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High Definition Market Update - Critical Time for HD Disc Formats - Q4 in 2007 is seen by many as a crucial time in the life of both HD-DVD and Blu-ray Disc (BD), and a timely new industry bulletin from Understanding & Solutions looks at the future of the HD marketplace, the opportunities and the threats
High Definition Market Update - Critical Time for HD Disc Formats

 

PRZOOM - /newswire/ - London, United Kingdom, 2007/09/24 - Q4 in 2007 is seen by many as a crucial time in the life of both HD-DVD and Blu-ray Disc (BD), and a timely new industry bulletin from Understanding & Solutions looks at the future of the HD marketplace, the opportunities and the threats.

   
 
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Commentary and analysis provided by Jim Bottoms, Co-Managing Director, Understanding & Solutions

Q4 in 2007 is seen by many as a crucial time in the life of both HD-DVD and Blu-ray Disc (BD), as it is the second Christmas period for both formats in the USA – long highlighted by Understanding & Solutions as the point at which the format battle could potentially be won or lost – and, more importantly, where the long term success of high definition discs will be decided.

It is also a crucial time for PS3, having underperformed last year in the USA due to its high price, delayed availability and the unexpected success of the Wii, as well as missing the European Christmas season completely.

Though player prices are falling across the board, there is growing concern that the consumer does not fully understand the high definition concept; and the confusion is further compounded by the choice of two different disc-based formats.

Taking everything into account, BD has been the leader for much of the year, accounting for close to two thirds of HD discs sold in the US. In Europe, BD’s share is at a lower level, but it enjoys a stronger performance in Japan.

However, developments over the past few weeks have the potential to erode BD’s current lead, and there is growing concern throughout the industry that both high definition disc formats could be lost completely in a world of competing delivery options and viewing platforms.

Last month, Understanding & Solutions stated the decision by Paramount and DreamWorks to release exclusively on HD DVD was not in itself sufficient to change the balance significantly, though it was a major PR coup for the HD DVD group and did erode BD’s industry strength. At the same time we expressed the opinion that the major impact of this decision would be to prolong the format battle, something that is not good news for the industry overall.

These views have not changed, but a number of additional factors have emerged that may impact the situation and extend the current period of uncertainty.
• The Blu-ray technical standards – particularly in respect of its online connectivity option, BD Live – are still not finalised.
- There are no BD Live enabled players currently on the market, whereas all HD DVD players have connectivity (although not all discs support this feature).
- It is understood that PS3 consoles have the technical capability to support BD Live with a firmware upgrade but as yet there has been no indication from Sony when this might be implemented.
• Player pricing, whilst falling rapidly, has not yet reached the point where it is attractive to the mass market.
From the perspective of software and hardware support, HD DVD has been trailing BD. However, its two main supporters, Toshiba and Microsoft, have been campaigning hard to bring other content owners and CE manufacturers on board.
• In late August, Paramount announced it would release future titles exclusively on HD DVD.
• Chinese manufacturer Alco-Venturer has announced a $199 HD DVD player for Q4 this year.
Paramount’s decision may not have significantly affected the balance between the formats, but the landscape would change dramatically should Warner make a similar decision, or one of the BD-exclusive studios defected to HD DVD or even elected to release on both formats.
• Warner recently stated that high definition software sales are sufficient in each format to make dual support viable.
- The average is 2:1 in favour of BD, although ‘Planet Earth’ sold more on HD DVD.
Whilst supporting both formats ensures that the entire potential Hi Def disc market is addressed, the additional costs involved are not insignificant.
• The very different technologies employed by BD and HD DVD, particularly with respect to interactivity, means that each has to be authored separately.
• Mastering and print costs are doubled, and replication volumes are smaller.
• The only area where there is any real commonality between the formats is in video encoding, the result being that BD titles released in parallel to HD DVD frequently use the same video file and therefore do not make full use of the format’s 50GB capacity.

Although recent developments have favoured HD DVD, there has also been encouraging news for Blu-ray.
• A number of European studios/distributors who had previously announced that they would release on HD DVD only, announced at IFA that they will support both formats. Among these are Studio Canal and Bertelsmann-owned Universum Film.
• Three European replicators are adding Blu-ray lines to meet the anticipated demand: Infodisc, Germany (Oerlikon line); QOL, France (Singulus line) and a third as yet unnamed plant (also Singulus).
• There has been progress in developing BD-Java authoring tools.
- Technicolor’s in-house ‘BD-Jive’ – a GUI-based Java compiler, which greatly simplifies the creation of BD-Java titles – may be made available to third parties.
• Chinese player manufacturer, China Huala Group (CHLG), has joined the Blu-ray Disc Association (BDA) as a contributor member, enabling the company to input suggestions for enhancements to the format.
• PS3 sales, whilst perhaps disappointing from a games perspective, still add significantly to the installed base of BD-enabled video playback devices.

Conclusions
As we stand today, industry support for BD across content and hardware remains the strongest grouping and it is therefore the format with the greatest chance of market success, although its strength is being eroded.
Whatever happens, continued competition between the two groups will lead to continuing confusion and uncertainty, and therefore delayed consumer purchase decisions. This in turn will lead to further price erosion of hardware – and to a lesser extent, software.
All this comes at a time when research is increasingly showing that consumers are already confused about the overall ‘high definition’ message. Stories abound of consumers with HD capable TVs but standard definition cable or satellite service thinking they are watching HDTV.
The continuing improvements in the upscaling capabilities of standard definition DVD players cannot be ignored as they may satisfy many consumers needs for an enhanced viewing experience at a competitive price.
The next six months will be critical for the future of high definition discs. There is significant market potential for pre-recorded High Definition media but there is a growing concern within the industry that this potential could go unfulfilled.

High Definition Conference
Understanding & Solutions would also like to announce its forthcoming conference, ‘High Definition in Europe: conveying the message’, taking place in Barcelona on 12-13 November. Now in its second year, this year’s conference highlights will include:

• Hollywood Studio panel
• European content creation and distribution
• The US experience and the lessons learned
• The broadcasters’ angle: commitment and progression
• The impact of next generation games consoles
• Practical experiences of live HD broadcasting
• Bigger venue, more attendees, even better networking opportunities than last year

Addressing the developments in 2007 and beyond, this is an essential conference for content owners, broadcasters, IPTV operators, professional and consumer electronics equipment manufacturers, video and games production and post-production houses, disc manufacturers and retailers.

 
 
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High Definition Market Update - Critical Time for HD Disc Formats

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