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FUD: Fear, Uncertainty, and Doubt

Mar 28th, 2008
The high definition market needs clarity

I fear I’m becoming another Andy Rooney. When I’m irritated by misinformation or falsehoods or dishonesty, I feel compelled to speak out, ranting on my soapbox, both venting my annoyance and trying to inform. Today’s question is, is it safe to buy into the Blu-ray Disc format? (By the way, if I’m being too much of a curmudgeon, please let me know.)

The FUD Factor

Historically, FUD was been associated prominently with Microsoft as it battled for operating system dominance. Throughout the ‘80s Microsoft used FUD to discourage sales of IBM’s OS2 by describing advances in soon to be released Windows operating systems. (Internal Microsoft documents were leaked that made clear that FUD was part of corporate strategy. One such document was entered as evidence in January of 2007 in an ongoing lawsuit, Comes v. Microsoft .)

The object of the strategy is to cause sufficient fear, uncertainty, and doubt in the minds of potential consumers that they delay purchases of rivals’ products until the FUD-monger can deliver something that’s competitive. I wrote on many occasions that I believed Microsoft’s staunch support of HD DVD was a form of FUD. By supporting a format war, it delayed many fearful mainstream consumers from purchasing high definition disc players, affording Microsoft the time to continue to develop its own home theater solution: downloads.

Some readers wrote to suggest that my views were a bit paranoid and that Microsoft’s interest in HD DVD was exclusively due to the potential for profits from its HDi XML-based advanced interactive supplement experience. (As you know, the Blu-ray Disc camp opted for a Java-based BD-J software solution for interactive supplements, and as you also know, Java comes from Microsoft archrival Sun.) But now that Blu-ray Disc has won the format war and is poised to enjoy accelerated, impressive growth, if Microsoft were truly interested in making a profit from physical media (like HD DVD), it would support the victor with product. Right?

That’s not the case, and we’re now beginning to see comments from the software giant that make clear its true intentions. Xbox 360 product manager Aaron Greenberg was quoted as saying, "Xbox is not currently in talks with Sony or the Blu-ray Association to integrate Blu-ray into the Xbox experience. We're the only console offering digital distribution of entertainment content."

And Microsoft’s Chief Xbox executive in Europe, Chris Lewis, gave an interview in which he said, “Going forwards, digital downloads is really where it's at. More and more people's ongoing and ever-increasing downloading of music and movies is becoming the de facto. I think that's going to happen in very short order; people want to consume that way. Before very long we will look back wistfully at shiny discs as something that was somewhat a historic phenomenon in a way that we kind of think about vinyl or VCRs today."

Lewis downplayed the Blu-ray Disc victory, claiming that downloads will unseat physical media "sooner than any of us think. That's the future direction, and I think that's going to be the case in the next twelve to eighteen months. I think we're going to be talking much more about that than anything else. Do I think that this Christmas will somehow be defined by DVD playback? I genuinely don't think that will be the case. I do not think that [the failure of the HD DVD format] will have any material impact on our console velocity. And I think other factors, specifically our architecture around downloads, is far more advantageous and important for the future. We are best placed to offer that, we already offer that, our online pedigree is such that we will offer the best and most seamless experience."

The best experience, huh. Video at 6.8 Mbps in the 720p format… right. FUD, FUD, FUD. I’ve written about the quality of HD download images in Of Resolution, Bit Rates, And Scaling and The Culture of War. The convenience factor means nothing without the ability to deliver quality. DVD was a remarkable success, even though more highly compressed and lower quality transfers were available on the Internet. Blu-ray Disc is expected to have explosive growth. Let’s see what organizations that don’t have a vested interest or an ulterior motive have to say.

Market Researchers Research

Let us start with the most conservative finding. The NPD Group conducted a survey in late February to determine consumer interest in Blu-ray Disc. NPD reports that 10.8% of those surveyed responded they are planning to buy a Blu-ray Disc player within six months. NPD conservatively discounted the numbers, assuming that 75% of the positive respondents would not actually make the purchase, but still estimated that two million players would be sold during that timeframe.

Strategy Analytics recently published the findings of its latest research. It estimates that Blu-ray Disc will have a market penetration of 29.4 million homes worldwide by the end of this year. The firm acknowledges the player shortage and states that Sony’s PS3 game console will continue to dominate until next year, when dedicated players will dominate. The firm predicts that by 2012, there will be in excess of 132 million homes worldwide with one or more Blu-ray Disc players installed. Principal Analyst David Mercer explains that one of the drivers, “265 million homes . . . will own an HDTV by 2012, and Hollywood’s need for a new growth engine, represent huge incentives for the industry to coordinate marketing activities and demonstrate unified support for the successor to DVD.”

The report goes on to predict that worldwide sales of Blu-ray Disc players will number 18.8 million by the end of 2008 (expected to be distributed among 4 million dedicated players, 13 million consoles, and 1.8 million PCs). Strategy Analytics estimates that in 2012, annual Blu-ray Disc player sales will number 57.4 million units (distributed among Europe at 26.4 million players, the United States at 22.6 million, and Japan at 8.4 million).

HMR Research examined software sales. It found that since the Blu-ray format was introduced, nine million BDs have been sold in the United States alone. More impressively, three million of the nine million have been sold since the beginning of 2008. At that rate, almost fifteen million Blu-ray Discs could be sold in 2008 alone. And consider first week sales. Previously, a top selling Blu-ray Disc release might garner 30,000 sales during its first week after street date. But Buena Visat Home Entertainment’s No Country for Old Men sold 68,000 copies on Blu-ray Disc during its first week.

Expressed another way, consider day-and-date releases of Blu-ray Discs and DVDs. According to Nielsen VideoScan statistics, the Blu-ray Disc version of No Country for Old Men represented 9.8% of its total disc sales over the course of its first five days of availability. 20th Century Fox Home Entertainment's Hitman saw 12.6% of its initial sales as Blu-ray Discs. During the format war, those percentages would more typically be two to three percent. High demand titles were relatively weak: Fox's The Simpsons Movie sold 2.8% on Blu-ray Disc and BVHE’s Pirates of the Caribbean: At World's End sold 3.7% on Blu-Ray Disc. The sales statistics for No Country for Old Men represents a huge growth surge for the high definition format war victor. 20th Century Fox Home Entertainment estimates that Blu-ray Disc sales will grow from 2007’s combined Blu-ray Disc and HD DVD sales of $300 million to $1 billion in Blu-ray Disc sales in 2008.

Adams Media Research home entertainment industry analyst Tom Adams explained, “Before, there was a tendency to play it safe and stick with the standard DVD. But now there's no longer anything to worry about." He predicts 2.9 million dedicated Blu-ray players and 8.4 million more PS3s in American homes by the end of 2008 (there were 500,000 Blu-ray Disc players and 3.2 million PS3s in the installed base as 2007 ended).

Even the Adult Entertainment (AE) industry is taking notice of the surge in Blu-ray Disc interest. Digital Playground, which enjoys a 40% share of the AE market, released its first Blu-ray Disc in January. Digital Playground co-founder Joone said, “Blu-ray sales are growing every month. DVDs are still larger in volume, but we are seeing consumers accepting Blu-ray much faster than they accepted the DVD.” Digital Playground is expected to add BD-Live features to its releases later this year.

So, is Blu-ray Disc a safe investment? Yes.

Thieves Steal; An Offshore Company Helps

A West Indies software company claims to have defeated the BD+ copy protection layer, lauding the ability to allow consumers to "make backup security copies of Blu-ray discs protected with BD+." A company spokesman said, "We are rather proud to have brought back to earth the highly-praised and previously 'unbreakable' BD+.”

With the newly introduced digital copy DVDs included in several Blu-ray Disc releases (with more to come), all rationale for this software product and the practice of breaking and copying BDs has been rendered useless to all but those who wish to steal. Writable BD media is so expensive that the cost of backing up a BD collection would vastly exceed the cost of replacing a few accidentally damaged BDs. And since children too young to properly handle a BD likely don’t care about high definition video and audio, it would probably be cheaper to buy the DVD versions for them rather than to invest in a BD write-capable drive, the West Indies software, and the writable BD blanks.

However, BD+ is adaptable and is capable of mounting a counterattack. Perhaps that’s why the company spokesman had to offer a caveat, "However, we must also admit that the Blu-ray titles released up to now have not fully exploited the possibilities of BD+. Future releases will undoubtedly have a modified and more polished BD+ protection, but we are well prepared for this and await the coming developments rather relaxed." So if you’re annoyed by player firmware updates but insist on making illegal copies of Blu-ray Discs, also be prepared for the annoyance numerous software updates as the two forces battle.

Macrovision bought the rights to BD+. Its executive VP and general manager of entertainment Eric Rodli reacted to this development, "Macrovision does not comment on specific techniques or procedures that may directly impact the BD+ security technology. BD+ is a security response system designed to react to security attacks, not prevent them entirely. As part of this system, updated BD+ security code is continuously developed so that BD+ customers obtain ongoing value from the use of this technology."

Parting Thoughts

Don’t be distracted or deceived by FUD. Blu-ray Disc is the finest delivery system for high definition content available today and for the foreseeable future. (I’ll mention that I recently left a voicemail message for an Apple representative concerning my wish to review HD from the Apple TV appliance for you. That was my second request. My call was not returned.)

All indications are that the Blu-ray Disc format is entering a dramatic growth stage that will rival or exceed that of DVD when it was introduced eleven years ago (DVD celebrated its eleventh birthday on March 26th). There will always be a market segment that prefers convenience to quality, and there will always be those who crave something for nothing, but neither of those groups will stall the growth and success of the finest product ever to have been offered to home theater enthusiasts and to film fans. If you haven’t joined the transition to high definition on disc yet, plan your Blu-ray Disc purchase now. But if you’re among the 30% who care strongly about supplements, I’d advise either waiting for Profile 2.0 dedicated players to be introduced or investing in a PS3, which will support Profile 2.0 with a firmware upgrade.

Here’s hoping I don’t have to spend the rest of the year reporting on another format war.