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Blu Licensing Price Cut Could Help Adoption

18 Mar, 2009 By: Chris Tribbey

At his final Macworld appearance in October 2008, Apple CEO Steve Jobs told everyone why we still don’t see Blu-ray Disc drives in his company’s computers.

“Blu-ray is just a bag of hurt,” he said. “It’s great to watch the movies, but the licensing of the tech is so complex. We’re waiting until things settle down and Blu-ray takes off in the marketplace.”

If licensing is a roadblock for Apple — or other manufacturers, or content owners — then Sony, Philips and Panasonic are proposing to clear the way. Their late-February announcement of a one-stop Blu-ray licensing shop — hopefully up and running this summer — would bring together roughly 20 Blu-ray patent holders, lowering the royalty prices for hardware and software, and the headaches associated with going to more than one patent holder to get into the Blu-ray market.

“We really believe that the ease of use for both licensees and licensors is significant and thus the program will serve and stimulate the whole Blu-ray Disc market,” said Caroline Kamberbeek, spokeswoman for Philips’ intellectual property and standards department.

Akin to the 1999 formation of the DVD6C patent pool — where six DVD developers pooled their resources to launch a worldwide licensing program — the new Blu-ray licensing group believes it will drive down licensing costs by 40%, with quoted product licensing costs of $9.50 for a Blu-ray player and $14 for a recorder.

The group has been in the works for more than a year, Kamberbeek added. “It really took quite some time to build a fully new, solid and transparent program that really serves the market,” she said.

The one-stop licensing shop — which will be based in the United States, with offices in Asia, Europe and Latin America — aims to offer licenses for CD and DVD as well.

“There are patent pools for other optical storage formats, but a product license like this does not exist for optical storage products,” Kamberbeek said. “This a product license that takes care that all relevant patents in the product are licensed also for CD and DVD.

“This is unique in the optical storage market.”

From the hardware side, Anthony Jasionowski, senior group manager for Panasonic’s technology liaison and alliance group, the prospect of added Blu-ray player competition for his company isn’t exactly welcome, but more competition can only spell good things for the Blu-ray industry on the whole, he said.

“It can only accelerate the total business of Blu-ray, and not just from the hardware perspective,” he said.

On the software side, the new group is quoting per-disc licensing fees of 11 cents for a read-only Blu-ray, 12 cents for a recordable disc, and 15 cents for a rewritable disc.

Reaction from suppliers was mostly positive to the announcement that licensing costs for Blu-ray could be on their way down.

“It better,” said Mike Stimler with Water Bearer Films. “The licensing issue has prevented all the smaller labels from entering Blu-ray. [Still] I feel that even with this change, the drive toward Blu-ray still will be slow and the consumer adoption rate is bearing this out.”

Freyr Thor, president and CEO of Vanguard Cinema, said that licensing fees from Sony were hampering his company’s Blu-ray plans, and the new licensing group would help independent suppliers join the game.

“They were unrealistic, not only cost per unit, but also the upfront fee per title,” he said of Sony’s costs.

Berry Meyerowitz, president of Peace Arch Home Entertainment, concurred: “When you’re doing volume, every 5, 10 cents matters.”

But David Rand, SVP of feature films for Image Entertainment, said even with lowered licensing costs, independent suppliers would continue to tread carefully when it comes to Blu-ray.

“I don’t think this will increase the number of independent Blu-ray releases, not with this economy,” he said.

Rand said that the current economy has slowed down spending for both consumers and retailer buyers.

“At least once a week someone here finds a title in our catalog and says, ‘Should we do a Blu-ray?’ added his Image colleague, Richard Buchalter, SVP of sellthrough. “I’ve got hundreds, maybe thousands of titles with HD masters, but it may be too soon to hit the Blu-ray consumers with these catalog titles.”

Martin Mair, head of home entertainment for Cinema Libre, said it was the still-high authoring costs for Blu-ray keeping more suppliers from diving in, while Bruce Frigeri, president of Lifesize Entertainment, said consumer demand for Blu-ray still has him wary.

“That being said, if a release has enough visibility to warrant the demand, these reduced costs could very well be the tipping point for an independent film releasing on Blu-ray,” Frigeri said.

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