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One, Two, Three, Four — Let's Avoid a Format War!

10 Dec, 2004 By: Thomas K. Arnold

The stunning announcement earlier this week that Buena Vista Home Entertainment will line up with the Blu-ray Disc camp, alongside Sony Pictures Home Entertainment, changes the next-generation equation.

The previous week, you will recall, three studios — half of all majors — came out on the HD-DVD side, and some pundits were proclaiming Blu-ray Disc all but dead.

Now it's three to two, and the sole fence-sitter, 20th Century Fox Home Entertainment, will likely side with Blu-ray Disc as well, informed sources tell me.

That would evenly split the major studios, and the likelihood of a format war — once dismissed as a remote possibility, given the compromise eight years ago on the DVD front in which the two competing sides hammered out their differences and had plenty of time to make a united stand at launch — now appears very real.

After all, we're less than a year away from when at least one of the competing next-gen platforms, HD-DVD, will supposedly appear on consumer electronics store shelves, and at this stage in the DVD game, the two rival sides were already at the table.

But when you strip aside all the rhetoric from the two competing camps, all the statements of support and reasons behind that support from the studios, and all the dire pronouncements and warnings from analysts, you begin to focus in on a word common to all the press announcements that came in the past 10 days: “nonexclusive.”

Now, that can mean one of two things. On the surface, it appears that if both sides do come to market, studios with “nonexclusive” commitments to either side can easily double up and release product on both Blu-ray Disc and HD-DVD.

But quite honestly, I don't see that happening. Imagine the costs of producing two completely different SKUs and then having to tell consumers about the difference in the marketing campaign. No one's going to play that game. Marketing costs for DVDs are already going through the roof, driven by the growing importance of first-week sales and the sellthrough bent of the business. Studios are already spending a bundle reaching the consumer, and while they may not balk at spending more to introduce consumers to a new format, they're certainly not going to want to spend significantly more to promote two formats, both at the same time — marketing campaigns that seek to not just sell the product and the format, but also explain the difference.

No, what I believe the “nonexclusive” clause really means is that the studios are hedging their bets and reserving the right to change their minds. Nonexclusive commitments are a lot easier to break than exclusive ones — it's the difference between a casual girlfriend and a wife.

Don't be surprised if we see one or more studios changing partners in the coming months — or maybe even weeks.

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