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Blu-ray Wins DVD Battle, War May Shift

Jan 9, 2008  •  Post A Comment

With Warner Bros.’ announcement last week that it would release high-definition DVDs exclusively in the Blu-ray format starting later this year, Sony has likely won the battle over Toshiba’s HD DVD format.
The next question is whether the DVD format war will keep its strategic significance in a world that may be moving toward digital delivery of movies through pay-per-view, streaming video and downloads.
Warner Bros.’ choice of Blu-ray may cause Paramount Pictures to do the same, which would leave General Electric unit Universal Pictures as the only major studio to exclusively back HD DVD.
“Warner’s decision to essentially drop HD DVD is a significant win for Blu-ray and further cements its position in the market,” said Tony Wible, analyst at Citigroup, in a note to investors last week. “Blu-ray will prevail in the hi-def format wars.”
Paramount, which hasn’t made any announcement, has a contractual clause allowing it to switch next-generation DVD formats should Warner Bros. switch to only Blu-ray, the Financial Times reported, citing unidentified sources. Paramount, along with DreamWorks Animation, said in August that it would back HD DVD exclusively.
Still, a larger fight among HD movie delivery systems may be looming, according to some analysts.
With satellite and cable providers boosting the number of pay-per-view channels in HD, established companies such as Amazon.com and Apple selling downloadable movies through their Unbox and iTunes services and upstarts like Vudu selling set-top boxes to do the same, more customers may choose to rent movies online or through PPV, rather than spending $300 or more for Blu-ray players.
“Does there need to be a next step for DVDs, or are we going to go in a different direction of packaged media?” said Pete Putman, publisher and editor of HD Web site HDTVexpert.com. “Between rentals, broadband and Unbox, the consumer’s going to say, ‘Now I can really be lazy.’”
Additionally, Blu-ray sales may suffer because many customers either mistakenly believe their HD televisions can display HD movies using their standard DVD players or cannot tell the difference between HD and standard definition, said both Mr. Putman and Bruce Leichtman, president of Leichtman Research Group.
DVD sales have been losing ground to DVD rentals for at least two years; Pali Research analyst Richard Greenfield last week estimated DVD sales will fall 3% this year. U.S. DVD sales increased 1.2% to $16.6 billion in 2006 while DVD rentals jumped 15% to $7.5 billion, according to DVD trade group Digital Entertainment Group. Meanwhile, U.S. DVD player unit sales, which peaked at 37.1 million in 2004, fell to 32.7 million in 2006.
Since then, Amazon.com, whose Unbox allows customers to buy movies online and download them via the Internet, teamed up with digital video recorder maker TiVo to allow downloads directly to TV sets (TiVo also dropped the price of its HD recorder to $299 last July, about five months before the cheapest Blu-ray players fell below the $300 mark). Apple, which began offering movies in its iTunes format in September 2006, has an inventory of more than 500 movies that can be transferred to TV sets.
Meanwhile, Vudu, which began selling its set-top boxes last September for $399, started offering HD titles from Paramount Pictures, Universal Studios and Lionsgate two months ago. And last week, Netflix, the world’s largest movie-rental service via e-mail, said it would work with LG Electronics to build a set-top box to allow movie streaming into HDTVs by the end of this year.
All of these pose challenges to Sony, whose Blu-ray outsold the HD DVD format by more than a 2-to-1 margin during most of last year. After Warner Bros.’ statement that it would switch exclusively to Blu-ray in June, Toshiba said in a statement that it was “surprised” and “disappointed” by the decision.
Mr. Greenfield, in an analyst note, said HD DVD would “die a quick death.”
“Boy, it’s going to be harder to buy that hardware with only two studios providing software for that format,” said Leichtman. “The next challenge is convincing consumers that it’s worthwhile to upgrade and that they haven’t already done that.”

3 Comments

  1. Don’t kid yourself.
    The only way Blu-Ray got its numbers up was thru its PS3 gaming module. Deduct those Blu-Ray players on the gaming systems and see what you have.
    True video enthusiasts have not selected Blu-Ray. They don’t need all those extra features (just like all those extra features on Sony camcorders never get used).
    Sony tried to squeeze the public for extra bucks for their blu-ray players. Samsung played it straight. I hope they win the game. I am buying an HD DVD player.

  2. What ever happened to the possibilities of a multi-format disk. One that would have several layers for both DVD and HD DVD or Blu-ray? I remember reading about a lot of research, and some companies showing actual disks that worked in both kinds of players. However, it seemed like they could only do DVD and one HD format, not all three on one disk. But still, that would help solve buying disks to play in any player you get. Samsung and LG have come out with multi-format HD DVD players that work with both formats and standard DVD. But they are pricey. Sony and the HD-DVD camp should have come together, they probably have lost any hope of gaining a significant portion of the HD market with so many options now available. The gain difference between DVD and HD DVD’s is far less then from VHS to DVD.

  3. You’ve noticed the right technology here – not DVDs – downloading options. One of the most interesting out of CES is xStreamHD, a satellite based 1080p set-top box system.
    Let’s assume they’re going to figure out a competitive cost. What we have here is:
    A box with three “Off-Air HD tuners” and recording capability. Plus a service providing extremely rapid downloading of DVD content in HD – possibly including TV show box sets.
    In other words, besides movies you could watch all the last season’s shows you might be interested in without commercials, plus OTA HD tv. Most everything I watch on cable and OTA channels comes out on DVD within a few months after the season ends. And shows that find an audience whatever the initial medium could be delivered this way.
    xStreamHD will have to be well capitalized for the long haul. And they are initially going to have to give away their boxes, dishes, etc. for an 18-month contract.
    Unbox, Vudu, xStreamHD, etc. are pointing away from DVD’s as the delivery medium – and that’s what the writer’s strike is all about.

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