False starts in race to future of DVDs

news analysis Is all of this Blu-ray Disc versus HD DVD bickering much ado about nothing?

Many column inches and much screen space have been filled with discussions of a "war" between two rival next-generation DVD formats. On one hand, it's understandable: the opposing camps are manned by the world's leading technology companies and the biggest names in film and television: Microsoft, Hewlett-Packard, Apple, Dell, Intel, Sony, Toshiba, Samsung, 20th Century Fox, Universal, Warner Bros., Paramount, MGM and many more.

But more than 18 months after the launch of both formats, the question remains, should the average consumer care? Most would say, "not yet." Both sides are still engaged in a battle for consumer attention and dollars, while some are prematurely declaring victory. (Panasonic is the most recent to predict Blu-ray--which it is backing exclusively--will be the undisputed champion.)

There is no guarantee either of these formats will still be viable 12 months from now, so it's unclear why the casual movie fan would consider investing in either side at all--particular because the price of the players and discs are still relatively high. More importantly, many consumers think regular old DVDs are perfectly fine.

The studios and hardware makers on both sides are betting heavily on launching a new format, of course. But all the bickering and public posturing over the last year looks patently ridiculous when one considers how few discs and players these industry giants are actually arguing over.

Case in point: 300 is the fastest-selling next-generation title so far, according to Warner Bros., which says it sold 250,000 high-definition copies of it in the first week. (How fitting that the most successful next-generation movie thus far is about a group of warriors waging an unwinnable battle).

At an industry conference last week, representatives from Microsoft (HD DVD), Sony and Pioneer (Blu-ray), sniped at each other over the number of copies of 300 sold on each format. Blu-ray claims its version of the disc outsold HD DVD's by a margin of two to one in the first week. The breakdown was actually 65 percent Blu-ray, 35 percent HD DVD, according to a Warner Bros. representative.

But only when you consider that the studio sold more than 5 million copies of 300 on standard DVD does it become clear that all this posturing is over less than 5 percent of sales. On the hardware side, DisplaySearch said 5 percent of sales of standalone DVD players in September were either HD DVD or Blu-ray.

For now, both sides are priming the pump to create awareness for a technology that, currently, most consumers can't necessarily even take advantage of because they need a full high-definition (1080p) television to get the maximum effect of an HD DVD or Blu-ray movie.

"It's a different sell if you don't have an HDTV set yet," said Paul Erickson, director of DVD and HD market research for DisplaySearch. "Most of the appeal (of a next-generation player) will come from (having) 1080p. While that may be the standard in the future, 720p is still selling very strongly."

"DVD is a victim of its own success. It's a good technology."

--Josh Martin, analyst, Yankee Group

Luckily for the backers of both formats, high-definition TV sets are selling well these days. Eight out of every 10 TVs sold in the month of August were HDTVs, according to the NPD Group. And 1080p adoption is on the upswing as well; sales of 40-inch and larger LCD TVs that output 1080p resolution have increased more than 40 percent in the last year, according to data from DisplaySearch.

But NPD uncovered a very telling statistic in its 2007 report on high-definition video: 73 percent of current HDTV owners "are satisfied with DVD and don't feel the need to replace" their current players.

Ultimately, DVDs are good enough for most people. Most consumers probably already own a DVD player. If they don't, the average price is certainly more attractive than those of either HD DVD or Blu-ray players. Though prices of both have come way down in the last nine months, the average price for next-generation DVD players is $390 more than standard DVD players.

"DVD is a victim of its own success. It's a good technology," said Josh Martin, an analyst with Yankee Group Research. Plus, the step up to DVD from VHS tapes is not analogous to the step up from DVD to high-definition discs. "Next-gen isn't redefining, it's more tweaking of the technology. Content owners think it's a bigger leap, but consumers look at (a next-generation disc), and it's a disc, and it's not worth $600 or whatever" for the player to go with it.

Some would argue the biggest roadblock in Blu-ray and HD DVD's aspirations of becoming the standard in home video actually isn't the format competition--it's inexpensive, so-called upconverting DVD players, or standard players that have the ability to take regular DVDs and translate them into 1080p, the same resolution as Blu-ray and HD DVD. Though the studios and hardware makers will argue that it's just not the same as the movies recorded and played back in 1080p, it will be good enough for the average consumer.

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