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Panel: Connectivity, Dual Publishing Key to Format Stalemate

15 Nov, 2007 By: Erik Gruenwedel

Wal-Mart's recent secret sale of Toshiba's HD-A2 HD DVD player for $98 was a turning point in the ongoing format war, said panelists last week at the Piper Jaffray Global Internet Summit in Laguna Beach, Calif.

Ted Sarandos, chief content officer with Netflix Inc., said Wal-Mart's decision to sell Toshiba, coupled with Paramount Pictures move to exclusively distribute titles in HD DVD, would change the format playing field.

“In a Wal-Mart age, the notion that two formats can co-exist with such a huge price disparity doesn't seem very likely,” Sarandos said.

He said a little known fact about the 30,000 HD DVD players sold by Wal-Mart was that 30% of the devices were connected to the Internet shortly after purchase.

“You wouldn't have expected that from that demographic,” he said.

Sarandos said ongoing consumer confusion about high-def packaged media isn't necessarily as much about HD DVD vs. Blu-ray as it is about high-def itself.

“Most people think they are watching HD content and they aren't,” he said. “The ability to navigate that at a typical Best Buy these days is pretty difficult. It is much more difficult than it should be given how long [HD packaged media] has been in the market.”

He said the preferable way to solve the format war would be through dual publishing. Serandos says the likelihood the studios will put out dual format content is very high.

“Look at video games, there are as many as five skews on every major game release,” he said. “Adding another skew or two for high-def is very manageable for retailers. And if you get Wal-Mart and Target on board everything else would fall into place.”

Curt Marvis, founder and CEO of movie download service CinemaNow, said studios' preoccupation with the format war could increase distribution of standard definition movies via the Internet.

“One of the trends we believe will happen is as the studios focus on selling HD DVD and Blu-ray at retail, that will free up standard definition online,” Marvis said.

He said distribution of major new releases over the Internet has met resistance from studios concerned about eroding wholesale and retail price points. Marvis said the studios' increased focus on HD could result in a wholesale price drop for standard definition thereby enhancing online distribution.

“The business could grow as a result of that,” Marvis said.

Finally Sarandos and Marvis said connectivity capabilities of both Blu-ray and HD DVD players to the Internet also allow studios to deliver standard definition movies into the players.

“Hopefully in the next year or two that will open up viewing opportunities for online as well,” Marvis said.

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