Posted by Allan on 12/26/05 16:17

http://www.gadsdentimes.com/apps/pbcs.dll/article?AID=/20051226/ZNYT05/512260348/1011

Fiddling With Format While DVD's Burn

The war for control of the next-generation DVD is approaching a
critical juncture: next week in Las Vegas at the Consumer Electronics
Show, companies championing the two competing high-definition DVD
standards - Blu-ray and HD-DVD - will unveil their lineups of new
players and movie titles.
There are growing signs, though, that the battle for supremacy in this
multibillion-dollar market may yield a hollow victory. As electronics
makers, technology companies and Hollywood studios haggle over the
fine points of their formats, consumers are quickly finding
alternatives to buying and renting packaged DVD's, high definition or
otherwise.
"While they fight, Rome is burning," said Robert Heiblim, an
independent consultant to electronics companies. "High-definition
video-on-demand and digital video recorders are compelling, and people
will say, 'Why do I need it?' " when considering whether to buy a
high-definition player.
The fight between the Blu-ray and HD-DVD groups is based on different
views of what consumers want. The HD-DVD camp, led by Toshiba, assumes
that consumers will buy high-definition DVD's and players, but only at
the right price. So it is improving existing DVD technology, which can
be made cheaply and quickly.
The Blu-ray group figures that something brand new is needed to get
consumers interested, so it is developing discs with enough capacity
to allow for innovative features in the future.
Both sides agree, however, that now is the time to introduce
high-definition DVD discs and players. Sales of high-definition
televisions, with their sleek design and superior picture and sound
quality, are soaring, and the major networks are broadcasting more
programs in high definition.
Game console makers like Sony see high-definition video games as a way
to increase sales, and Hollywood hopes that high-definition discs will
offset slumping sales of current-generation DVD's in the $19 billion
prepackaged disc market.
Yet the alternatives to these new players and DVD's are growing by the
day. The most promising is the on-demand programming, both standard
and high definition, being offered by cable companies. The percentage
of cable customers who watch on-demand television has doubled in the
past year, to 23 percent, according to the Leichtman Research Group.
With thousands of free movies available at any time, consumers have
fewer reasons to rent a DVD at Blockbuster or buy a new one at Best
Buy. They are also likely to think twice before spending $1,000 or
more for a new high-definition DVD player, or $25 or so to own a disc
of a movie they might already have in standard definition.
Of course, these newfangled ways of watching video are still a small
piece of the overall video market, and industry executives and
analysts say they expect most consumers to continue buying prerecorded
DVD's for years to come. They also say they believe that
high-definition programs - and the televisions to watch them on - are
the way of the future. The question is how consumers will get that
programming.
Even without these alternatives, high-definition DVD's face an
unpredictable start. The inability of the Blu-ray group and HD-DVD
camp to agree on a standard means that consumers must consider two
sets of machines. Except for avid technophiles, consumers are likely
to wait out the standards battle, lest they get stuck with an obsolete
player.
Machines will also be expensive - $1,000 or more - and consumers will
need a television capable of playing high-definition programs, which
can easily cost several thousand dollars more. The list of movies
available in the formats will be skimpy at first.
Sony, which leads the Blu-ray group, has said that its new video game
consoles, due out this spring, will play Blu-ray DVD's. But few
industry analysts expect consumers to buy the game machine just to
watch movies.
In the meantime, other companies are making it easier to watch and
copy high-definition movies. Scientific-Atlanta has a new set-top box
with a digital video recorder and DVD recorder built in, so cable
subscribers can use a single machine to record programming and burn it
onto blank discs.
"Consumers are getting hooked on video-on-demand and the flexibility
of moving content around the home," said Ted Schadler, an industry
analyst at Forrester. "The battle over the format is silly. For the
product to grow, they have to promote the benefits of HD, not battle
each other."
Yet the two sides are digging in their heels, not shaking hands. Sony,
Panasonic, Samsung and other backers of the Blu-ray format expect to
flood stores next year with high-definition DVD players, and half a
dozen studios will make movies for them.
Not to be outdone, the HD-DVD camp led by Toshiba has won endorsements
from Microsoft and Intel. Hewlett-Packard, a member of the Blu-ray
group, agreed last week to work with the HD-DVD camp as well.
These allies say that the wall between computers and consumer
electronics is blurring and that the new formats should let users move
movies and other content among various devices seamlessly. Not
surprisingly, they see computers as the main conduit, not stand-alone
electronic devices.
"If PC's don't adopt these technologies, it will be a ho-hum 2006" for
next-generation DVD's, said Maureen Weber, the general manager of the
personal storage group at Hewlett-Packard. "It all boils down to
Microsoft and Sony wanting to dominate the connected home. It's a
showdown between consumer electronics and personal computers over
convergence."
Ms. Weber, like many other executives, acknowledges that the longer
the format battle continues, the higher the likelihood that consumers
will find other solutions, including video-on-demand.
Comcast, the country's largest cable provider, already gives its 20
million subscribers access to 3,800 movies and television shows. The
44 percent of Comcast's subscribers who have the set-top box needed to
see on-demand programs have watched more than a billion of them so far
this year.
There are signs that rising on-demand viewing is denting DVD sales and
rentals, a worrying sign for Hollywood executives who increasingly
rely on disc sales to offset the rising cost of producing movies.
Since consumer electronics makers and Hollywood studios earn much of
their profit on sales margins, they will feel the pinch if these new
viewing options grab even 5 or 10 percent of video market.
A poll by the Starz Entertainment Group this month showed that 60
percent of those who watch on-demand video buy fewer DVD's, while 72
percent of those surveyed are renting fewer movies.
Starz has also broadened the definition of on-demand with Starz
Ticket, which lets users download movies to their laptops or other
devices for $12.95 a month. The service includes a rotation of 300
movies that can be watched repeatedly and, like a digital video
recorder, can be paused, rewound and fast-forwarded. Like store-bought
DVD's, they also include directors' cuts, foreign-language versions
and other bonus material.
"We're on the verge of another major shift in terms of how consumers
receive video," said Tom Southwick, a spokesman for the Starz
Entertainment Group. "What's happening in the video arena is just like
what is happening in the MP3 market. Over time, there's going to be so
much available with cable on-demand and the Internet that having a
library of tapes that you buy or borrow will become inconvenient."
For now, none of the Starz Ticket movies are in high definition
because typical broadband connections are too slow to make downloads
feasible. The current generation of discs hold up to 8.5 gigabytes,
not enough for a full-length movie in high definition.
Consumer habits also die hard.
"You can change technology all you want, but you can't change people,"
said Andy Parsons, a Blu-ray group spokesman who noted that the vast
majority of music fans still buy CD's. "Average folks still want to
watch the movie and buy it. It's presuming a lot to think that they
will replace the model they've used for decades."
But even average folks may learn fast when they have cheaper and more
convenient options.






"Arguing with anonymous strangers on the Internet is a sucker's game
because they almost always turn out to be -- or to be indistinguishable from
-- self-righteous sixteen-year-olds possessing infinite amounts of free time."
- Neil Stephenson, _Cryptonomicon_

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