Why No One Wins in the High-Def Format War

The ongoing tussle between backers of the two high-definition media formats -- Blu-ray Disc and HD DVD -- took a dramatic turn with the news that Paramount would release all future titles on HD DVD only. The studio's statement last month set off a spate of announcements from other parties as members of each camp tried to rally the troops and stake out their positions heading into the holiday season.

The news couldn't come at a worse time, what with consumers revving up to make a buying choice this holiday season -- assuming they're ready to jump into the high-def fray at all. Suddenly, what had been a fairly clear advantage for Blu-ray became much more uncertain. And that's actually not a good thing for either fledgling format.

Before Paramount's announcement, Blu-ray appeared to have an enviable edge: Two Blu-ray discs were being sold for every HD-DVD disc, and the format's studio backing was wider than HD DVD's. For a while, more -- and cooler -- titles seemed to be coming out on Blu-ray (Pirates of the Caribbean, anyone?) than on HD DVD. Even US retailers appeared to be voting for Blu-ray, with Blockbuster saying that it would stock HD DVD in only 250 out of 1700 stores slated to carry high-def titles (all will have Blu-ray), and with Target declaring that it would promote Blu-ray players in its stores.

The Paramount Decision

The Paramount announcement caught the Blu-ray Disc Association and its members off-guard. Even Andy Parsons, who heads the BDA's promotional efforts in the United States, expressed surprise at Paramount's move. Like many observers (myself included), Parsons would have understood if Paramount had taken the step earlier this year, before Nielsen sales data began showing stronger support for Blu-ray than HD DVD. But now?

Paramount CTO Alan Bell made some valid points, though, in explaining the reasons behind Paramount's decision. Many of the reasons he cited were technical ones; he didn't get into the business side too much, leaving that for other studio spokespeople. While I don't for a minute believe that the decision was wholly based on technical reasons, I do believe that Bell is right on one specific point: the Blu-ray specs mess.

Right now the Blu-ray Disc format is in transition, as new minimum requirements will go into effect come October 31. All players will need to support up to 256MB of storage and secondary audio and video decoding (which enables features such as picture-in-picture content). Additionally, players supporting BD Live--the much-touted Internet-connected interactivity that the Blu-ray Disc specification calls for--must have 1GB of storage and an ethernet connection as well as the secondary audio and video decoding.

The brewing confusion lies in the fact that the latest Blu-ray Disc players don't have those features; furthermore, it's unclear as to whether the manufacturers of the players announced at the giant CEDIA home-theater trade show earlier this month (LG, Pioneer, Samsung, and Sharp) will be able to offer firmware upgrades to those models to enable what's being referred to as the Blu-ray 1.1 profile (which encompasses all of the new specs that go into effect October 31).

I have no doubt that these new Blu-ray players, like the ones that have preceded them, will play all movies and TV shows in gorgeous high-def. But the players you can buy this holiday season most likely won't be able to deliver the full Blu-ray entertainment experience as movie discs ship with new interactive features. Next year, and the year after next, greater features and interactivity will be coming, assuming Blu-ray persists as an entertainment format. Do you really want to have to buy yet another player just to handle the cool, extra disc-playback features you read about in a review?

Following so far? If so, you're doing better than most folks I describe this situation to. And you're probably ahead of the masses of consumers who will converge on Best Buy and other retailers this holiday season.

No wonder, then, that the player specs might be an issue for a movie studio. How can studios author content without knowing the capabilities of the player? How can they market the extras, knowing that the early adopters who bought a player in the last two years probably won't be able to view that content? This is a huge marketing and educational hurdle that the Blu-ray camp must face as new players and new features start to appear. In this respect, HD DVD holds an advantage over Blu-ray: From day one, every HD DVD player has been able to handle the same level of interactivity. As time goes on, that could prove a winning strength of HD DVD.

Any Winners in the Room?

Maybe saying that no one wins here is too strong a statement. Certainly, the Paramount announcement is a clear coup for the DVD Forum and the backers of HD DVD (led by Toshiba, Microsoft, and NBC Universal Studios). Aside from Toshiba's price drops in the spring and summer, HD DVD had really had no momentum going. The Paramount announcement reinvigorated the HD DVD movement.

Assuming the rumors of a $150 million payoff are true, Paramount is likely the only other party that doesn't lose. Although Paramount's Bell told me that the studio's HD DVD exclusivity deal doesn't have a timeline attached to it, I've heard through the grapevine that the agreement may be limited to just two years. If so, my guess is that the payoff--whatever form it took (reports say that it wasn't a cash payment, but Paramount is officially mum on the terms of this arrangement)--more than offsets any of Paramount's potential losses from not having its movies and TV shows available in both HD DVD and Blu-ray.

Sure, consumers will get angry, but in the long run, if Star Trek fans buy Paramount-produced Star Trek titles on HD DVD, and if they ultimately need to buy them again in Blu-ray because Blu-ray becomes the industry's format of choice in the future, then they're going to end up buying the titles again. End of story.

Toshiba will likely see some uptick in player sales thanks to Paramount. And because the company's players are relatively inexpensive (the new HD-A3, due out in October, will retail for $300), it won't surprise me if some consumers end up opting for HD DVD just because they can afford it.

Page Break

The Consumer Quandary

Meanwhile, consumers remain caught in the middle. Forget the specs battle for a moment. Take away all the minutiae that the average consumer doesn't want to bother with (and, frankly, shouldn't be bothered with). Why buy a Blu-ray player today when you know something better (Profile 1.1) is coming along? The answer is, of course, that you want to see Blu-ray content today, not tomorrow or (more likely) next year or even further into the future.

As more and more high-def TVs enter homes, consumers clearly will want high-def content to play. If all you care about is picture quality, and you want the movies coming out on Blu-ray, you'll want to buy a player this holiday season. But you'll be buying a piece of equipment that will be almost instantly obsolete.

Ultimately, which format you'll buy will depend on the movies you want. You may never have noticed which studio produced (or distributed) your favorite films and TV shows, but given the current state of affairs, now you'll have to. Paramount and Universal are exclusively HD DVD; Disney, Fox, Lionsgate, MGM, and Sony are exclusively Blu-ray. Warner Bros. is format agnostic, and says it plans to continue offering its content in both formats (though the rumor mill is saying that both HD DVD and Blu-ray backers are actively courting Warner to go exclusive to one format).

What Should a Buyer Do?

You could solve the problem by opting for a dual-format player such as the upcoming LG BH200 or the Samsung BD-UP5000. Even though neither model, as it is, supports the Blu-ray Profile 1.1 spec, they both can, at least, play Blu-ray and HD DVD titles. That alone is a boon for consumers faced with choosing between the two formats. But you'll be paying a hefty premium for such convenience: For the price of one of these devices, you could buy a pair of stand-alone players, one in each format. That's a sad commentary on the state of these technologies and this format war, if you ask me.

Many in the industry seem to think that this holiday season will be a decisive moment in the format war, and I have to agree. The format that enjoys more traction in hardware and software sales during this season will be the one that has momentum going into next year and beyond. This year has been the grace period for the two formats to work out the kinks, get their acts together. Analysts have been predicting that 2008 will be the year Blu-ray and HD DVD expand into the mainstream, as prices fall and the production of discs and players increases.

But for 2008 to be a year of growth, consumers will need to feel a modicum of confidence about the format they're buying. Or, they'll need to resign themselves to the possibility that whatever they buy may become obsolete fairly soon--but at least they'll have some immediate gratification.

I recommend skipping this holiday buying season entirely. Neither format feels mature enough for anyone but gamblers willing to risk buying a player and media that might not be around a decade from now: Blu-ray's specs are in transition, and HD DVD just doesn't have wide enough studio support, even with Paramount on board. HD DVD needs at least two more studios to tip the scales fully in its favor.

Blu-ray will be ready for the masses once the next generation of players hits sometime in 2008. But regardless of which format you go with, if you're patient and wait another six to eight months before buying a player, you'll likely be rewarded twofold: first, by saving bucks on your hardware purchase, and second, by having more confidence in whichever format you end up buying.

If I were a betting person--and assuming the status quo, with no other business deals cropping up to sway a studio from its current allegiance--I'd still lean toward Blu-ray as the winner in the long haul, in large part because of the studio support it carries. But the Paramount deal makes that call less clear-cut, and confuses matters for the time being.