01-06-2008, 11:11 AM
Join Date: Dec 2007
Blu-Ray Scores Big in Format War, But It Ain't Over Despite Money and Exaggeration
Warner Bros. announced it's going Blu-ray exclusive, sending the HD DVD camp scrambling. It's a huge battle, where money is changing hands, some media report opinion as fact, and little Ms. Consumer is still twiddling her thumbs, wondering if she should even care.
Digital Journal, Op-Ed -- The format war is not over, despite what some major media organizations are screaming. Indeed, the Blu-ray camp scored major points with the Warner Bros. announcement it was going exclusively with Blu-ray for future high-definition DVD releases. Warner Bros. says the move was made "in response to consumer demand."
In plain English, what I think Warner Bros. is trying to say is that it made the choice to go with one format exclusively because it doesn't like the expense of mass producing movies in two different high-def formats. "In response to consumer demand" really means putting an end to the war so it can start making some real money.
For anyone not up-to-speed on this format war: The next generation of DVDs are high-def, but there are two competing formats: HD DVD and Blu-ray. Both sides say they are better, and they want consumers to decide who should reign supreme.
But there is a lot of politics, spin and PR stunts being pulled on both sides. Rather than collaborating on a standard so you and I could be watching high-def movies now, we have to wait until the war is sorted out (nobody wants to buy a player that ends up becoming redundant).
Barry Meyer, Chairman & CEO, Warner Bros., said, "Warner Bros.' move to exclusively release in the Blu-ray disc format is a strategic decision focused on the long term and the most direct way to give consumers what they want."
Give consumers what they want? What has Warner been doing up until now?
Meyer went on to show he's not totally naive: "The window of opportunity for high-definition DVD could be missed if format confusion continues to linger. We believe that exclusively distributing in Blu-ray will further the potential for mass market success and ultimately benefit retailers, producers, and most importantly, consumers."
And he's right. Whether you are a Blu-ray fan or not, putting a nail in the coffin of this god-forsaken format war is exactly what high-def consumers want and need. However, let's not forget this format war is more about money than it is about you, me and Dupree.
Warner is the pretty woman on the block (albeit the biggest one of the bunch) and both Blu-ray and HD DVD have been courting her for a long time in an attempt to woo her into monogamy. Blu-ray has finally scored with her, but the question is: What did it have to do to win her over?
The New York Times notes Toshiba sent Yoshihide Fujii, the executive in charge of its HD DVD business, to Warner three times recently. Sony has done the same, dispatching its CEO Howard Stringer to make buddy-buddy with the new CEO of Time Warner. Both sides have been pitching, and pitching hard.
Money is power in this business, as Toshiba has reportedly given $150 million in financial incentives to Paramount and DreamWorks Animation to stick with them and HD DVD according to the New York Times. Apparently they tried the same with Warner, but clearly that didn't work. Which leaves me with one question: How much did the Blu-ray camp pay Warner Bros. to go exclusive?
Kevin Tsujihara, president of the Warner Brothers Home Entertainment Group, would not comment on payments offered by Blu-ray when asked by the New York Times. Instead, he only said, "This market is absolutely critical to our future growth," and "You couldn’t put a number on that.”
Indeed, Sony's Blu-ray camp can strut its stuff this week: Sony Pictures, 20th Century Fox, Disney, MGM and Lionsgate are now all Blu-ray exclusive. Paramount, Universal and DreamWorks Animation support HD DVD. The Blu-ray studios represent about 70 per cent of the home video market.
Warner Bros. currently makes movies in both HD DVD and Blu-ray, and will continue to do so until May when it will make the switch to Blu-ray exclusively. Warner is just what Blu-ray needed, as its the biggest player in the global home entertainment market which pulls in about $42 billion each year.
"Warner Bros. has produced in both high-definition formats in an effort to provide consumer choice, foster mainstream adoption and drive down hardware prices," said Jeff Bewkes, President and Chief Executive Officer, Time Warner Inc., the parent company of Warner Bros. Entertainment. "Today's decision by Warner Bros. to distribute in a single format comes at the right time and is the best decision both for consumers and Time Warner."
According to some analysts, Blu-ray tiles have sold 2-1 over HD DVD since the beginning of 2007. Why? Sony's PlayStation 3 video game console has helped. But when it comes to declaring a winner, it's still too early.
However, that has not stopped some in the mainstream media from stating opinions as facts. Case in point: The L.A. Times ran an article with an utterly irresponsible headline proclaiming "DVD format war appears to be over." Now if that isn't hyperbole designed solely to get attention, I don't know what is. If the article was labelled Op-Ed, it would be a moot point. But when a publication as large as the L.A. Times declares Blu-ray is a victor in the format war, it muddies the waters and confuses consumers even more. The media's job is to report the news, not make the news, is it not?
The L.A. Times makes itself sound even more ridiculous by saying: "The decision, announced on the eve of the influential Consumer Electronics Show, delivers a de facto knockout punch to the rival HD DVD format..." and continues with, "It also averts a further costly format war..."
A knockout punch? Averting a future war? What? Let us remind the L.A. Times: It certainly does not look good for HD DVD, but the format war is not over quite yet -- HD DVD still has two major studios supporting the format. I wouldn't be dividing the estate until grandpa actually passes on, as you never know how much kick he has left in him.
The HD DVD camp is clearly nervous. With CES being an important platform in which everyone in the tech industry can pimp their wares, the HD DVD group has cancelled a news conference.
In a statement, the HD DVD camp admits it was “quite surprised” and “particularly disappointed” by Warner’s decision. The group went on to say, "We are currently discussing the potential impact of this announcement with the other HD DVD partner companies and evaluating next steps. We believe the consumer continues to benefit from HD DVD's commitment to quality and affordability," the group said in a statement.
The media, analysts and industry pundits have been declaring winners in this war for a few years. But tables can turn.
Analysts say home DVD sales fell by about 3 per cent in 2007, partly because of confusion in the market over formats. And the holiday shopping season was a complete flop for high-def DVDs despite the fact both sides slashed prices and spend millions marketing to consumers.
"A two-format landscape has led to consumer confusion and indifference toward high definition, which has kept the technology from reaching mass adoption and becoming the important revenue stream that it can be for the industry," said Kevin Tsujihara, President, Warner Bros. Home Entertainment Group, in a statement.
Blu-ray looks like it could win the format war (or maybe one could say it's likely to win), but it's not over yet.
Furthermore, Internet broadband speeds and penetration are picking up quickly, which could render both formats completely irrelevant. The high-def DVD format war might just end up being the big bout nobody stuck around for.
Here's some level-headed thinking.