Blu-ray Wins DVD Battle, War May Shift

[jd13]

Posted on TVWeek.com yesterday: Blu-ray Wins DVD Battle, War May Shift

News

January 9, 2008
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Blu-ray Wins DVD Battle, War May Shift
By Danny King, Special to TelevisionWeek
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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.”

[xtop]

the thing i've noticed about the whole dvd rental thing. you've got those boxes at fast food joints and grocery stores to rent for a buck, and then you've got movie stores selling nearly new release movies for 5 for 25, so why would anyone want to a. buy a movie, or b. pay full price for a new copy when they can get it for a rental price used

all i know....the bda needs to step it up if they expect to take over dvd anytime soon

[PS3-Playb3yond]

Good read. There is no way Blu-ray is going to lose. And what's up with this "streaming movies" and "set-top boxes" crap? Not everyone has a PC on their home let alone internet. No one is going to stream nor download a whole movie . . . not to mention high-def movies.

[jd13]

Originally Posted by PS3-Playb3yond

Good read. There is no way Blu-ray is going to lose. And what's up with this "streaming movies" and "set-top boxes" crap? Not everyone has a PC on their home let alone internet. No one is going to stream nor download a whole movie . . . not to mention high-def movies.

On top of that, the quality that you get with BD is outstanding compared to what you could get with streaming or downloads. You have to have a heck of a lot of bandwidth for that. I cannot even stream HD trailers on my media server via wireless to the PS3 without copying them over, so yea, let's stream and download, for what, a worse picture than cable or sat and even worse audio. Besides, for some reason, people like to have the hard product. If given a choice to download software that you can buy on a cd, which would you do? Personally, give me a disc.

[monkyman]

Well, it's not up to us if BD will beat DVD, It is now up to the studios. If they want BD to beat DVD they will have to lower BD prices on new releases and even go up to $20.00 DVD releases. Make it an equal price structure, but show how much more you get with BD.

Oh man, Toshiba won't like that..

[camper]

The people who think that downloads, pay-per-view, on-demand, and internet streaming video will overtake High Def movies deserve to watch movies only from downloads, pay-per-vew, on-demand, and internet streaming video.

~Camper