Fall 2006

Format Wars

As HD and Blu-ray DVD backers prepare for a big sales push, both sides insist the dueling home formats are here to stay.

BY ALEX BEN BLOCK

Illustrated by Tricia Noble
Television director Chuck Bowman is a self-confessed “gadget freak.” The consumer electronics industry would refer to him as “an early adopter.” He is frequently among the first buyers of new high-end video and audio devices to upgrade the media room in his Pasadena, California home. Currently, he has a 60-inch Sony LCD screen (made high-definition with a Sony add-on box), a Bose surround sound system, an all-in-one DVD recorder, player and DVR by TiVo and an XBox 360 video game player.

“When you are looking at the quality of an image,” explains Bowman about his passion for the latest developments, “you want as true color as you can get, good contrast, brightness, all of that.”

He often discusses the latest gear with his son Rob Bowman, director of The X-Files TV series and movie. “In my family you’ve got two people who stay pretty close to what is happening out there and watch how it’s all evolving,” says Chuck Bowman.

Bowman wants one of the new HD players but feels stymied by incompatible formats. Since last spring there has been an HD player/recorder available from Toshiba starting at about $500 using the HD-DVD standard, an adaptation of the current DVD that provides a markedly improved image when projected on a high-definition screen.

This past summer a second HD player made by Samsung went on sale starting at $1,000, based on a different format called Blu-ray. By Christmas, Sony and others hope to offer at least some Blu-ray machines in high-end electronics stores. But the availability of Blu-ray machines and discs may be less than anticipated because of manufacturing difficulties.

Bowman, like many consumers, just wants the best available. However, he doesn’t want to buy the wrong one. “It bothers me,” says Bowman. “We were all privy to the VHS-Beta debacle in the early 1980s. I wish the manufacturers would have compromised one way or another, so we wouldn’t have to deal with this. But that’s just the way it is.”

Beta, first released by Sony in the late 1970s, was considered the superior imaging technology, but VHS, backed by JVC, Panasonic and others, was less expensive, more widely marketed and had a broader manufacturing base. In the mid-1980s, Sony pulled the plug on Beta, making those machines and cassettes instantly obsolete.

“I see some comparisons but I think the situation is reversed,” says Don Eklund, executive vice president of advanced technologies for Sony Pictures Home Entertainment. “VHS was successful because it had longer recording time. That’s a function of capacity. Blu-ray has higher capacity... and superior technology. [Blu-ray] didn’t try to modify an existing disc format. They made a new one that was forward-thinking. VHS was successful because it was supported by numerous electronic companies. This time, Blu-ray is supported by a larger number of companies.”

Sony has enlisted many former VHS competitors including Panasonic, Philips, Mitsubishi, LG, Pioneer, Hitachi and Sharp, along with PC makers Apple, Dell, HP, TDK and others, who are incorporating Blu-ray into the next generation of computers.

HD-DVD machines are being made so far only by Toshiba, Thompson (RCA), which is also making Blu-ray players, and two Chinese companies, Amoi Electronics and Sichuan Changhong Electric, who cited the lower manufacturing cost and ease of adapting current DVD lines, compared to an entire new factory required for Blu-ray. The HD-DVD format is also supported by Intel and Microsoft, who plan to incorporate it into new computers, as well as the next-generation XBox console. Microsoft has been a driving force for HD-DVD behind the scenes, offering incentives to manufacturers and committing major marketing expenditures.

Blu-ray has exclusive deals to put out movies from Sony, Disney, MGM, Fox and Lion’s Gate. Warner Bros., HBO and Paramount plan to release top titles like Mission: Impossible III and Superman Returns on both formats. Universal is releasing exclusively on HD-DVD. All distributors are also putting the same pictures out on standard DVD. Players for both formats are backward-compatible (so they also play standard DVDs, and in some cases, CDs and CD-ROMs as well).

“I think to date we’ve been the most aggressive studio [in supporting multiple platforms],” says Ron Sanders, president of Warner Home Video, explaining that the roll-out of movies on Blu-ray has been slower because it’s a more complex technology. “We started off this year releasing the HD-DVD format prior to Blu-ray only because the format specs were further along. Now we’re catching up on Blu-ray.”

HD-DVD makes its own claims to technological superiority. It offers Dolby high-definition audio, Microsoft’s IHD interactivity software and an easier connection to the Internet. The Blu-ray player will also connect but requires an add-on device.

Sony’s claim of greater capacity for Blu-ray is challenged by Jodi Sally, vice president of marketing for Toshiba America Consumer Products, who insists that, so far, no one has actually been able to exploit that capacity. “Right now Blu-ray is utilizing 25 gigabyte discs and they’re using an older compression [standard], MPEG-2,” says Sally. “So right now they are challenged for space on the disc. If you look, most of their releases run around 100 minutes.”

In any case, Sally is sanguine over the prospect of dueling formats. “You have to look at it in the way the [video] gaming industry has been marketing two formats for years,” says Sally. “We have different formats for flat panel TVs. We have different formats among service providers for cellular phones. We already live in a world where different formats can survive.”

The video game analogy is particularly apt since the high-definition format battle is an echo of an on-going competition between Microsoft’s XBox 360 (released a year ago using the standard DVD format with plans for an external HD-DVD drive and possibly an internal drive in the future) and Sony’s PlayStation, which launches a new generation this November. PlayStation 3 will incorporate a Blu-ray player and play movies as well as games for about $500.

However, due to manufacturing difficulties with Blu-ray, Sony had to push back the release of PS3 from spring 2006 to November, and then said it would only have limited production of machines for Christmas 2006. In Europe, the launch of PS3 has been put off until some time in 2007. This could be significant because PS3 is an important part of Sony’s strategy in marketing the Blu-ray technology.

“Blu-ray’s big hope at this point is PlayStation 3,” says analyst Tom Adams, president of Adams Media Research, “otherwise it’s a $500 machine versus a $1,000 machine [for a Blu-ray player].”

Sony hopes the PS3 will be used by the whole family and not just the kids. It’s no sure thing, according to former MGM home video executive Ralph Tribbey, who now publishes the DVD Release Report. “Sony has really, I think, guessed wrong on how this is going to work. They’re confusing gaming, which is one sort of packaged entertainment, with watching movies, which is an entirely different game altogether.”

The question may be whether anyone really needs either. “This is not as big as DVD replacing tape because that was a huge change,” said Scott Hettrick, media consultant and former home video editor at Variety and The Hollywood Reporter. “This is more a refinement, it’s a better experience which matters to some and not others.”

There is also the prospect the two new formats are late, because delivery of movies may eventually shift to the Internet, where consumers will be able to download titles and burn to a DVD or transfer electronically to another TV set in the house. However, most experts say it still takes too long for consumers to download a movie. In addition, the quality of the image on downloads is currently poor, and the technology to transport the movie “the last 10 feet” from the computer to the TV remains in the nascent stage, although Apple recently announced a strategy to connect desktop computers to family television sets.

“Digital downloading is coming but, if we’re lucky, it will reach $20 million this year versus the $25 billion video market,” says analyst Tom Adams. “We’re a long way from it being significant.”

One thing you won’t find anytime soon is a combination machine that can play both HD-DVD and Blu-ray discs. “I don’t think we’re close to a compromise [on the two formats]. I think that time has passed,” says Sony’s Eklund. “A combo player could forever relegate us to having two different physical formats. I don’t think that’s a service to anyone, whether it’s the retailers, consumers or the companies. I think one format is the right choice and the best format should prevail.”

Eklund claims that when Sony releases its Blu-ray machines before Christmas, it will offer images that, when delivered over a Sony HD-TV, “will be every bit as good as those in digital cinemas today.” He believes the images will be comparable to film shot at 24 frames per second, but on video at home. Sally says HD-DVD can deliver the same high quality, so consumers can’t lose with either system—as long as they stay around. It is a battle that may well last as long, or longer, than the eight years it took for VHS to beat out Beta.

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