THE FRONT LINE: JANUARY 4, 2008
Warner Brothers Rejects HD DVD For BLU-RAY
It wasn’t a complete surprise, but this defection may have tipped the scales against Toshiba’s blue laser format for good.
Warner’s announcement today that it will release HD movie titles exclusively in the Blu-ray format, starting in June of 2008, is a major setback for Toshiba’s HD DVD format — possibly one that the latter will never recover from.
Warner, who announced the Total HD combo HD DVD/Blu-ray format at CES 2007 only to abandon it ten months later, ostensibly took this action because they are worried about the long-term forecast for packaged media sales. According to Adams Media Research, DVD sales declined 4.5% in 2007, the first substantial year-to-year decline since the red laser optical disc format was introduced in 1997.
According to the Reuters story, Warner chairman and chief executive Barry Meyer said in a statement Friday, "The window of opportunity for high-definition DVD could be missed if format confusion continues to linger. We believe that exclusively distributing in Blu-ray will further the potential for mass market success and ultimately benefit retailers, producers, and most importantly, consumers."
Warner Brothers accounts for as much as 20% of all DVD sales, so their decision to join the Blu-ray club exclusively more than offsets Paramount and DreamWorks Animation’s 2007 deal to stay 100% with HD DVD (and that was only for 18 months). It will also put tremendous pressure on Universal Studios, the only steadfast supporter of Toshiba’s blue laser format from the start, to join the crowd and ultimately adopt Blu-ray as a release format.
The Warner decision represents a major victory for Sony, who developed Blu-ray and its commercial siblings XDCAM and XDCAM HD. It assuages the wounds Sony has suffered to its pride over the past two decades as one proprietary Sony media format after another (Betacam, Mini CD, SACD) was soundly rejected by consumers or was met with indifference.
Blu-ray, which was never adopted by the DVD Forum, has claimed the top spot largely on the sale of BD-equipped PlayStation III consoles, many of which are not being used to watch movies at all. Toshiba has sold more stand-alone movie players, but Blu-ray titles have outsold HD DVD by a sizeable margin over the past 12 months.
So, where does this leave Toshiba and the North American HD DVD Marketing Group, both of which have been effectively upstaged right before the world’s largest consumer electronics show? It’s hard to say, but you can bet there will be immediate and aggressive further discounts on Toshiba HD DVD players in an attempt to capture substantially greater market share before June.
Warner’s decision has also caused instant migraines for product managers at LG Electronics and Samsung, both of whom offer expensive dual-format blue laser players (LG’s BH200, $999 and Samsung’s BD-UP5000, $799). You can bet those are now the last dual-format blue laser players we’re ever likely to see.
To put this all in perspective, sales of blue laser DVD players still represent a small part of the market. Adams Media Research predicted sales of 578,000 HD DVD and 370,000 Blu-ray players in 2007, while NPD surveys predict only 11 percent of HDTV set owners strongly intend to buy a Blu-ray or HD DVD player in the 1st quarter of 2008.
The wild card in all of this is video-on-demand, which includes a class of devices from Apple TV to TiVo and Amazon’s Unbox downloading service. As broadband pipes get faster, it will be possible to rent and purchase HD movies over the Internet or from a cable or satellite provider. These files could be stored on any sort of flash memory, or even a portable hard drive with encryption and passkeys.
Can Toshiba recover from Warner’s defection? Will market demand for blue laser optical disc ever reach the levels of red laser DVD? Or, will blue laser DVD become a niche format? Only time will tell…
