CES: the silly season

So there’s this little thing called the Consumer Electronics Show out in Las Vegas where all the big tech companies come together and show off all the geek service they’ve got lined up for the following year. Everyone except for Apple, that is, who has their own little bash a week later to be fashionable. But this year, the overlap of CES with the political cycle makes for some interesting and informative analogies. Consider this. Two candidates, each representing change from the current status quo, each promising vast advantages and benefits and superior experience. Both are locked in a drawn-out battle for the hearts of voters, but also a more pragmatic one for the minds of delegates, because each one wants to be the nominee for the bigger battle ahead. And suddenly in the very first contest between them of the year, one candidate pulls ahead with a dramatic upset, casting seer doubt on the viability of the other (who had campaigned with an aura of inevitability).

Hillary Clinton and Barack Obama, competing for the Democratic presidential nomination? Nope. HD-DVD and Blu-ray, competing for next-generation DVD status in your home theater (and more importantly, on your DVD bookshelf).

The big news last week was that Warner Video is ditching HD-DVD; now comes news from the Financial Times that Paramount might also abandon the format and embrace Blu-ray exclusivity:

Paramount is poised to drop its support of HD-DVD following Warner Brothers’ recent backing of Sony’s Blu-ray technology, in a move that could sound the death knell of HD-DVD and bring the home entertainment format war to a definitive end.

Paramount and DreamWorks Animation, which makes the Shrek films, came out in support of HD-DVD last summer, joining General Electric’s Universal Studios as the main backers of the Toshiba format.

However, Paramount, which is owned by Viacom, is understood to have a clause in its contract with the HD-DVD camp that would allow it to switch sides in the event of Warner backing Blu-ray, according to people familiar with the situation.

Paramount is set to have a bumper 2008 with several likely blockbusters, including the latest instalment in the Indiana Jones franchise, slated for release.

This basically leaves HD-DVD without any major must-have titles in its format exclusively, as Blu-Ray already had about 70% of the content even before you take Paramount into account. Already, TechCrunch is declaring the format war over and that HD-DVD has “joined the Deadpool”. To say this is premature is an understatement. To date, combined sales of HD-DVD and Blu-Ray players and discs alike are a drop in the bucket compared to traditional DVD sales. Plus, Universal Studios still is committed to the format and as we have just seen, major studio allegiances can shift over time. The key I think to keeping HD-DVD alive is that the players are cheap, and they do the job as an advanced DVD player to upconvert traditional DVD to HDTV resolution. Take the Playstation 3 out of the equation and standalone HD-DVD players easily outsell Blu-ray; from a consumer perspective it’s the $99-$199 piece of hardware that is easier to justify than the $499-$699 one, especially when that consumer still is feeling the pain of the outlay for the fancy new HDTV (which everyone’s going to feel at some point, given the pending switchover).

I think it’s absurd to count HD-DVD out right now. Certainly the news isn’t great, but neither format is viable yet and it will be years before they even begin to approach a reasonable fraction of the existing DVD market. I’d still buy an HD-DVD today if I had an HDTV to watch it on, mainly because it would serve double duty and ultimately all of this won’t matter because the future is not physical media, it’s video download.

4 thoughts on “CES: the silly season”

  1. Well, it certainly doesn’t look good for HD-DVD. Cheap players don’t mean much when you can’t find the movies you want. My history is a little rusty, but I’m pretty sure that this is what happened with the VHS/Betamax situation. Studios started favoring VHS, and that spelt doom for Beta (which found a home in professional and broadcast video industries). It’s also worth noting that the cheaper HD-DVD players are only 720p, while the 1080p ones are much more expensive.

    Blu Ray is also starting to come down in price a bit. The PS3 is now only $399, and you can usually find some big deals for getting that along with a bunch of free discs (I saw some crazy stuff, like a $399 PS3 with 15 free movies, during the holidays). Of course, you can get deals like that with HD-DVD as well, but their selection is more limited.

    I’d love to see HD-DVD win this war (I hate Sony), but I just don’t see how that’s possible. I think that the holiday season 2008 will still feature a big push by both formats, but I think that’s HD-DVDs last chance. If it doesn’t do so well by the end of this year, they’re cooked.

  2. It does make me wonder just what kind of bribes Sony offered them. Tou wouldn’t think there would be any advantage in format exclusivity for a studio, all other things being equal.

  3. The key I think to keeping HD-DVD alive is that the players are cheap, and they do the job as an advanced DVD player to upconvert traditional DVD to HDTV resolution.

    Backwards compatibility is hardly exclusive to HD-DVD. If I understand correctly it was quite an engineering challenge to have a blue laser read a standard DVD, but somehow they got it to work. I’m no Blu-ray partisan (let me take this opportunity to echo the general “Sony sucks!” sentiment), but just because the format doesn’t have “DVD” in its name doesn’t mean it isn’t compatible with them, heh.

    (Looking into this further, it does seem that backwards compatibility is a mandatory part of the HD-DVD standard, whereas it’s optional for Blu-ray players, but why would any major manufacturer would leave it out? Maybe in five or six years when we start seeing cheapo $30 Apex high-def players…)

  4. Mark, I agree it doesn’t look good. And I will confess to being reflexively anti-Sony. However, you can get the Toshiba HD-A2 for under $200, and while it doesn’t support 1080p, it does support 1080i, which is actually good enough. The vast majority of HDTVs out there don’t support 1080p either, and only a true videophile is going to notice the difference anyway. Most people are going to buy a low end HDTV and those only do 780p which is really the default.

    The PS3 still costs twice that, and doesn’t support the interactive features of Blu-Ray that HD-DVD had out of the box at launch as standard. Actually the Samsung BD-P1400 is cheaper than a PS3 and does go up to 1080p, but that’s still way more expensive than its HD-DVD counterpart.

    I don’t think either format is cooked until it starts to achieve significant market share relative to legacy DVD. The numbers horserace between them is meaningless since all nextgen-DVD sales of players and discs combined are still a drop in the bucket.

    Did Sony bribe Warner? who knows, but I was skeptical that Toshiba et al bribed Paramount when it made its big switch earlier, so I guess I should extend the same benefit of the doubt. I think it’s more likely that the big studios are trying to gamble on one or the other to save themselves the cost of producing titles in both and diluting their marketing.

    Andrew, you’re right that Blu-ray can be backwards compatible. I guess I sholdn’t imply otherwise. But as you said, with HD-DVD its already in the spec. My argument is basically that buying HD-DVD is not a risk like buying Betamax was, though, because the HD DVD players have value and aren’t junk if the format dies off. Plus HD-DVD is less of a risk from the simple upfront cost perspective, too.

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