High Definition Market Update - Critical Time for HD Disc Formats

[PaulGo]

High Definition Market Update - Critical Time for HD Disc Formats



NewswireToday - /newswire/ - London, United Kingdom, 09/24/2007 - Q4 in 2007 is seen by many as a crucial time in the life of both HD-DVD and Blu-ray Disc (BD), and a timely new industry bulletin from Understanding & Solutions looks at the future of the HD marketplace, the opportunities and the threats.



Commentary and analysis provided by Jim Bottoms, Co-Managing Director, Understanding & Solutions

Q4 in 2007 is seen by many as a crucial time in the life of both HD-DVD and Blu-ray Disc (BD), as it is the second Christmas period for both formats in the USA – long highlighted by Understanding & Solutions as the point at which the format battle could potentially be won or lost – and, more importantly, where the long term success of high definition discs will be decided.

It is also a crucial time for PS3, having underperformed last year in the USA due to its high price, delayed availability and the unexpected success of the Wii, as well as missing the European Christmas season completely.

Though player prices are falling across the board, there is growing concern that the consumer does not fully understand the high definition concept; and the confusion is further compounded by the choice of two different disc-based formats.

Taking everything into account, BD has been the leader for much of the year, accounting for close to two thirds of HD discs sold in the US. In Europe, BD’s share is at a lower level, but it enjoys a stronger performance in Japan.

However, developments over the past few weeks have the potential to erode BD’s current lead, and there is growing concern throughout the industry that both high definition disc formats could be lost completely in a world of competing delivery options and viewing platforms.

Last month, Understanding & Solutions stated the decision by Paramount and DreamWorks to release exclusively on HD DVD was not in itself sufficient to change the balance significantly, though it was a major PR coup for the HD DVD group and did erode BD’s industry strength. At the same time we expressed the opinion that the major impact of this decision would be to prolong the format battle, something that is not good news for the industry overall.

These views have not changed, but a number of additional factors have emerged that may impact the situation and extend the current period of uncertainty.
• The Blu-ray technical standards – particularly in respect of its online connectivity option, BD Live – are still not finalised.
- There are no BD Live enabled players currently on the market, whereas all HD DVD players have connectivity (although not all discs support this feature).
- It is understood that PS3 consoles have the technical capability to support BD Live with a firmware upgrade but as yet there has been no indication from Sony when this might be implemented.
• Player pricing, whilst falling rapidly, has not yet reached the point where it is attractive to the mass market.
From the perspective of software and hardware support, HD DVD has been trailing BD. However, its two main supporters, Toshiba and Microsoft, have been campaigning hard to bring other content owners and CE manufacturers on board.
• In late August, Paramount announced it would release future titles exclusively on HD DVD.
• Chinese manufacturer Alco-Venturer has announced a $199 HD DVD player for Q4 this year.
Paramount’s decision may not have significantly affected the balance between the formats, but the landscape would change dramatically should Warner make a similar decision, or one of the BD-exclusive studios defected to HD DVD or even elected to release on both formats.
• Warner recently stated that high definition software sales are sufficient in each format to make dual support viable.
- The average is 2:1 in favour of BD, although ‘Planet Earth’ sold more on HD DVD.
Whilst supporting both formats ensures that the entire potential Hi Def disc market is addressed, the additional costs involved are not insignificant.
• The very different technologies employed by BD and HD DVD, particularly with respect to interactivity, means that each has to be authored separately.
• Mastering and print costs are doubled, and replication volumes are smaller.
• The only area where there is any real commonality between the formats is in video encoding, the result being that BD titles released in parallel to HD DVD frequently use the same video file and therefore do not make full use of the format’s 50GB capacity.

Although recent developments have favoured HD DVD, there has also been encouraging news for Blu-ray.
• A number of European studios/distributors who had previously announced that they would release on HD DVD only, announced at IFA that they will support both formats. Among these are Studio Canal and Bertelsmann-owned Universum Film.
• Three European replicators are adding Blu-ray lines to meet the anticipated demand: Infodisc, Germany (Oerlikon line); QOL, France (Singulus line) and a third as yet unnamed plant (also Singulus).
• There has been progress in developing BD-Java authoring tools.
- Technicolor’s in-house ‘BD-Jive’ – a GUI-based Java compiler, which greatly simplifies the creation of BD-Java titles – may be made available to third parties.
• Chinese player manufacturer, China Huala Group (CHLG), has joined the Blu-ray Disc Association (BDA) as a contributor member, enabling the company to input suggestions for enhancements to the format.
• PS3 sales, whilst perhaps disappointing from a games perspective, still add significantly to the installed base of BD-enabled video playback devices.

Conclusions
As we stand today, industry support for BD across content and hardware remains the strongest grouping and it is therefore the format with the greatest chance of market success, although its strength is being eroded.
Whatever happens, continued competition between the two groups will lead to continuing confusion and uncertainty, and therefore delayed consumer purchase decisions. This in turn will lead to further price erosion of hardware – and to a lesser extent, software.
All this comes at a time when research is increasingly showing that consumers are already confused about the overall ‘high definition’ message. Stories abound of consumers with HD capable TVs but standard definition cable or satellite service thinking they are watching HDTV.
The continuing improvements in the upscaling capabilities of standard definition DVD players cannot be ignored as they may satisfy many consumers needs for an enhanced viewing experience at a competitive price.
The next six months will be critical for the future of high definition discs. There is significant market potential for pre-recorded High Definition media but there is a growing concern within the industry that this potential could go unfulfilled.

http://www.newswiretoday.com/news/23859/

[Sonny]

kinda scary. blu has to win.

[JAG1977]

All the facts are there, it simply depends how much faith you have in each factor.

I personally believe BD-Live and anything but the most basic of DVD extras are utterly pointles for 99% of consumers, while cheap HD-DVD players are all well and good, but if few stores stock them whats the point?

Perception more than facts will determine the war, if you walk into a store and see Disney and big CE brands on the Blu side and Toshiba on the other, thats a powerful message.

PS, why do none of these reports ever suggest a HD-DVD supporting studio will support Blu-ray exclusively?

I would have thought after Paramounts buy off the Blu side would be even more willing to spend whatever it takes to buy support from a HD-DVD studio.

[SS316SRV]

Has scary as this sounds, we already knew all of that. The reason why HD DVD seems to make more news is because blu-rays continuing success isn't news. It would be like CNN running a breaking news update, "The sun rose today, expected to set this evening." HD DVD makes news because it is suprising that they are doing something somewhat positively. For and CE publication to report, "Blu-ray continuing to advance next gen technology, exceeds capabilities of rival HD DVD." is like reporting the sun rise.

[w_tanoto]

what I often hear now is HD DVD losing exclusive support: pathe and some european companies are the example

[CptGreedle]

The fact is, BD is on top, but HD-DVD is gaining some ground. However it seems this is not going to affect the industry much except delay the format war. As BD is already more accepted it will be a long time until HD-DVD finally succumbs and drops out. All we can hope for is that the studios will continue to support BD. If Warner does go BD exclusive, it will bring the war much closer to an end, but until universal starts releasing BD, it will not end. We need Unversal and WB to end it. If WB goes HD-DVD, we will not loose, but we will not win either... the formats will eventually be lost and the war will be a draw. It would be the end of the HD disc industry IMO. We need to keep WB in our grasp. We need to buy WB this 4Q and show them BD is the way to go. We need to support all BD formats and hope that Uni and Para will follow suite and realize how much they are loosing by going HD-DVD exclusive.
Lets face it, this is a long hard dirty war, and anything can happen.

[jsteinhauer]

The most important part of that is about the consumers' confusion, not just about the two formats, but about HD. Perhaps is the manufacturers' of HD television, or one of the HD media formats would run some ad campaigns explaining the concepts, some of that confusion would be relieved. It is amazing how many don't even know they can get HD programming cost free over the airwaves and have been watching SD programming on there HD televisions, which would obviously lead to a high level of dissatisfaction with the whole idea of HD. This may all change in 2009, when Americans will be forced to replace their analog hardware, if they still want to watch American Idol and Survivor.

Why doesn't the Blu-ray camp run some campaigns saying "our format is superior and this is why"? Instead, they rely on sales people at Best Buy and others to market their product. Everyone is suspcious of salespeople, especially when steered toward more expensive products.

The fact that microsoft is on board with HDDVD is worrisome for Blu-ray, at least in the US, but given that the behemoth seems to have less influence in the EU may factor in.

[Luis_A51]

I find that recently there has been more emphasis in stores that you need an HD source along with your HDTV or else its not HD. Obviously its in the stores best interest to sell you more products, but before I dont think they made it clear enough.

I wholeheartedly feel that HDDVD has done far more to hurt HDM than it has to improve it. Thanks to HDDVD we are stuck with crappy encodes on Warner movies and low consumer adoption for HDM as a whole. While I hope HDDVD dies soon, I dont feel that the whole industry will implode if they dont. I think between BD+ and the premium cost to consumers of HDM movies, BD will be an attractive option for studios for a long time.

[Kristin Simard]

For example: If there were 500 titles available in HD and 2,000 in Blu, wouldn't that tip the scale a bit?

Industry executives, please look at our lists in this forum!

[SS316SRV]

Originally Posted by Kristin Simard

For example: If there were 500 titles available in HD and 2,000 in Blu, wouldn't that tip the scale a bit?

Industry executives, please look at our lists in this forum!

The problem here is that in order to do this, distributers would have to open new factories. They wouldn't be able to use the existing because they are being used to press SD DVDs. There truthfully is not THAT MUCH demand for next gen discs.

[Terjyn]

HD-DVD is not gaining ground, they are losing it.

Paramount is the only good news for the HD-DVD group in 6 months.

How people can say that Paramount alone outweighs everything else is beyond me.

[Kristin Simard]

Originally Posted by SS316SRV

The problem here is that in order to do this, distributers would have to open new factories. They wouldn't be able to use the existing because they are being used to press SD DVDs. There truthfully is not THAT MUCH demand for next gen discs.

You certainly have a point there, but ultimately the side with the larger catalog wins. Increased availability creates the demand.

[PaulGo]

One big advantage of Blu-ray disks is the scratch proof coating. Many parents with little children get many ruined (unplayable) disks. (My daughter stuck with VHS tapes for many years because of this.) An advertising campain comparing Blu-ray to standard DVD and HD-DVD showing the benefits of this coating would get a lot of people purchasing Blu-ray.

[Thundercrash07]

Originally Posted by PaulGo

• Player pricing, whilst falling rapidly, has not yet reached the point where it is attractive to the mass market.
From the perspective of software and hardware support, HD DVD has been trailing BD. However, its two main supporters, Toshiba and Microsoft, have been campaigning hard to bring other content owners and CE manufacturers on board.


• Chinese manufacturer Alco-Venturer has announced a $199 HD DVD player for Q4 this year.

Where's that cheap Funai-crap when you need it?