No backing down in high-def battle
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HIGH-DEF GUIDE: Blu-ray claims victory, but HD DVD supporters hold their ground
By Jennifer Netherby -- Video Business, 5/21/2007
MAY 21 | When it comes to next-generation movie discs, there’s one thing every studio agrees on: one format will prevail.
Which one, you ask? Why, the one backed by the studio you’re asking, of course.
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Walt Disney Co. CEO Bob Iger said in a recent earnings call with analysts that the Blu-ray supporting studio is unlikely to release films on HD DVD. On the rival front, Universal is the only studio releasing films only on HD DVD, and Universal Studios Home Entertainment president Craig Kornblau says it is not considering adding Blu-ray support at this time.
Disney, Lionsgate, Sony Pictures and 20th Century Fox—all Blu-ray-only supporters—point to sales in the first three months of the year as evidence that their format has already won over consumers.
"We’re really encouraged by how well Blu-ray is doing from a hardware and software perspective," says Lori MacPherson, Buena Vista Worldwide Home Entertainment’s general manager for North America. "It has been outselling HD DVD by quite a margin, and we’re starting to see that translate into retail space as well."
MacPherson declined to name specific retailers that are giving more space to Blu-ray, and no major retailer would confirm to VB that they are shifting the balance to Blu-ray across the board, though individual titles may be stocked more heavily in the format.
But MacPherson’s comments were echoed by other studio execs, who pointed to big releases such as Buena Vista’s first two Pirates of the Caribbean films, due on Blu-ray May 22, and Sony’s Spider-Man 3,expected on the format later this year, as evidence of Blu-ray’s building momentum.
"Right now, there is 50/50 space devoted to Blu-ray titles and HD DVD titles," says Sony Pictures Home Entertainment worldwide president David Bishop. "But if Blu-ray continues to maintain the momentum, we will see 70% of the titles be devoted to Blu-ray, and 30% will be HD DVD. This should send a powerful message to the consumer."
Still, HD DVD sales continue to grow, and studios releasing films on the format see no dire end in sight.
Equal footing
Both Blu-ray and HD DVD are around the 1 million-unit mark in software sales, with Blu-ray a little ahead. About 200 titles are available on each format so far. HD DVD had a head start when software launched for the format before Blu-ray titles last year, but Blu-ray has since caught up because of support from more major studios.
Yet HD DVD backers note that their format’s set-top sales have been outselling Blu-ray player sales three-to-one since Toshiba cut its player price to $399.
"This is a new-release business," says Kornblau. He notes that 70% of high-def sales are new releases, which gave Blu-ray a lead early this year. "Any retailer who has done its homework will realize what caused the big burst in the month of March was completely new-release driven."
Supporting both formats
So far, the real winner on high-def has been Warner Home Video, which, along with Paramount Home Entertainment, is releasing films on both formats.
Warner is generating on average 30% to 40% more high-def revenue by releasing on both formats, says president Ron Sanders.
"We don’t see [the format war] over by a long shot," says Sanders. "The formats are co-existing with each other for the time being. Blu-ray had a strong month in March [with Sony’s Casino Royale]. But price drops for Toshiba are making it now a strong time for HD."
Warner will adjust its release strategy come late-third/early-fourth quarter, when it streets its first Total HD disc, which features an HD DVD movie on one side and a Blu-ray film on the flip side. Warner plans to release all of its high-def films in Total HD from that point on.
Many indie suppliers still have not yet committed to releasing in either HD DVD or Blu-ray, citing production costs as one barrier to entry.
First Look Home Entertainment decided to release its first high-def title, The Contract, in HD DVD, primarily because it is about 50% cheaper to manufacture than Blu-ray, says president Bill Bromiley.
Magnolia Home Entertainment and Image Entertainment are producing in both HD DVD and Blu-ray.
Regardless of how the format war ends, the high-def disc business is further along than other new movie viewing alternatives, such as downloading. Studios say they are still exploring different models in online movie delivery to see how consumers respond. But they are openly courting retailers, signing download deals with Wal-Mart and Amazon and talking to others.
BVWHE is working with retailers and other sites that it believes offer a great consumer experience, adequate content protection and a viable business model, says MacPherson. Still, "I think electronic sell-through is an exciting new business that gets a lot of press for its size," she says.
As Kornblau summarizes, "Right now, we say the HD DVD business is about the early, early adopter," while digital downloading "is about the early, early, early adopter."
