a year ago for $1,000 now can't support any of the new features of the new Blu-ray discs that are hitting the market now...and there is no way for their players to be updated."
1. It's no one's fault "first adopters" rushed to get these things when they first came out.
2. You wouldn't expect me to scream at Sony because my PSP doesn't have the new features from the recently released PSP Slim, do you?
Man..I swear...
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|1. I've yet to find a mention in any of BR's launch material that alludes to future hardware/software upgrades being required for features promised at launch. Salespeople are claiming to have had no knowledge of this when BR launched. Comments made by BDA reps give the definite impression that it was a well known fact that they cut corners and intended to add hardware later. By omitting that information, they decieved people into thinking it was a more advanced machine than it really was. It's a movie machine, not a computer. Historically, this type of machine remains compatibile well after they launch (look at VHS, DVD, even CDs). BR is not.
2. With a screen name like yours? Of course not.
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|About #1, THAT'S why you should wait! and as for #2, nope it wouldn't be because you think I praise SONY, NO! it's because such thing would be idiotic!
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|That is one very lame a** excuss for the mess blu ray has created. Not being able to play stuff bak is bull shi). Can't wait until they get sued again. They are used to that. I bet they have account set up for when we screw the consumer and they have the nerve to sue us. This is the very reason so many people loath everything about $ony. The PSP is a poor way to compare. You can buy 4 or 5 of those pieces of s*** for what some of those blo ray player cost.
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|Sure, just like all those people that bought HDTV's with no HDMI or even DVI. Or those suckers that bought those SD widescreen TV's.
First adopters always get screwed. But you don't care about history...you just want to rant about Sony.
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|"2. You wouldn't expect me to scream at Sony because my PSP doesn't have the new features from the recently released PSP Slim, do you?"
No....but I bet you'll be pissed if PSP games start coming out that are not compatible with your PSP
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|As usual, you fail at logic.
Blu Ray Discs won't fully function in Blu Ray players.
it is totally unlike an SD TV not displaying HD content. 2 different formats. That'd be like whining because your new HD-DVD brick won't play Blu-Ray movies (or your new Blu Ray player won't play...Blu Ray content)
...go figure.
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|Generally speaking, the mass market waits for the prices to become reasonable. However, the last few generations of video machines (like I said, VHS, DVD) have allowed for the reasonable expectation that content coming out will be compatable.
For example, I still have a top loading VCR, that was bought back at the height of the Betamax/VHS war. That machine was able to play VHS movies released over 15 YEARS after it was, without issues. I have an APEX DVD player that was bought almost 8 years ago. It can still play DVDs purchased today. Hell, it plays recordable media as well, which hit the mainstream a few years after its release.
If the BDA had released information about hardware upgrades being needed for some of their promised features (even if they had a small blurb that said 'possibly'), I'd agree with you. But that's not what happened. Instead, they went to market, knowing full well that people would need to buy new players in a relatively short period of time. That's what could cause them problems down the line.
The rushed, incomplete launch also explains some of the problems that the format has had to date...players that couldn't play movies with the BD+ protection scheme (like FF: Rise of the Silver Surfer), and players that couldn't handle BD-J content (the infamous POTC Liar's Dice incident).
To use your PSP arguement as an example: If you were suddenly unable to play an entire UMD movie or game, because you didn't have the slim model, wouldn't you be pissed? It's a similar situation.
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|In regards to home entertainment gear, early adopters do not 'always get screwed'.
As I said further down the page, even the earliest VHS players would play cassettes released YEARS after the formats launch. The earliest DVD players are still able to play discs bought today. Launch CD players can play any current CD.
With a history like that, how is it unreasonable to expect the new generation to perform in a similar fashion?
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|I would think it's not going to be a stellar year for bluray if the consumers get educated on the different profiles but of course i'm sure they are going to try and hide that issue for as long as possible.
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|I certainly respect Carmi Levy's position on the subject. I happen to agree with every one of those opinions... especially regarding what Blu-ray needs to accomplish to become truly mainstream.
Yes... I've accepted reality. I'm one of those hard-core HD DVD supporters who still believes HD DVD should have won. However, I have no problem admitting defeat for the sake of simply moving past this ridiculous format war... in spite of the fact that it was a war of the BDA's own creation in the first place.
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|I agree with you to a certain extent; however, I'm not quite sure that it's time to declare HD DVD dead, just yet.
Toshiba has been fairly quiet the last week, and understandably so. Warner's announcement does make it look bleak for them.
The sticking point for me, though, is MS commitment to the format. Generally speaking, Gates and Co. have their bases covered; and the fact that they're continuing to back HD DVD makes me think that the format has a trick or two up its sleeve.
The next few weeks should be very interesting...
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|Nah...its over man, let it go.
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|I agree with you, something is up with HD DVD. I do think it was MS' mistake not adding HD DVD to the XBOX 360 right off the bat. Adding a regualr dvd player knowing Sony was going to add a blu-ray player was a mistake. If they were smart they would add a high end Xbox 360 with an HD DVD/Blu-Ray player in it now, at least this will keep things going. Sure it will have a Blu-Ray player in it as well but it'll show that MS is supporting duel format, meeting Sony half way. I thought from the start that duel format players should be the way to go especially since I read that there isn't much difference in the electronics of both players. Both use the same laser, most of the difference is the programming of the players software and the media itself. Sure there are other differences but their small, thats why it was so easy for LG to make a duel format right away.
I also agree that things are going the way of streaming. I've been saying this for about a year now. With pay-per-view and on demand already in play, all we need is an easy way to get the movies and tv shows out there. I don't only think movies will be streamed, but I think this could also change the way we watch tv. Instead of having to be home or record a show at a specific time, you'll just go to on demand (or whatever it'll be called) and watch the show you want. They already have it actually, I use Uverse and I can go to my on demand and watch shows from showtime like Dexter, and I can watch the last season. I see this happening with all stations, this will get rid of the need for DVR's too because you'll be able to watch any show when you want to. I think this may take a while because the TV stations and movie companies are going to have to come up with a universal model unless every cable, sat and iptv company uses their own playback divice like they use their own set top box which is possible. Maybe there will be some form of DVR because people will still want to fast forward commercials, but all in all I think everything is going to go the way of streaming.
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|If you believe everything coming out of CES this past week, the format war is over. Therefore it is not a duel format device, but a dual form device.
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|Trust me, it's not a matter of pride. Simply put, I own both, and prefer the HD DVD format. It's a piece of tech that I'll use, even if it does disappear from store shelves.
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