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The War Is Still A Mess

Nov 9th, 2007
And a little fallout from the Blu-ray Festival

Microsoft On The Format War

Last week, during the Blu-ray Festival, there was a backhanded slap at the unnamed Microsoft when it was characterized as the 800 pound gorilla in the room.  The software giant is ostensively profiting from the application of HDi on HD DVD and, although I’m not quite sure of any fees involved in the application of the VC-1 video CODEC, that’s another possible revenue stream.  But one possible implication is that Microsoft may be fostering customer uncertainty and reluctance to buy into any HD format as a means to delay a format war winner long enough for the infrastructure to be put in place to support its download service.

Kevin Collins, director of the Microsoft Consumer Media Technology Group responded to the comments made at the Festival, “The [Blu-ray] camp’s claims about Microsoft’s desire to have a format war are baseless.  Microsoft has over 100 people working on HD DVD interactivity and we believe that HD DVD is the next-generation optical format.”  Collins claimed that Microsoft’s support is based on lower manufacturing costs and soon to be available mandated managed copy.  He continued, “The key fact is that Microsoft believed that a next-generation format should be ‘consumer friendly’ and at the time of the decision, only HD DVD supported this.”  I find his position interesting in light of Bill Gate’s comments that the age of physical media is over.  Sorry, Microsoft, I’m still concerned about your motives.

Warner and Multi-format Support

I mentioned in my Blu-ray Festival column that Warner Home Video Vice President of High-Definition Media Dan Silverberg caused a firestorm of speculation when he was reported to have said, “One thing that may be changing is our strategy.  When both formats launched and hardware prices were high, we made a decision to support both formats and let the consumer decide. But now that hardware pricing is affordable for both Blu-ray and HD DVD, it appears consumers no longer want to decide - so the notion of staying in two formats for the duration is something we are re-evaluating now that we are in the fourth quarter.”

I also mentioned that when he was approached at the Disney event, he backpedalled and said that he was misinterpreted.  It has since been reported that Warner made an on-the-record statement concerning support for HD DVD and Blu-ray Disc, “Warner's position has not changed . . . We support both formats and we have made no decision to alter that policy, nor are there any such announcements coming, or being planned.”  Since this response came from Jim Noonan, Senior Vice President of Strategic Promotion and Communication for Warner Home Entertainment Group, we can assume that Warner will continue to keep a toe in both camps for the foreseeable future.  He said, “Like any major company, we are always reviewing our strategies in every aspect of our business, it is what smart companies do. I can't say what may happen five, ten years down the line. But right now, Warner Bros. has made no decision to change course.”

The HD DVD Installed Base Gets A Boost

I also mentioned the Toshiba sale in my last column; the HD-A2 unsold inventory was being dumped at a fire sale price of only $99 each.  Consumers responded; reports indicate that 90,000 players were purchased last weekend.  That’s very impressive.  Sony has shipped about 100,000 of its best selling $499 BDP-S300 Blu-ray Disc player since it was introduced summer 2007.   And since one research firm indicated that prior to this sale Toshiba sold only 256,000 of all its players since format introduction, those 90,000 purchases could represent a 35% increase in Toshiba’s installed base.

But, I received email from kind readers who were onsite for the sales.  One reader observed that even though HD DVDs were being offered for only $15 at the store he visited, he didn’t see any titles in HD-A2 purchasers’ baskets.  From that he suggested that many purchasers might have been buying a second player, perhaps for a master bedroom.  It will be interesting to watch the Nielson point-of-sale statistics to see if 90,000 more HD DVD players affect disc sales.

Sony Discusses Fourth Quarter Expectations

A biannual media roundtable hosted by Sony was attended by Sony Electronics President Stan Glasgow.  It was at this meeting that he was quoted as saying that Sony Blu-ray Disc player pricing should be “in the $399 range [for the holiday season] . . . I don’t expect it to go much lower than that.”  Commenting on the format war, “It continues. I still find it curious that there are 170 companies backing [Blu-ray Disc] and two companies behind [HD DVD]. I find some abnormality in that. Hopefully when all the [movie] titles reach the market this season and the beginning of 2008, [consumers] will see the [difference] in performance.”

He briefly discussed Panasonic’s introduction of a Profile 1.1 player and mentioned that Sony plans to introduce its own next year with “possibly [Profile] 1.2” features.  He also indicated that certain existing Blu-ray Disc players could be “upgraded with firmware” to support some 1.1 features, a vague reference at best. 

Blu-ray Profiles

The terminology used by Panasonic at its event last week when it introduced a “final profile” player motivated me to do a little research.  Apparently, “final profile” is imprecise; the term is more correctly “final standard profile,” defined as Profile 1.1.  That standard requires the player to have no less than 256 megabytes of internal memory and a secondary video decoder for picture-in-picture, requiring separate electronics in desktop players but might be possible with the existing Cell Processor in the PS3 with a firmware update.  Profile 2.0 is “full profile,” and includes capabilities for Internet connectivity and a minimum of 1 gigabyte of internal memory.  In other words, it’s going to take until Profile 2.0 for the BD camp to catch up with what HD DVD has offered for quite some time.

That’s annoying, not because BD player owners have to wait for the kinds of supplements available on HD DVD, but because early BD players will not be capable of conforming to the newer profiles.  My Sony BDP-S1 was not inexpensive; but, it has neither a secondary video decoder nor an Internet port.  So to report on the latest and greatest on BD, I have to buy another player.  And for you to enjoy the latest and greatest on BD, you have to buy another player.  Profile 1.1 and 2.0 titles are on the way from Fox and Buena Vista and perhaps other studios.  But will it make a difference in the format war? 

I seem to recall the surprising results of a study by a market research firm that demonstrated only 30% of DVD viewers care about or view supplements.  If that were true, are the advanced supplement features of HD players going to make a significant difference in determining which format will prevail?

This evolving BD profile situation is a symptom of technology brought to market prematurely.  The HD DVD standards were better defined and implemented (although I’ve experienced more disc glitches with HD DVD than with Blu-ray Disc).  And Blu-ray Disc was rushed to market to avoid HD DVD’s developing an insurmountable lead with a large installed base.  Perhaps Sony should initiate a consumer loyalty program that allows owners of obsolete profile players to trade in their units for a newer player at a very substantial savings.

Parting Thoughts

According to Nielsen VideoScan point-of-sales data, the BD to HD DVD sales advantage slipped considerably for the week ending 10/28 to 55%:45% or 1.22:1.  That’s a considerable drop from the 2:1 sales lead BD enjoyed for months.  It even had a noticeable effect on the year-to-date sales ratio; it now stands at 64%:36% or 1.78:1.  I suspect that Paramount’s HD DVD release of Transformers might have had something to do with that shift.  Now that we’re one-third into the hot fourth quarter, and Toshiba’s HD DVD desktop player installed base just shot up by 35%, I’ll be very interested to track disc sales.  The drama continues.