HD-DVD backers say disc cost is key to format battle

The battle over the standard for optical discs used in high-definition video began heating up on Wednesday in a sleepy village about an hour north of Tokyo.

Memory-Tech, one of Japan's largest optical disc makers, demonstrated production of HD-DVD discs using a slightly modified DVD production line at its factory in Akeno on Thursday. The company said it will be able to produce HD-DVDs initially at a premium of about 10 percent over current DVDs, and rapidly move to near-DVD prices.

Memory-Tech showed an optical disc production line turning out HD-DVD discs at a rate, or cycle-time, of one every 3.5 seconds. After several minutes of production, the line was halted and switched to DVD production by swapping the disc stamping tool. The switch took around five minutes, after which the same production line turned out DVDs at a cycle time of 3 seconds.

"This is an example of cutting-edge production technology in the heart of the countryside," said Ryoichi Hayatsu, chief manager of NEC's 1st storage division. The HD-DVD format has been largely developed by NEC and Toshiba.

The fact that the Memory-Tech demonstration has focused on optical disc production and not the more consumer-friendly areas of picture or sound quality could indicate that the battle between HD-DVD and the rival Blu-ray Disc format will be fought not in the living room but in the board rooms of major movie producers and DVD distributors.

The reason: when it comes to picture and sound quality, which both consumers and content producers tend to scrutinize closely, there is little to tell the two formats apart. Both deliver digital high-definition images that most users would be hard-pressed to distinguish. HD-DVD has an edge in that it uses more advanced video compression codecs, but backers of Blu-ray Disc are also considering using the same codecs -- MPEG4 and Microsoft's VC9 -- thus eliminating this competitive edge in the future.

However, where the two formats differ is in the area of disc production. HD-DVD discs share the same basic structure as DVDs but Blu-ray Disc, by comparison, uses a new structure requiring new production lines, which will drive up costs, at least initially.

Already, representatives of several content producers, including Time Warner, The Walt Disney Co. and Fox Broadcasting, have been shown the same demonstration and were impressed, according to Hayatsu. "They said ... cost is the most important. If it costs even one cent more then you lose," he said.

Memory-Tech aims to reduce cycle times to 3 seconds within a year or so, according to Kanji Katsuura, Memory-Tech's chief executive of technology for next-generation DVD. Beyond that, 2.5 seconds may be possible, he said. By reducing the cycle time the disc production costs should fall.

Memory-Tech will release details of its production technology to help convince other DVD makers that HD-DVDs can be produced easily, according to Katsuura. "The equipment makers are ready," he said.

Hayatsu underscored the different approaches of the Blu-ray Disc and the HD-DVD camps. Sony is pushing to develop a quad-layer disc capable of storing up to 100G-bytes of information, the company said earlier this month. Blu-ray Disc backers are promoting the technology as a storage and playback technology. Memory-Tech, however, will not go to a 3-layer or 4-layer disc technology because of the expense.

"Our target is to realize a dual-layer with less than a 40 percent cost increase... if we make a two-layer disc and the cost is more than 40 percent, there is no meaning," Hayatsu said.

"We are much more practical guys," he said, comparing the difference in approach between the HD-DVD and Blu-ray camps. "They are just focusing on the technology. We focus on current technology and how much we can extend it. But they want to jump (to a totally new technology)."

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