Blu-ray's Battle Has Only Just Begun

The costly format war between Toshiba's HD DVD and Sony's Blu-ray Disc has come to an end. Blu-ray has emerged from the fray victorious, while HD DVD has unceremoniously left the field. So Blu-ray will naturally assume the mantle of DVD's heir-apparent, right?

Maybe. But the reality is the war with HD DVD was just a battle. There are still tough times ahead for Blu-ray, as the real war for market dominance against DVD is just beginning.

In order to overcome the tremendous inertia of DVD, Blu-ray has to offer buyers something new and innovative. Short of having price parity with DVD, it needs to wow consumers in a way it currently doesn't.

With low-cost up-converting players available, Blu-ray offers very little practical improvement over DVD for the average consumer. It is banking on its super high-quality audio and video, but the cost of entry for these improvements isn't cheap.

With the retail pricing of some bare-bones discs around $40 and full-profile standalone players costing $500 (all added to the price of an HDTV), the format is strictly for eager enthusiasts. For the wider public, the numbers just don't add up yet. Consumers need to feel it's worth the premium to buy into the format.

If the studios are smart, they will focus on the value proposition by expanding the format's largely untapped potential as a fully interactive experience, while reducing prices to lure new buyers. Likewise, Blu-ray player manufacturers must begin reducing hardware prices.

If Blu-ray can offer creative features and a quality viewing experience at a reasonable price, it has a shot, but it must move fast since there is only a brief window to succeed thanks to the hovering threat of cheap high-definition Web downloads.

For now the format's future is still uncertain, and the eyes of many will be closely scrutinizing its direction over the coming months. Any wrong step could still see it consigned to the scrap heap of dead formats that have tried valiantly and failed. Any doubts? Just ask Toshiba.

Blu-ray Won; What Now?

One of the greatest revelations about DVD versus its predecessor, VHS, was that it offered a much better value for the price. It was smaller and easier to store, its content was easier to navigate and — to top it off — it was for the most part cheaper on street date. VHS wasn't universally sellthrough priced as was DVD.

Since the size issue no longer applies, Blu-ray Disc must somehow compete with DVD on value. The disc enthusiasts at Home Theater Forum think better picture and sound just won't be enough. Player prices will have to come down, as will the prices on the software to compel consumers to make the transition.

Also, Blu-ray Disc extras will need to blow away those on DVD. Now that many DVD producers can turn their attention away from authoring for both HD DVD and Blu-ray Disc, perhaps they can focus on making the next great leap forward in disc features.

In my opinion, digital copies of movies on discs will make Blu-ray a much greater value than DVD. It marries the best of both packaged media and digital delivery. Studios can control how the digital copy is used (limiting it to, say, one or two copies). And consumers won't be compelled to go online, where they may turn to illegal downloading.Another possibility, as I've mentioned in a review of Close Encounters of the Third Kind, is multiple versions of a movie on one disc. That Blu-ray release included the multiple incarnations of the Steven Spielberg classic, explaining each and every change — an invaluable resource for film buffs and fans of the movie. The strategy also somewhat mitigates one of the major consumer complaints about DVD, that studios release theatrical and then director's cut versions. Now, the studio can go back and put both on one Blu-ray, making the new buy a space saver — and a greater value for the consumer.

Ultimately, it's value that will make Blu-ray a winner in the mainstream market, not hype or the end of the format war (although those both help). How will the industry entice the consumer to value Blu-ray as a new format? That's the question DVD producers and studios need to be asking themselves right now.

Searching for a Serial Killer

Reportedly there are about 50 documented serial killers on the loose in the United States, according to the FBI.

I was just looking for one. And he wasn't even real.

My girlfriend, who abhors gratuitous violence in films, surprisingly asked me about “Dexter,” the critically acclaimed Showtime cable series with Michael C. Hall (“Six Feet Under”) as an eccentric police blood pathologist who moonlights by slicing and dicing the dregs of Miami.

She'd heard it was good and wondered if I had the first season on DVD at the office. It's been out since August from Paramount but I couldn't find a copy. And since I don't get Showtime, recording it was not an option.

I know CBS is airing edited episodes of “Dexter.” But that's like watching soft-core porn or pouring water on my Wheaties.

So I asked around the office with little luck.

John Latchem, our TV DVD guy and movie reviewer, said he might have a copy. Getting it from him or anyone else in the office is often problematic. Some of my colleagues covet DVDs as much as little girls do Barbie. DVDs at the office are like currency. Asking for a disc is akin to asking his or her salary. You don't go there.

I considered electronic distribution. It's supposed to be the future of home entertainment. I write about it weekly. Sure enough, I found “Dexter” episodes that could be downloaded for $1.99.

But watching buffered video about a serial killer (no matter how charming) on a PC window didn't appeal to my girlfriend or me. A previous attempt with an episode of “The Closer” had mixed results.

Unless a video file can be viewed on a TV screen, forget it. Size does matter I found out when trying to watch video on my daughter's iPod.

Video isn't music. More than 844 million digital music songs were sold in 2007, up 43% from 588 million in 2006. Apple Inc.'s iTunes Music Store reportedly became the third largest music retailer in the United States.

Unless “Dexter” could be successfully converted to an audio experience, I was destined to go retail Then there it was. The season one boxed set on my desk, courtesy of Latch. I guess he can't review everything.

Industry Must Rally Post Format War

So now the great format war is over, with HD DVD developer Toshiba throwing in the towel and conceding defeat to Sony's Blu-ray Disc — a story we broke here in Home Media Magazine on Feb. 14.

But the funny thing is that what could have been a St. Valentine's Day massacre for Toshiba stock instead turned into a rallying point, with analysts praising the Japanese consumer electronics manufacturer for swiftly killing off its doomed next-generation format in the wake of overwhelming retailer rejection.

Both Toshiba and Sony saw their stock price jump as word leaked about the imminent surrender, with Toshiba shares gaining 5.7% to 829 yen on the Tokyo Stock Exchange and Sony's stock price rising 1% to 4,900 yen.

The discrepancy between the gains is telling: Toshiba is no longer going to pour good money after bad and will reportedly shift its focus back to more profitable core businesses such as semiconductors and industrial electronics.

Sony, meanwhile, may have won the format war against HD DVD, but the real fight is only beginning: getting consumers to transition from standard DVD to Blu-ray Disc. Sure, the company has a lot of allies, both in Hollywood — studios such as Disney, which last year launched an expensive mall tour to educate the masses about the benefits of Blu-ray — and in the consumer electronics realm.

Still, it's not going to be easy, or cheap. As they say in the music industry, it's not the singer, it's the song — and in this case the tune isn't radically different. Unlike the transition from VHS to DVD, there is no dramatic physical change — movies still come on a five-inch disc — nor are the visual differences nearly as pronounced. On top of that, the potential audience for DVD was everyone who owned a TV set, whereas in this case the potential audience is limited to those households that have HDTVs.

But with only one format now in the market, a clear, concise message can at last be formulated. Instead of fighting each other, we can focus all our energy on fighting the chief obstacle to widespread Blu-ray Disc acceptance: consumer indifference.

It won't happen overnight, but it's a fight that ultimately can be won — at least, that's what we all hope. The stakes, after all, are extraordinarily high: Sony and its allies aren't just betting their own futures, but also the future of home entertainment and packaged media.

Godspeed.

Becoming a High-Def Snob

I have officially become a high-def snob.

I never thought it would happen, but now if I see an inferior picture quality on my HDTV — even from upconverted DVDs — I turn up my nose.

Previously I have said that DVDs looked wonderful upconverted on HDTVs. At first I couldn't differentiate between the two. But what a difference a few months of experience with HDTV can make.

Now, I notice that the picture on upconverted DVDs isn't so great. I see subtle differences between the upconverted DVD and high-definition discs and programs broadcast through our cable company.

And I'm not the only one. My husband has all along seen the difference between upconverted DVDs and Blu-ray or HD DVD discs. Even my kids now ask if a title is on DVD or Blu-ray — with the latter the much-preferred format.

The revered father of DVD, Warren Lieberfarb, predicted we would need a packaged-media product for the high-definition future, and as far as I can tell, he was dead right. DVD will not suffice in a high-definition world for long.

I can't see limping along with DVD given my current HDTV setup. Heck, some of the high-def broadcasts from the cable company look better.

Previously, DVD smoked everything else in picture and sound quality. Why would I put up with less on my HDTV?

I want everything to look great on a TV for which I paid several thousand dollars. Why would I pay good money for the in-wall speaker setup, the mounting, the receiver, only to get a DVD picture that is just a little better than what I get on the analog TV?

This is the realization that I believe most HDTV buyers will have at one point or another. They'll become accustomed to the better picture offered by cable companies or other providers, and easily notice anything inferior in quality.

If the packaged-media business is to keep up with cable and other offerings for HDTVs, it's got to move beyond DVD to a high-definition disc format — and that format, based on recent moves by retailers Netflix and Best Buy, is looking like it will be Blu.

Movies Won't Face Same Fate as Music

How many times have we heard the warning that the home entertainment industry had better watch out, that we're headed toward the same future as the music industry? Ultimately electronic delivery will triumph; it's merely a matter of time before packaged media is obsolete.

Hooey.

The music industry effectively committed suicide due to its own shortsightedness. First, the record companies killed off the single, which traditionally had been the cheap entry point for a new artist or an established artist's new record. Then Napster emerged as a way for consumers to swap songs, which they no longer could buy individually in packaged-media form. The music industry reacted by hiking up the list price of new CDs to more than $20.

This, of course, led to further sales declines — and more consumers migrating to the Web, where they could easily snag a song or two, which is all they wanted in the first place.

Ultimately the record companies realized their folly and developed their own download model, while dramatically cutting back the price of a new CD. But by then the damage had been done, and the whole portability trend only further hurt CD sales since iPods and other mobile devices rely completely on digital music files.

Parallels between this business and our business are beyond me. For starters, the way the public consumes music and movies is completely different. There is no equivalent to the single; we don't watch individual chapters, or scenes. We watch the whole movie.

Secondly, DVDs have remained affordable; movies can generally be had for less than $15 at any big retailer the day they are released.

So instead of being faced with the choice of a cheap electronic “single” or a $20 CD, the movie consumer can buy a packaged or digital version of the same movie for roughly the same price — a value proposition that's hardly out of whack.

Then there's the quality issue. A digital download of a song sounds as good as a CD. But a downloaded movie is “near-DVD quality,” hardly something you want to hear when you've plunked down $10,000 for a high-definition home theater system.

Sure, we are moving more toward portability, with laptops and iPods, but the studios have come up with a solution: including a digital copy on a physical disc, which I predict will become the norm.

Music and movies may be close cousins, but they're definitely not singing the same tune.

High-def Discs Double Size of Download Market

Consumers spent more than $260 million on high-def discs in 2007. Less than half that amount was spent on Internet downloads — $123 million — according to Adams Media Research.

I mention that only to provide perspective. Internet downloads and Web-delivered content are the hot topic these days. As a consumer, I welcome new viewing options that suit my preference. The more the better.

I consider Blu-ray Disc to be one of the most exciting of the cool new technologies. And I like Fox's digital copy for iTunes strategy, which takes away the download time that is still far too slow and cumbersome for the average consumer.

As exciting as all these new technologies are, it's important not to lose sight of where consumers are spending their money, and where studio profits will continue to come from for many years.

Analysts and some bloggers often have a hard time with the concept of peaceful co-existence and strong revenue from multiple formats simultaneously.

In fact, the beauty of all these new technologies is they are wonderful additional ways to enjoy movies and TV shows, but they do not negate or replace my primary desire of watching a movie, when possible, in full 1080p high-def with surround sound.

Sure, I can start watching a high-def movie download within seconds after clicking to do so, but it will still take hours to completely download. When it does finish downloading, it is compressed and not in full 1080p and does not have uncompressed audio. It takes up a ton of storage space. It doesn't have chapter stops. It doesn't have bonus features. And I can't lend it to a friend.

Adams projects that within five years digital download revenue will overtake the cable/satellite pay-per-view/video-on-demand market, which has taken decades to even reach the $1 billion mark.

Meanwhile, the market for movies on discs already stands at more than $24 billion. Having reached $260 million in the first full year despite being bogged down by a large-scale format war, Adams projects high-def discs will provide a big spark for growth in the overall disc market.

Sounds like there are a lot of formats and technologies to be bullish about — not just one.

In Support of Branding Blu-ray Disc

Back in August of 2006, I wrote a column about the name recognition advantage HD DVD had.

Pioneer had just opened a branded store in South Coast Plaza, a mall here in Orange County, Calif. The Blu-ray Disc logo was prominently displayed around the store, but in a nod to the ubiquitous brand of DVD, the sign above the Blu-ray software display had the Blu-ray logo right next to the DVD logo.

Not so anymore. The Pioneer store now has changed that sign to Blu-ray Disc only.

Similarly, the Sony Style store in the same mall has put the Blu-ray Disc front and center in the display windows. The first thing shoppers see when they enter the store is the PlayStation 3 and a Blu-ray disc displayed together. DVD is downplayed in a wash of Blu.

During the recent Consumer Electronics Show in Las Vegas, Blu-ray supporters noted how they have been largely successful in branding the Blu-ray name. They said that, while Blu-ray awareness among consumers at the end of 2006 was 26%, it's now 80%. Evidently Blu-ray supporters were aware of the name problem and did the necessary advertising and promotion to push the format moniker.

And the Blu-ray camp is certainly putting its displays where its research is. They are playing up the Blu-ray name with assuredness. No longer are the merchandising efforts tentative. The Blu-ray Disc logo is everywhere.

I can't help but contrast that with the display of Apple TV in the Apple store in the same mall complex. Whereas formerly the Apple TV device was in the display window, now — even after CEO Steve Jobs' big announcement of a rental service — the device is just one of dozens of display components inside the store. It certainly isn't a focus of the store's display plan.

Thus, slowly and subtly, Blu-ray is making its name in store displays at Blu-ray supporting companies, while Apple TV has been relegated to one of many offerings at the Apple store.

If store placement is any measure, I'd say Blu-ray's future has gotten brighter since mid-2006 and Apple TV's has dimmed. Although the format battle isn't yet over, the Blu-ray camp at least has put the chips down in the merchandising arena to bet that it is. Incidentally, at the Sony store a clerk told me just that: “The format war is over. Warner has gone Blu-ray.”

HD DVD Backers Should Call It a Day

Is the future of Hollywood in the grasp of two computer companies? Sadly, it is so. If this format war continues much longer, we could be in for a repeat of what happened in the music industry. We saw two next-generation formats, Super CD and DVD-Audio, battle it out, and in the end neither won — leaving the tired, old CD to fend for itself in an increasingly electronic environment.

Toshiba and Microsoft, by stubbornly continuing to back HD DVD at a point where it is clear the format cannot win, are threatening to derail the entire home entertainment packaged-media business — Hollywood's primary cash cow, and as such, a vital bloodline to the creation of new movies.

Toshiba may prolong the fight with Blu-ray Disc by slashing player prices and aggressively courting DVD owners by promising them the new HD DVD machines will make their existing libraries look better, but to what end? As one of the developers of DVD, Toshiba does have a vested interest in keeping the format around as long as it can — and if HD DVD, which Toshiba also developed, has no way of winning the format war, then Toshiba's alternate approach very well may be to keep the format alive as a spoiler, as a buffer to widespread acceptance of Blu-ray Disc, developed by archrival Sony.

But what Toshiba can't do is reverse the decline in consumer spending on DVD. Only a new format can do that, one that takes full advantage of HD technology. Sure, HD DVD fits the bill, but it's not going to prevail — that much is clear to pretty much everyone at this point. So Toshiba needs to swallow its pride and do the right thing for our industry — and, in the long term if not the short term, its own corporate shareholders.

The same goes for Microsoft, which at least has opened the door to Blu-ray in a series of cryptic statements issued just after Warner made the announcement at the Consumer Electronics Show in Las Vegas that it would exclusively support Blu-ray Disc. If Microsoft goes Blu — or at least issues a Blu-ray add-on for its Xbox 360, as it has for HD DVD — then Toshiba will likely cave as well.

Hopefully one or both companies will see the light before it gets dark for all of us.

DVD of Theatrical Release Pops Up in Local Dive

You'll find them every so often: restaurants, bars and coffeehouses that show mainstream movies on DVD.

The likelihood of most of these places having the required public performance licenses to play the DVDs is slim. They may not even know they need one. Unless they're charging to get in, it's likely they'll never have a letter or a suit from the Motion Picture Association of America show up at the door.

But when you're a bar and grill off Bourbon Street in New Orleans, and you're showing a $400 million-plus international blockbuster that's still in theaters, you can bet it's going to get back to someone who cares.

Three-Legged Dog was a little place referred to me by locals. When I walked in, every loud TV was showing the end of Live Free or Die Hard. A stack of DVDs next to the player included both Young Guns movies, We Are Marshall, Dazed and Confused and a host of other flicks geared mostly at young adult males. Not exactly a five-star spot, the place probably didn't have the proper paperwork, not that many were watching.

After John McClane's business was done, the bartender popped in another DVD. And at first I thought I was watching previews: a desolate Manhattan, apocalypse, Will Smith. I Am Legend. I thought maybe it was an advance, opening preview on some Warner DVD I hadn't seen. After 20 minutes it was obvious: A movie in theaters was being shown for free at some New Orleans dive.

Maybe the bartender could see my interest was more than casual. He only said the DVD came from a friend. It wasn't a hand-held camera hatchet job, that's for sure. The result of an unscrupulous employee at a local theater, perhaps? There was no “Property of Warner Home Video” warning every 10 minutes either.

A Warner Home Video representative said there's no way it came out of the studio, adding she was disappointed to hear about the bar's DVD.

The people who should be disappointed are the theater owners in a city still recovering from a natural disaster.

And if it's happening in one place, the chances are good it's happening elsewhere.