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Analysts: Format Frustration at CES

28 Dec, 2007 By: Erik Gruenwedel

At holiday gatherings, hearsay about Blu-ray Disc and HD DVD frequented banter with predictable results.

Rory Willits of Mission Viejo, Calif., was leaning toward Blu-ray because of the availability of Disney titles for his kids.

“I'm going to wait and see what happens,” Willits said.

Atlanta-based Brian Donnelly didn't hesitate and purchased “Planet Earth” on HD DVD so his kids could watch it on their uncle's flat-screen television in Tustin, Calif.

“He's got [HDTV], it will work,” he said.

Of course, having an HDTV is only half the prerequisite. Two dissatisfied consumers leave little retail impact.

A similar scenario could beckon at the 2008 International CES in Las Vegas, say analysts well-versed in the show that is the world's largest consumer electronics showcase.

“There is certainly a frustration level at all levels, with neither side gaining enough traction to declare victory in this battle,” said Michael Gartenberg, emerging technology analyst with Jupiter Research. “Expect both sides at CES to highlight their wins, downplay their losses and continue to point to themselves as the future of high-definition.”

Heading into the holidays, both sides slashed hardware prices to entice budget-conscience consumers.

Wal-Mart reportedly sold more than 90,000 Toshiba HD DVD players during a pre-Black Friday sale that saw the price cut to $99. Amazon.com is now selling the Toshiba A-3 player for less than $180, and Sony cut the price of its Blu-ray player below $300 before Christmas.

Jupiter's Gartenberg said HD DVD realized first that price is a strong motivator among consumers of electronics.

“The competition isn't really each other, but with cheap DVD players that upconvert to basic HD resolution,” he said. “The devices upscale really good pictures and cost very little money.”

Ken Graffeo, EVP of HD strategic marketing with Universal Studios Home Entertainment and co-president of the HD DVD Promotional Group, said CES will showcase HD DVD's reach beyond the set-top player and Xbox to include PC drives.

“You'll see more of a focus on the whole [HD DVD] ecosystem,” he said.

Sony Pictures Home Entertainment remains focused on specific Blu-ray titles. Together with Amazon.com, Sony is allowing consumers to choose the box art for the April 8 Blu-ray and DVD release of The Adventures of Baron Munchausen.

The Blu-ray Disc Association will hold a press event Jan. 7 at the Casanova Ballroom at The Venetian.

Richard Doherty, media analyst with The Envisioneering Group, downplayed scuttlebutt that Warner Home Video might announce exclusively backing Blu-ray. The studio currently backs both formats.

“All that really does is cheer up the Blu-ray camp and tick off a lot of Warner customers who bought the HD DVD version,” Doherty said. “If that is the big news for the BD camp … it won't make the retailers or consumers any happier.”

Doherty expects the debut of a sub-$500 dual-format player. He pointed to the evolution of the MP3 player, which quickly embraced alternative music file formats.

“It is back on the CE manufacturers to show some innovation,” Doherty said. “Hardware manufacturers can rally to give the consumers what they want while the format proponents think they've got the winner-take-all solution.”

He cited consumer surveys that stated preferences for devices that either play both formats or both movies on one disc.

“We think at CES it is not so much about sides that are changing, as it is the solutions that are going to evolve,” Doherty said.

Gartenberg said but for one format delivering a knockout blow early in 2008, upconverting DVD players could steal the thunder.

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