Social Feed

http://www.nytimes.com/2007/12/31/business/31dvd.html?_r=1&ref=business&oref=sloginhttp://www.nytimes.com/2007/12/31/bu...l?ref=business


In the DVD War Over High Definition, Most Buyers Are Sitting It Out
By ERIC A. TAUB

What if nobody wins the high-definition DVD format wars? That increasingly looks to be the situation for the next-generation DVD technology, which is available to consumers in two incompatible formats.

A little more than 18 months after their introduction, the two systems — Blu-ray, developed by Sony, and HD DVD, from Toshiba — have sold around one million stand-alone players combined. Both sides promote their technologies, their movie studio allies and the growing list of movies available in the new formats.

Yet neither has a clear advantage, either in terms of technology, number of movies or, increasingly, the price of the equipment. According to data from Adams Media Research, 578,000 HD DVD and 370,000 Blu-ray machines will be sold by the end of this year.

The winner of the format wars could be determined by which company has the most content, in the same way the VHS-Betamax VCR war was decided. But both formats offer about 400 movies. Studios allied with the Blu-ray camp include Columbia, Disney, Fox, Lionsgate, Miramax, New Line and Sony.

In the HD DVD camp are DreamWorks, Paramount, Universal, the Weinstein Company, and several smaller TV and motion picture companies. Warner Brothers releases movies for both systems.

In November, Howard Stringer, the Sony chairman, publicly acknowledged that the formats were in a stalemate, and predicted that neither side would fold.

High-definition DVDs of both formats provide superior picture and sound quality compared with standard DVDs.

They also offer advanced interactive features like multiple camera angles, games, picture-in-picture commentaries and, in the case of HD DVD, a connection to the Internet to download more content.

But the visual and audio differences depend on the size of the TV screen used to display them.

"You start to enjoy the benefits of high-definition DVD at 40 inches and above," said Chris Fawcett, vice president for product marketing at Sony Electronics' home video group.

Only high-definition sets can display high-definition DVD images. And only the highest-resolution displays, the so-called 1080p HDTVs, for progressive scan, can show the images at their best. As a result, the potential customer base is limited. With a lower-resolution 720p set, "you are not as likely to see a dramatic a difference" between standard and high-definition DVDs, according to Andy Parsons, chairman of the Blu-ray Disc Association.

The two camps are victims of their own earlier success with DVD. The standard DVDs offered a quantum leap in quality from the picture and sound of VHS videotape, and for many that was more than adequate.

In addition, DVD players that can convert images to near high-definition quality can be found for under $100, hundreds less than a true high-definition DVD player, further reducing the urgency to upgrade to one of the new formats.

"Today, an HDTV owner hooks up a standard DVD and it looks good," said Ken Graffeo, executive vice president of HD Strategic Marketing at Universal, and co-president of the HD DVD Promotional Group. "Unless they experience the new format, they won't understand it."

Not many consumers are interested in even taking a look. According to research by NPD Group, only 11 percent of HDTV set owners strongly intend to buy a Blu-ray or HD DVD player by next spring. Almost three-quarters of those HDTV owners surveyed said that standard DVD was good enough for them.

"This may emerge as a premium, luxury item, not a successor to DVD," said Ross Rubin, director for industry analysis at NPD.

Blu-ray and HD DVD proponents are doing what they can to change that attitude. And the best technique to pique interest is dropping the price. As with most things electronic, prices for both players have fallen drastically since their introduction.

HD DVD players, the vast majority of which are made by Toshiba, still have the price advantage. The company's least-expensive model — which displays images in the lower-quality 1080i format — can be found for $200 or less in electronics store promotions or from online discounters.

Its least-expensive 1080p model is selling at Amazon for $250. But it is a tit-for-tat war. A Blu-ray 1080p unit from Samsung is just $30 more at Costco. Blu-ray units are also made by Panasonic, Philips, Sony and others.

Several holiday promotions had players in either version selling for as low as $200.

In an effort to finesse the format war, LG sells a combination unit that plays both formats; however, its $1,000 price has prompted only a few thousand consumers to buy.

As prices drop, high-definition DVD drives will find their way into other devices. Mr. Graffeo predicts that by the end of next year, 5 million notebook computers will be sold with HD DVD drives.

Sony says that 3.4 million Blu-ray disc drives are also in PlayStation 3 machines, giving it a numerical advantage. But the rival camp points out that gamers are not buying the PS3 to watch movies, and in any case, 300,000 HD DVD add-on drives will have been purchased to use with the Xbox 360 game console from Microsoft.

The 400 movies available in each format are a fraction of the 90,000 movies and TV programs that the video rental company Netflix offers. Increasingly, high-definition DVDs are being issued simultaneously with the standard definition DVD release.

Consumers are usually advised to wait until a clear winner emerges. But if there is a deciding factor, it might be which format has the more compelling movies. Good animation looks three-dimensional in high definition, so Sony is hoping to gain an advantage by providing Blu-ray formats of "Ratatouille," the Disney/Pixar film about a cute French rat who cooks, and blockbusters like "Spider-Man 3."

As an indication of their owners' enthusiasm, Blu-ray users are buying twice as many discs as their HD DVD counterparts, according to Tom Adams, president of Adams Media Research.

Discs can be rented at the Blockbuster and Netflix online stores. Of Blockbuster's 5,000 physical stores, 250 offer both high-definition DVD formats, while 1,450 rent only Blu-ray; the rest offer none. The company emphasizes Blu-ray because 70 percent of its rentals are for that format, said Karen Raskopf, a Blockbuster spokeswoman.

The HD DVD camp is playing up its new interactive features, believing that the next generation of viewers wants to combine TV viewing with video games.

In Universal's just-released HD DVD of "The Bourne Ultimatum," viewers can play a game that tests their memories, and then upload their results using a broadband connection to a Web site and compare their scores with others.

Viewers can also find character dossiers, watch "Webisodes" with the Volkswagen Touareg sport utility vehicle featured in the film, and create playlists of their favorite scenes and share them with friends.

Those features will do little to increase sales, said Richard Doherty, an analyst with the Envisioneering Group. The market consultants' surveys show that just 3 percent of consumers want interactivity, he said.

As more consumers buy HDTVs, and the price of dual format players drop, an uneasy truce may descend. With the studios in the United States collectively making $16.5 billion in worldwide video sales, according to Mr. Adams, companies will be loath to miss an opportunity to make money by allying themselves with one high-definition DVD format over the other. And then, the once-unthinkable could happen.

"When high-definition DVD reaches its tipping point, studios will have to release their movies in both HD DVD and Blu-ray," Mr. Adams said. "No studio will be able to afford not to."