Paramount Switch to HD DVD Evens the Stakes

Owners of Blu-ray Disc players anxious for the upcoming release of Shrek the Third were shocked to learn this morning it was not going to happen - at least, not for the brand they'd chosen. The Viacom division, which now includes the DreamWorks Animation label, said it has chosen to resume supporting the HD DVD format exclusively, effectively reversing its decision of October 2005 to release in both formats.

The move appears sudden, as only ten days ago video press sources were given notice by Viacom that Shrek the Third and many other titles were being released for both formats on November 13. Now, Viacom plans to formally commence its exclusive HD DVD support with the release of the Will Farrell comedy Blades of Glory on August 28, with Shrek and Transformers to follow thereafter. Those three titles combined garnered $1.5 billion in US box office sales.

In a statement early this afternoon, Viacom stated its studios' mutual decision "resulted from an extensive evaluation of current market offerings, which confirmed the clear benefits of HD DVD, particularly its market-ready technology and lower manufacturing costs."

Executives there may also have been swayed by recent announcements made by Chinese manufacturers to produce even lower-price players, with an apparent edge given to HD DVD; as well as Wal-Mart’s decision to exclusively carry low-end HD DVD players in the near future.

When Paramount made that 2005 decision to support both formats, it quoted Home Entertainment division president Thomas Lesinski as saying the company's reasons were twofold: First, it looked forward to Blu-ray leading Sony's PlayStation 3 into the home in a big way. Second, it re-evaluated the cost of making Blu-ray Discs versus HD DVDs, and decided the difference was not all that great.

But this morning, the landscape looks very different. PS3 wasn't mentioned, but the cost factor was. Perhaps even more importantly, it was the studio production heads -- not the home entertainment division heads -- leading the charge this time.

Paramount Chairman and CEO Brad Grey took the banner. "Part of our vision is to aggressively extend our movies beyond the theater," Grey stated, "and deliver the quality and features that appeal to our audience. I believe HD DVD is not only the affordable high quality choice for consumers, but also the smart choice for Paramount." Grey's comments were coupled with a strange remark from DreamWorks head Jeffrey Katzenberg that somehow HD DVD was better suited to families.

Lesinski has been known to be personally impressed with HD DVD, especially the 45 GB double-bonded disc project which was launched in 2005 - another multi-ply project in high-def which has yet to bear fruit. But historically, he's been an advocate for a cautious approach, telling reporters that his company's tack is to let the market decide which format should eventually rule the high-definition home. Either the company has made that decision, or Lesinski's been overruled.

In either event, the news was taken hard by Blu-ray aficionados. On the unofficial Blu-ray.com blog, there was a rumor that Viacom had received a $150 million payout from the HD DVD Promotions Group. That rumor was apparently launched by LA Weekly blogger Nikki Finke, who first repeated whispers of Viacom's pending move on Sunday.

Just last month, Blu-ray.com reported that Paramount would release Blades of Glory with a PCM 5.1 lossless soundtrack for Blu-ray only, with a lossy soundtrack on HD DVD, with other similar releases to follow. According to that story, its sources cited HD DVD's space constraints as a key reason.

A fresh check of High-Def Digest, which was apparently updated this afternoon, shows the "lesser" audio format for Blades' forthcoming HD DVD release to be Dolby TrueHD 5.1, which is not exactly all that shabby.

Viacom's move leaves Warner Bros. as the single major studio to straddle the fence by supporting both formats, as Universal hangs on tight to HD DVD while the various Sony studios, Disney, and 20th Century-Fox maintain their allegiance to Blu-ray. As a senior member of the AV Science Forum commented today, "What worries me most is what [Warner Bros.] does next. If they go HD-DVD exclusive which I think they will, everything will be back to square one."