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Sony Wins DVD Battle, But War Likely Pending

Jan 7, 2008  •  Post A Comment

While Sony Corp. may have won the battle of the high-definition DVD players last week when Warner Bros. announced its support for Sony’s Blu-ray format, the war for HD movie delivery systems may still be looming, say 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 formats, 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 a Blu-ray player.
“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 they cannot tell the difference between HD and standard definition, said both 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 also can be transferred to TV sets.
Meanwhile, Vudu, which began selling its set-top boxes in 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 format may have clinched a victory over the Toshiba Corp.-led HD DVD format when Time Warner’s Warner Bros. unit said Jan. 4 that it would release its HD films exclusively in Blu-ray starting in June. Toshiba said in a statement that it was “surprised” and “disappointed” by the decision while 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.”
12:30 p.m.: Updated second, sixth paragraphs

32 Comments

  1. While I am a big Blu-Ray supporter, I think neither format is truly ready for the general public given the frequency of firmware updates that must be applied.
    For example, with each new “name” release, I now know to immediately look for a firmware update for my Sony BDP-S1 and to apply it before even attempting to watch the disc. The discs themselves now even come with inserts informing buyers they should check their player manufacturer’s website for firmware updates first.
    This is inevitable in a world where media players are more computer than appliance, but will the ordinary buyer be willing to burn a firmware update to a disc every few weeks and update their player?
    Of course most HD DVD players and some newer Blu-Ray players have network ports to connect the players to the Internet, but really, how many buyers would go through that hassle? How many TiVo owners have?
    This is why I didn’t give a Blu-Ray player as a gift this Christmas even though I have friends who would have appreciated one. If you’re not a dedicated early adopter, it’s just too much work if you just want to buy a movie and have it play.
    Meanwhile studios are busy adding things like online stores your player will connect to allowing you to buy while watching the film – like the “eco store” Universal added to the Evan Almighty HD DVD – is this really a feature customers are clamoring for? I somehow don’t think so.
    That having been said, I think many of the alternatives are a joke given just how hard it is to get high speed Internet in many areas of the country and the price involved. I live in one of the highest tech areas of the country and all I can get from my phone company is 256K DSL, and my cable company requires $100/month in other goodies to provide me with cable modem service. Is it any wonder the majority of Americans still use dialup service to access the Internet?
    I do have my TiVo connected to the Internet, but with my DSL service I’m not willing to tie up my connection for a day to download a low resolution movie from Unbox; meanwhile, downloading a simple 24 minute HD television program, were one available, would take nearly a day with my “high speed Internet” connection.
    The industry is great about making predictions about how the Internet will change everything and make disc-based media obsolete, but until connections are a lot faster, and more importantly, ubiquitous and cheap (say 10 MBps or more for $10/month), there’s no easier way to get that 50 GB of data on a Blu-Ray disc into the home than via that disc.

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