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Marketing Key to New Format

28 Oct, 2004 By: Jessica Wolf

Both Buena Vista Home Entertainment president Bob Chapek and former Warner Home Video head (and now HD-DVD pundit) Warren Lieberfarb used The DVD Forum's conference this week as a forum to call the industry to action on the next-generation DVD format front.

The marketing more than the technology will be the deciding factor in the consumer's mind should there be a next-generation format war between HD-DVD and Blu-ray, Chapek said.

Strong branding of whatever format rises to the top will be key, he said. But, Chapek added, two competing formats could drive the 30 million HD-enabled households to cable or satellite for their high-definition home viewing, “potentially crippling the next-generation format.”

“Studios have a chance to keep the wild ride of DVD packaged media going for another 10 years,” he said, but they have to do it without “utterly confusing or aggravating the consumer.”

Those 30 million HD-enabled households are not only growing, but are not relegated to the traditional early-adopter status most new technology releases are used to catering to in the beginning, Chapek said.

But while VCR consumers, after 15 years in the market, were ready to trade up their machines, the same mentality may not hold true for folks who've only owned a DVD player in the past few years, Chapek said.

Therefore, he said promoting the next generation of DVD will take “significant marketing expenditures” and have to encompass more than just the enhanced video element of next-generation DVD and called for a “salient, easy-to-understand portfolio of consumer benefits.”

Next-gen DVD marketing campaigns will also have to tout the format's lossless audio and surround-sound features, advanced interactive capabilities and backward-compatibility with standard -definition DVD, he said.Lieberfarb compared the impending format war to the biblical story of King Solomon and the two mothers fighting over a baby. He also drew a dismal parallel between a potential format war and the music industry's lack of foresight when coming up with a high-resolution audio format. Neither DVD-Audio nor SACD found success in the market to any degree, he pointed out.

“So P2P filesharing became the next-generation boom,” Lieberfarb said.“Time marches very fast in the digital world,” he added. “The music industry missed out by procrastinating and debating all the wrong issues.”

“The effect of the [high-res audio] format war was to prolong the life of the CD, but at declining numbers, and created an open space for MP3s and piracy to grow,” he said.

Lieberfarb charged the video industry to learn from history.

“The action that has to be taken now is to decide upon and support a single format and create a market [for next-generation DVD] that avoids consumer confusion and redundant inventories,” he said.

Launching next-generation DVD in 2005 means mass-market pricing won't hit until 2007, Lieberfarb said. “The longer we wait, the more broadband [connectivity] and DVD burners are out there.”

He also called for the industry to adopt the format-neutral Advanced Access Management System (AAMS) as the digital rights management option for high-definition DVD.

Panelists speaking on the subject of high-definition DVD at the conference agreed that a format war is dangerous, but see very little way around it at this point, with few studios willing to commit to one side or the other.Kilroy Hughes, program manager of digital media standards and strategy for Microsoft (which is creating video codecs for the new technology), and Dominick Dallaverde, director of engineering and pre-production for replicator Cinram, both said their respective companies are keeping their options open for both formats, though plans for HD-DVD are further along for both companies.

Electronics manufacturer Sanyo Fisher has lined up on the side of HD-DVD, and its consumer products side will start offering players as early as fourth quarter of next year and recorders in Q4 2006, but the component side of the company will also be creating products for use in Blu-ray machines, said Paul D'Arcy, EVP of Sanyo Fisher.

Jodie Sally, assistant VP for Toshiba, warned pundits in both camps not to discount standard DVD too quickly in the leap to next-generation technology, pointing out that backward-compatibility will be a big part of the marketing message.

“At Toshiba, we see HD-DVD as an evolution of the current DVD format,” she said. “Consumers don't adopt new technology like we would like to think they do.” Sally cited Consumer Electronics Association research statistics that show DVD players with a dual VCR deck sell as well if not better than DVD-only set tops.

Both Sally and Sanyo's D'Arcy estimate that the entry price for a HD-DVD player will be $1,000 and should drop by half within a year. Starter pricing for recordable HD-DVD will be around $2,000, Sally said.

Meanwhile, representatives from the music side speaking at the conference said they have no intention of making the same errors they did with DVD-Audio with the industry's new product offering, DualDisc — CD on one side, DVD on the other.

Music companies and artists are working to create a strong slate of DualDisc product for 2005 that will be day-and-date with current and major album releases, not just pumping out catalog like they did with DVD-Audio, said Kevin Gage, VP of strategic technology and new media for Warner Music Group. This week, WMG launched two DualDisc products day-and-date with new albums from Simple Plan and The Donnas. More releases from the major labels and independents will follow throughout the fourth quarter and into next year.

More importantly, the record labels and retailers are communicating better because of DualDisc, said John Trickett, chairman and CEO of 5.1 Entertainment Group.

“The music industry is not well-known for communicating with its customers,” he said, but a joint label/retailer task force has been set up to monitor the progress of the new product.

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