Blu-ray vs HD-DVD: Bonus play!

Summary:A few months ago I predicted that it was game over for HD-DVD in the Blu-ray vs HD-DVD blood match, with Blu-ray the winner. Why?

A few months ago I predicted that it was game over for HD-DVD in the Blu-ray vs HD-DVD blood match, with Blu-ray the winner. Why? Because there are more Blu-ray players, Blu-ray disks outsells HD-DVD 2 to 1, more content is available on Blu-ray and Blockbuster, a major distributor of digital content, has decided to only offer Blu-ray as it rolls out High Def content to more stores.

Toshiba strikes back So I was surprised to see Paramount, distributor of Dreamworks Animation's Shrek, announce it was going exclusively HD-DVD. For now, anyway. Paramount originally backed HD-DVD, switched to Blu-ray in '05, and is now switching back.

What is going on? Other than delaying the rise of a single format for High-Def disk content, which is what I want.

Things that make you go hm-m-m I'm not the only one wondering. Variety, the Hollywood trade rag, reports that DreamWorks Animation

. . . hasn't released any movies in HD DVD, and company topper Jeffrey Katzenberg has been dismissive of the concept. "Blu-Ray and HD DVD are a niche business," he said in March . . . . "They're not going to become the next platform. I think for the general consumer, there is not a big enough delta between the standard DVD in terms of where it is today and the next generation."

That's a far cry from the statement he put out on Monday: "We believe the combination of this year's low-priced HD DVD players and the commitment to release a significant number of hit titles in the fall makes HD DVD the best way to view movies at home."

Toshiba: cheap is better Toshiba's value proposition is that HD-DVD is a cheaper way to get High-Def content on disks. HD-DVDs can be produced on the same equipment as standard DVD's and the players are less expensive to build. Lower capital investment for both producers and consumers.

Sony: more is better Sony's value prop is that Blu-ray disks can offer 66% more content per disk. Lower cost-per-byte for consumers. Bundling Blu-ray into Playstation 3 jumpstarted the market. The Playstation volume should have driven Blu-ray costs down the learning curve, but that certainly isn't evident in Blu-ray player pricing.

Money talks Evidently, Toshiba bought Paramount's support with cash. Give the tiny sales of both HD formats, Toshiba's largesse could make up for the lost profit on lower HD sales. Notes Variety:

. . . HD DVD format's backers, led by Toshiba, apparently reached a deal with Par[amount] . . . to switch back to their side. Just as with the Blu-ray-only studios, Par and DWA almost certainly will be receiving multimillion-dollar financial commitments to support one format over the other.

Some of the financial details may later be disclosed by DreamWorks Animation, which is a public company. Update: The New York Times reported that Toshiba gave $150 million in incentives for an 18 month commitment from Paramount. And the deal doesn't include Spielberg's films. I think I understand Paramount's sudden change of heart. End update.

Given the strong sales advantage Blu-ray has enjoyed in the marketplace, most industryites said only a behind-the-scenes deal could have motivated the switch.

"Nothing seems to support this," said consumer electronics analyst Richard Doherty. "It seems to fly in the face of normal retail and consumer forces."

I'll say.

The Storage Bits take As I predicted several months ago, Toshiba is playing the price card. Expect to see Q4 price promotions that cut HD-DVD player prices in half to $125. This is do-or-die for Toshiba and HD-DVD.

It is Sony's game to lose. Stubborn pricing has cost them markets in the past, and if they think they can win with 3x player prices this fall they are sadly mistaken. New blue LED lines are ramping up so the component supply problems they've had should ease. Sony is bleeding red ink in some major businesses, like Playstation, but it is time for some short term pain if they want to push Blu-ray over the top.

In the meantime all this costly competition is doing nothing for consumers who just want High Def content on disks. Why they felt the need to fight is beyond me. Barring a major screwup, Blu-ray is still the winner.

Comments welcome, of course.

Topics: Toshiba

About

Harris has been working with computers for over 35 years and selling and marketing data storage for over 30 in companies large and small. He introduced a couple of multi-billion dollar storage products (DLT, the first Fibre Channel array) to market, as well as a many smaller ones. Earlier he spent 10 years marketing servers and networks.... Full Bio

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