According to Variety, in a decision reminiscent of the tech conflict that changed the industry forever, three studios -- Warner, Universal and Paramount -- have taken sides in a battle for the next-generation DVD market by endorsing a format, HD DVD, that will compete with one backed by Sony.
Decision means that starting next fall, consumers will be faced with high-definition DVDs with similar features but two incompatible formats.
Backing HD DVD's competitor, Blu-ray, will be the 8,000 pic library of Sony and its soon-to-be partner, MGM. Sony and MGM had a combined 19% of the DVD market through October, while Par, U and WB accounted for 41%.
Putting the Lion in the Blu-ray camp was a significant reason behind the Sony-led consortium's agreement to acquire the studio for $5 billion.
Toshiba, the main tech company behind HD DVD, is believed to have joined with Time Warner to back a last minute unsuccessful bid for MGM for the same reason.
Yet to declare their allegiances are Disney, Fox, DreamWorks and Lions Gate. New Line and HBO are aligned with their sister company and DVD distributor Warner.
At stake are billions of dollars in patent and copyright fees and tens of billions of dollars in consumer spending on movies, TV shows, music and videogames. Any confusion in the marketplace by consumers could delay and possibly derail anticipated incremental revenue that could mirror the windfall enjoyed by the introduction of DVD.
HD DVD releases are expected to start by the fourth quarter of next year, along with the first players, and will include a mix of new releases and library titles that should reach several dozen from each studio. Blu-ray machines and discs, meanwhile, likely won't hit the market until 2006.
Such plans are based on the assumption that consumers will adopt high-def DVDs aggressively, as they did when shifting from VHS to DVD.
One major problem studios have is convincing consumers that a new player and more expensive discs will be worth the investment. High-def DVDs offer around six times as much storage capacity as current DVDs and allow for interactivity through broadband Internet connections, but studios have yet to figure out what they'll do with the storage beyond vague plans for more content and shipping entire seasons of a TV show on fewer discs.
Next-generation DVD players are expected to cost around $1000 when they launch late next year, with prices falling quickly as has happened to current players. Discs are expected to cost $5 or $10 more each.
The biggest draw may be the higher video quality hi-def DVDs enable. But to really see the difference, consumers will also have to purchase digital televisions. Over 13 million are in the U.S. market so far, with the Consumer Electronics Assn. predicting that over 10 million more will be sold next year.
Studios are eager to push the new formats to generate new revenue -- and because of their more robust copy protection. While current DVDs are relatively easy to hack, high-def discs are considered by tech experts to be nearly invulnerable, which could put a dent in film piracy.
The downside for consumers with competing formats is that many movies will be made available only in one format or the other. So far no studio other than Sony has said it will produce programming exclusively for one format or the other, but economics will likely make that a de facto situation.
"We will let the consumer be our guide, but right now we do not plan to release product in Blu-ray," Universal Studios Home Entertainment president Craig Kornblau said. "Our priority is HD DVD."
Execs at studios choosing HD DVD Monday said the lower cost of transitioning current DVD manufacturing plants to the other format was a key driver of the decision.
"It's simply a less expensive product to replicate," said Paramount worldwide home entertainment prexy Thomas Lesinski, a former lieutenant of Lieberfarb's at Warner. "We won't have to amortize the costs of retooling factories."
Below is the press release from Toshiba...
Toshiba Corporation disclosed today that the company has received separate commitments of support from Paramount Pictures, Universal Pictures, New Line Cinema and Warner Bros. Studios, respectively for the next-generation, high-definition DVD disc format, HD DVD.
HD DVD is the newly developed high definition DVD disc standard being developed at the DVD Forum, which represents over 230 consumer electronics, information technology, and content companies. HD DVD innovations include higher resolution video and audio available on a suite of disc capacities adaptable for longer or shorter programs – along with advanced navigation, web connectivity, and new consumer options. HD DVD supports such essential features as advanced content access and robust content security technology, which are critical to the studios. A single, dual-layer HD DVD ROM disc, with a 30-gigabyte capacity, can hold as much as eight hours of high-quality, high definition movie content. HD DVD is based on the same physical disc structure as DVD, which secures easy backward compatibility with today’s DVD, and enables manufacture of highly reliable hardware and discs at a reasonable cost.
Mr. Tadashi Okamura, President and CEO of Toshiba Corporation, said: “We are delighted that the HD DVD format has been independently endorsed by Paramount Pictures, Universal Pictures, New Line Cinema, and Warner Bros. Studios. We sought to contribute to development of the format through a close dialogue with Hollywood studios and extensive technical discussions within the DVD Forum, an approach that has been validated by these endorsements.
“HD DVD offers the necessary combination of picture quality, content security and advanced features, including interactivity, plus reasonable manufacturing costs. We believe this is why HD DVD is gaining broad acceptance and has won the support of each of these four leading studios,” Mr. Okamura continued. “Endorsement of HD DVD by these leading Hollywood studios is a great impetus to assuring the timely launch of HD DVD and to assuring that consumers have a range of attractive choices in both hardware and software. Major Hollywood studios are expected to release a number of movie titles, including new releases, to support the smooth progress of HD DVD in its initial year. Hundreds of other titles will also be available from other international content holders.”
The DVD Forum has been working on the fine details of the HD DVD specifications for almost two years, including physical, file format and application specifications for recordable and ROM discs. The DVD Forum approved the physical specifications of version 1.0 for HD DVD-ROM in February 2004, followed by version 1.0 of the HD DVD-Rewritable format in September 2004. Completion of the HD DVD-R, a one-time recordable format, is also expected by year end. “Every facet of HD DVD development is on track,” said Yoshihide Fujii, President and CEO, Toshiba’s Digital Media Network Company. “As we enter the age of high-definition broadcasting, consumers increasingly want HD content for their high definition, large-screen displays, and HD DVD naturally fits in with this trend. HD DVD will open up new horizons in visual entertainment.”
“With the emergence of a wide range of advanced digital devices, assurance of robust content protection is of primary importance to the sound development of both the hardware and software industries,” said Mr. Fujii. "We intend to reinforce close collaboration and dialogue with other hardware manufacturers, content holders and software distributors to meet this objective." The HD DVD format will enable the most advanced content protection technology; AACS (Advanced Access Content System), currently being developed by major international CE, IT companies and Hollywood studios, is expected to be selected.
HD DVD players are expected to become available in late 2005 and widely available in 2006. Toshiba plans to launch its first HD DVD products, a CE player and recorder, in the fourth quarter of 2005. The company also plans to release a notebook PC with a built-in HD DVD drive at the end of 2005.