HD DVD and Blu-ray: Toward an Endgame

In a recent survey of HDTV owners by NPD Group, a full 73% were satisfied with the picture quality provided by upconverted DVDs for them to become too interested in a high-definition disc player of either format. Other figures are equally shocking, suggesting that the high-def format war may already be over. BetaNews spoke at length with the NPD report's lead analyst, Ross Rubin.

If there were just one universally embraced format for high-definition video discs, it would most likely have been introduced just over two years ago, probably at the $1,200 price point. By the spring of 2006, the budget-priced versions would have appeared at around $699.

The video game console manufacturers would have been racing to be the first, and the best, to bring the format to market. Their competitive breakthroughs might have driven the stand-alone console price to $399. And today, we would have probably been trumpeting the entry of low-price manufacturers from China, ready to flood world markets with $150 models.

This is how it might have been. Unfortunately, groups of intellectual property rights holders with dueling portfolios have maintained the present state of stalemate between two high-def formats, Blu-ray and HD DVD, whose physical and technical distinctions from one another are perhaps notable, though often trivial.

We are well beyond the point in time where we should have been talking about the new, single high-def format eclipsing that critical juncture that marketers and analysts search for, that peak period when titles for high-def exceed those for first-generation DVD. Instead, we're still treating the owners of the first- and second-generation high-def consoles as early adopters, and every other customer as a potential market.

Among those early adopters, infighting remains fierce as they strive desperately to discover whatever new justification may remain, like shrinking mud puddles in a hot desert, for the investments they've already made. Their collective dissatisfaction is the clearest sign that the true potential for both formats has never been realized.

It is a sad end for a hopeful technology, perhaps the last generation of discs for distributing movies. However, it looks to be a long and dreary end, as the champions of both formats remain unwilling to concede any ground.

By any analyst's 2005 standards, neither HD DVD nor Blu-ray is the victor in this format war. Sure, Blu-ray may have sold the most movies for one stretch of months, and HD DVD may have one over one more studio that was on the fence. But like the incessant battle between "great taste" and "less filling," you start to get the feeling nobody ever devised this battle in such a way that it would end.

No one knows this feeling better than NPD's director of industry analysis for consumer electronics, Ross Rubin. According to his team's report released last week, 52% of consumers polled who already own HDTVs - just slightly more than half - knew high-definition players even existed. Among those, 11% had any intention of buying one in either or both formats before the holidays, while 62% said they're waiting for prices to fall.

But the incredible figure is this: A full 73% of HDTV owners claimed they're happy with the non-high-def DVD player they already have.

ROSS RUBIN, Director of Industry Analysis for Consumer Electronics, NPD Group: Over the past few years, we've seen an increase in the number of upconverting DVD players out on the market. Sales of those have been growing pretty impressively, and already progressive scan DVDs had output a high enough quality picture to sell millions of HDTVs, and upconverting has brought it to the point where most consumers would be hard-pressed to tell the difference between an upconverted DVD and a native HD DVD or Blu-ray Disc, unless you were really up close or someone was pointing out the differences in the details, both of which are pretty unusual situations.

SCOTT FULTON, BetaNews: But both high-def formats supposedly have this higher level of interactivity with the viewer that a DVD doesn't have. Are you saying that consumers have rejected that, or are you saying that consumers don't understand that?

ROSS RUBIN: It's definitely a more nuanced value proposition. First, consumers care more about title availability than either of those formats. We've still got a ways to go before critical mass of titles are available on either or both formats in aggregate. And in terms of playback options, a lot of DVDs today are played in the car. There's a big market for portable DVD, players for rear seat entertainment, I see a lot of kid's titles being played that way. So it's another incentive to purchase standard definition DVDs. So these interactive extras, they're wonderful for the person or the customer who's a real aficionado of the genre, or really wants to know more details behind the production, but it's certainly further down the list of important features.

NPD calls it, "The High-Definition Content Conundrum:" the seemingly impossible outcome of all the press being given to both sides in the format war leading to a lack of consumer's knowledge about them. Only 29% of all poll respondents, including non-HDTV owners, said they had ever heard of HD DVD; a mere 20% had heard of Blu-ray.

It's the kind of data that would convince manufacturers not to try to build a dual-format player - the kind of device which many, including Rubin, have thought could bring the format war to an amicable conclusion.

SCOTT FULTON: A year and a half ago, when you and I first talked about this topic, you predicted that by the end of 2007, by virtue of customer demand, there would be dual-format players on the market. Plural. It's not for lack of people wanting it because they do...Still, for any number of legal, licensing, trademark reasons, it can't seem to happen [on a larger scale]; there's an artificial barrier that is preventing market forces from enabling, I would think, a dual-format player to emerge from a broad group of manufacturers.

ROSS RUBIN: Well, my prediction will come true. Already, if you count PC-based products, there are already multiple dual-format drives out in the marketplace. Or even specialty PCs that may have both drives embedded in them. But yes, the bigger news is that Samsung will be shipping a dual-format deck that supports both interactive standards [BD-J and HDi] and that's due by the end of the year.

Again, I think if the format war were really the major inhibitor at this point in the market, we'd see sales of those players really rocket to the top of the sales charts. Right now, they're sold at a significant premium to other devices on the market. So you've got the PS3 starting at $499, you've got HD DVD players now at $399, or in some places less. Pioneer and Sharp have their Blu-ray players at around $1,000. Sony will soon have a stand-alone deck at $499. So yea, you've got this LG device at over $1,000; the Samsung device, I think they're going to try to bring it in for $999...Figure around a thousand dollars for a dual-format deck at this point. That's a price point where the availability of titles today doesn't make the purchase worthwhile for most consumers.

However, as HDTV penetration continues to grow, and title availability continues to grow, and if neither group of studios will budge on supporting the other standard, for consumers who want to continue to purchase physical media - and it's a big market to replace, about an $8 billion DVD market in the US - that [dual-format] solution may have much broader appeal.

Next: What if dual-format can't reach the magical price point?

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