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High Definition Market Report

May 4th, 2007

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Are we seeing a trend?

The Format War Wages On

While I was out of the country for several weeks, much publicity and posturing appeared to suggest a winner of the format war, followed by a firm defense by the opposite camp.  There are those who believe as Mark Twain once quipped and incorrectly attributed to Disraeli, "There are three kinds of lies: lies, damned lies, and statistics."  But it’s hard to dismiss the numbers revealing the sales and popularity of Blu-ray Disc and HD DVD.

In the first quarter of 2007, consumer purchases of 1.2 million high definition discs were 70% Blu-ray Disc and 30% HD DVD.  This is not necessarily attributable to the nature of the offered titles.  When consumers were given the choice of purchasing The Departed on either format, 63% opted for BD.  Of the top selling HD disc titles during the first quarter, eight were on BD, led by the impressive performance of Casino Royale.  It’s interesting to note that even though HD on disc has been available since April of 2006, more than half of the discs were purchased during the last of the four quarters that ended in March.  HD on disc is catching on much faster than did DVD.

BD’s short-term performance during the week of April 22nd was less impressive (52% BD vs. 48% HD DVD), but year to date, BD has a 68% to 32% advantage over HD DVD.  That growth allowed BD to catch up with HD DVD in overall sales since HD on disc was introduced in 2006; BD has captured 57% of all HD disc sales (data courtesy of Nielsen VideoScan).

Also interesting is the entry (although somewhat tentatively) of the mainstream retail giant Walmart into the HD disc sales arena.  Selective stores are now offering players and discs in both formats.  This is a very significant event that may help spur acceptance of HD discs by Joe Six Pack, critical to broad acceptance and ultimate market success.  And what will undoubtedly help is the continuing decline of prices of widescreen flat panel displays capable of taking advantage of HD program sources.  There was a 29% drop in prices for fifty-inch and larger such displays compared to early 2006.

With the kind of performance seen from BD, it’s not surprising that studio proponents of the format are hailing its apparent success.  Buena Vista Home Entertainment president Bob Chapek said, "All of this data points to the irrefutable facts that the consumers are voting with their dollars and adopting the revolutionary technology of the Blu-ray Disc.  With such beloved titles as Pirates of the Caribbean on the horizon, these numbers will only do one thing: grow."  From Sony Pictures Home Entertainment president David Bishop: "Breaking the one million-unit mark is a significant milestone for Blu-ray because it represents rapidly growing consumer acceptance for this revolutionary platform. I am confident that the numbers will increase and more critical benchmarks will be reached to ensure Blu-ray's position as the leading high-definition format."  And 20th Century Fox Home Entertainment president Mike Dunn agreed, chiming in, “Practically, Blu-ray launched this past November and in just over one business quarter has rocketed to a significant lead. Consumers are clearly choosing Blu-ray as their high-def format of choice and telling us so at retail cash registers."  Pioneer’s Andy Parsons, chairman of the Blu-ray Disc Association's promotion committee, also agreed, "It's exactly what we've said all along would happen. The strong support for Blu-ray among movie studio and equipment manufacturers means that consumers have more choices when it comes to players and titles. And they're choosing Blu-ray by an ever-increasing margin."

The HD DVD camp was quick to retaliate with its own volley of numbers and quotes, pointing out that, overall, HD DVD sales are fewer than two thousand units behind those of Blu-ray Disc.  From an HD DVD Promotional Group statement, “Yes, these are still small numbers compared to DVD sales, but point being: HD DVD is still very much in the game. As more HD DVD titles hit the market (take a look at pre-order rankings for Planet Earth and The Matrix Trilogy) and as prices for HD DVD hardware continue to drop below the $400 mark, we're seeing more equal week to week movie sales ratios between the formats.”

The HD DVD Promotional Group also announced that the format has sold more than one hundred thousand standalone players in the States since the format was introduced; they further claim that HD DVD players are currently outselling standalone Blu-ray players by a four-to-one margin.  This may be a slightly disingenuous statistic; many Sony PS3 purchasers bought the game system to take advantage of the much lower cost of the integrated Blu-ray Disc player compared to then available desktop BD players (that is changing quickly, as well).  I suspect that film on HD disc sales rates may be a more accurate indicator.

The War Mediator

I continue to enjoy HD on disc regardless of format, and I don’t regret buying a player for each.  If you don’t want to gamble on one format, but want to watch films from all the studios including those exclusive to one format or the other, you may be tempted to buy the LG Electronics dual-format player.  As you know, I was enthusiastic about the prospect of a universal player as preliminary information was released.  Alas, the product does not live up to expectations.  All the slick magazines have reviewed it; I think the first may have been Sound & Vision.  Unfortunately the unit has some severe limitations, particularly in its support of advanced audio CODECs.  And by now you’re probably aware that it does not fully support HD DVD’s interactivity; HD DVD navigation is through simple text menus and iHD features will not work.  So if you really want to get into both formats, my recommendation would be to buy the new $600 Sony BD player (which should street for about $464) and, since they are still available, also buy a first-generation Toshiba HD DVD player, the HD-A1 (current street price is about $300).  If you want a more future-proof HD DVD player, the most advanced Toshiba, the second-generation top end HD-XA2, now streets for about $550.  Either way, the combined street price will be lower than the street price of the LG Electronics combo player and you’ll have advanced audio internal decoding support and as good if not better video performance.

The War Against Illegal Copying

AACS responded to the attacks on its encryption.  It first issued a statement, “Regarding the reported attacks on 2/13/2007, AACS has confirmed that an additional key (called a ‘processing key’) has been published on public websites without authorization. This is a variation of the previously reported attack (a compromise of a specific implementation) on one or more players sold by AACS licensees. Although a different key was extracted, this represents no adverse impact on the ability of the AACS ecosystem to address the attack. All technical and legal measures applicable to the previously reported attack will be applicable against this attack as well.”

AACS has since revoked the published keys.  AACS further announced, “In response to attacks against certain PC-based applications for playing HD DVD and Blu-ray movie discs, Advanced Access Content System Licensing Administrator, LLC announces that it has taken action, in cooperation with relevant manufacturers, to expire the encryption keys associated with the specific implementations of AACS-enabled software.”  Software updates will be required to reactivate computer-based players to avoid being among the devices on newly issued movie discs’ Host Revocation List.

The hackers responded with, “They cannot revoke this hack. No matter how many Private Host Keys they revoke, we will still be able to get Volume IDs using patched Xbox 360 HD DVD drives. Of course some measures must be taken to make sure a patched drive will not be identified as such and revoked (in theory they could make new versions of WinDVD and PowerDVD ‘examine’ your patched drive and if confirmed to be hacked they could (in theory) ‘call back home’ and tell the AACS LA who can revoke your drive). But by simply reflashing the drive (with the original firmware) after getting all your Volume IDs (or making this feature stealthy) this will not be an issue at all.”

We can thank the miscreants for motivating Fox to stop issuing all but two BD titles after the breach (Eragon and Night at the Museum) for the foreseeable future.  Nice going, guys.  We can only hope that the rest of the studios don’t have a similar reaction.

What Has The Adult Entertainment Industry Done For The War Lately?

In and earlier Viewpoints column, I wrote about the first HD DVD from the Adult Entertainment (AE) industry, Island Fever 3.  I was disappointed with the image quality, soft and contaminated with edge halos.  Thanks to a kind reader and a bit of digging, I’m convinced that Island Fever 3 was likely shot in HDV, a format that offers resolutions of either 1280x720 progressive or 1440x1080 interlaced (as opposed to the full resolution of 1920x1080), but with real-time MPEG-2 compression to the camera's tape cassette.  That single-pass real-time compression may explain the halos and the softness on the disc. 

I still feel that high definition is a more intimate format than standard definition, and that AE in HD can only be more titillating.  Well, the folks at Digital Playground were kind enough to send along one of its next wave of HD DVD titles, Jack’s Teen America Mission #3.  Essentially another compilation disc with a thin premise that offers the soundmen of a documentary crew the opportunity to have sex with a series of attractive young women who have not one implant among them.  And with the exception of a brief outdoor parking lot sequence, this disc is substantially improved over the Island Fever release.  Once again, the resolution is not quite up to mainstream HD DVDs, but it’s far, far better than standard definition DVD.  Halos are even under control.  The result is precisely the kind of intimate titillation that I expected.  The only problem is that the director is still framing for standard definition, with excessively tight close-ups that simply aren’t required for the more revealing nature of HD.  But when he pulls back, framing the picture in a more esthetically pleasing manner, the in-the-room immediacy is quite impressive.

It will be interesting to see if Vivid’s Debbie Does Dallas...Again!, to be released in HD DVD and Blu-ray Disc, ups the visual quality ante.  If the AE buyer finds these discs more satisfying than SD DVD, it remains quite possible that AE might have an impact on the market acceptance of HD on disc and might contribute to the resolution of the format war.

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