Why No One Wins in the High-Def Format War

The ongoing tussle between backers of the two high-definition media formats -- Blu-ray Disc and HD DVD -- took a dramatic turn with the news that Paramount would release all future titles on HD DVD only. The studio's statement last month set off a spate of announcements from other parties as members of each camp tried to rally the troops and stake out their positions heading into the holiday season.

The news couldn't come at a worse time, what with consumers revving up to make a buying choice this holiday season -- assuming they're ready to jump into the high-def fray at all. Suddenly, what had been a fairly clear advantage for Blu-ray became much more uncertain. And that's actually not a good thing for either fledgling format.

Before Paramount's announcement, Blu-ray appeared to have an enviable edge: Two Blu-ray discs were being sold for every HD-DVD disc, and the format's studio backing was wider than HD DVD's. For a while, more -- and cooler -- titles seemed to be coming out on Blu-ray (Pirates of the Caribbean, anyone?) than on HD DVD. Even US retailers appeared to be voting for Blu-ray, with Blockbuster saying that it would stock HD DVD in only 250 out of 1700 stores slated to carry high-def titles (all will have Blu-ray), and with Target declaring that it would promote Blu-ray players in its stores.

The Paramount Decision

The Paramount announcement caught the Blu-ray Disc Association and its members off-guard. Even Andy Parsons, who heads the BDA's promotional efforts in the United States, expressed surprise at Paramount's move. Like many observers (myself included), Parsons would have understood if Paramount had taken the step earlier this year, before Nielsen sales data began showing stronger support for Blu-ray than HD DVD. But now?

Paramount CTO Alan Bell made some valid points, though, in explaining the reasons behind Paramount's decision. Many of the reasons he cited were technical ones; he didn't get into the business side too much, leaving that for other studio spokespeople. While I don't for a minute believe that the decision was wholly based on technical reasons, I do believe that Bell is right on one specific point: the Blu-ray specs mess.

Right now the Blu-ray Disc format is in transition, as new minimum requirements will go into effect come October 31. All players will need to support up to 256MB of storage and secondary audio and video decoding (which enables features such as picture-in-picture content). Additionally, players supporting BD Live--the much-touted Internet-connected interactivity that the Blu-ray Disc specification calls for--must have 1GB of storage and an ethernet connection as well as the secondary audio and video decoding.

The brewing confusion lies in the fact that the latest Blu-ray Disc players don't have those features; furthermore, it's unclear as to whether the manufacturers of the players announced at the giant CEDIA home-theater trade show earlier this month (LG, Pioneer, Samsung, and Sharp) will be able to offer firmware upgrades to those models to enable what's being referred to as the Blu-ray 1.1 profile (which encompasses all of the new specs that go into effect October 31).

I have no doubt that these new Blu-ray players, like the ones that have preceded them, will play all movies and TV shows in gorgeous high-def. But the players you can buy this holiday season most likely won't be able to deliver the full Blu-ray entertainment experience as movie discs ship with new interactive features. Next year, and the year after next, greater features and interactivity will be coming, assuming Blu-ray persists as an entertainment format. Do you really want to have to buy yet another player just to handle the cool, extra disc-playback features you read about in a review?

Following so far? If so, you're doing better than most folks I describe this situation to. And you're probably ahead of the masses of consumers who will converge on Best Buy and other retailers this holiday season.

No wonder, then, that the player specs might be an issue for a movie studio. How can studios author content without knowing the capabilities of the player? How can they market the extras, knowing that the early adopters who bought a player in the last two years probably won't be able to view that content? This is a huge marketing and educational hurdle that the Blu-ray camp must face as new players and new features start to appear. In this respect, HD DVD holds an advantage over Blu-ray: From day one, every HD DVD player has been able to handle the same level of interactivity. As time goes on, that could prove a winning strength of HD DVD.

Any Winners in the Room?

Maybe saying that no one wins here is too strong a statement. Certainly, the Paramount announcement is a clear coup for the DVD Forum and the backers of HD DVD (led by Toshiba, Microsoft, and NBC Universal Studios). Aside from Toshiba's price drops in the spring and summer, HD DVD had really had no momentum going. The Paramount announcement reinvigorated the HD DVD movement.

Assuming the rumors of a $150 million payoff are true, Paramount is likely the only other party that doesn't lose. Although Paramount's Bell told me that the studio's HD DVD exclusivity deal doesn't have a timeline attached to it, I've heard through the grapevine that the agreement may be limited to just two years. If so, my guess is that the payoff--whatever form it took (reports say that it wasn't a cash payment, but Paramount is officially mum on the terms of this arrangement)--more than offsets any of Paramount's potential losses from not having its movies and TV shows available in both HD DVD and Blu-ray.

Sure, consumers will get angry, but in the long run, if Star Trek fans buy Paramount-produced Star Trek titles on HD DVD, and if they ultimately need to buy them again in Blu-ray because Blu-ray becomes the industry's format of choice in the future, then they're going to end up buying the titles again. End of story.

Toshiba will likely see some uptick in player sales thanks to Paramount. And because the company's players are relatively inexpensive (the new HD-A3, due out in October, will retail for $300), it won't surprise me if some consumers end up opting for HD DVD just because they can afford it.

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Melissa J. Perenson

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