Top 12 Film Industry Stories of 2007 #9:
Next-Gen DVD Format War Wastes Everyone's Time
By David Mumpower
December 28, 2007
BoxOfficeProphets.com
In the beginning of the format wars, the anticipation was that Sony Blu-Ray player held all of the cards. The fledgling technology would be presented as a Trojan horse in the Sony PlayStation 3, the new videogame console expected to dominate the next generation of the industry. Meanwhile, Microsoft backed HD-DVD enough to discard Blu-Ray technology but not enough to make its proprietary technology a requisite aspect of their Xbox 360's feature set. It has been made available as a (relatively) cheap add-on, giving the consumer the flexibility to decide for themselves if they are interested. Anyone following the videogame industry or having a child under 13 knows how that worked out. The Nintendo Wii proved to be the system of choice for casual gamers and anyone yet to hit puberty. To date, its sales have dwarfed those of its competitors, making the videogame aspect of the next-gen DVD war shockingly irrelevant.
Where has this surprising turn of events left Hollywood? The expectation had been that one of the formats would win out by now. History supported such a resolution. A quick strike by DVD turned DivX into a laughing stock in a short period of time, making the previous generation of "future tech" amusingly one-sided. This has not been the case with the tense battle for HDTV video supremacy. The utter failure of the PS3 in its first year meant that the Trojan horse expected to win the race for Blu-Ray was never invited into the homes of most consumers. Perhaps wizened by the teachings of The Aeneid, consumers flatly rejected corporate geeks bearing gifts, creating confusion bordering on hysteria in Hollywood.
After all, the body of mainstream studios had offered their support to Blu-Ray predicated upon the supposition that it would earn a monopoly over HD-DVD in short order. Those studios who joined Sony - MGM, Disney, Fox and Lionsgate – found themselves in a relatively even contest in terms of software sales. A couple of studios timidly tested the water by supporting both formats. Those studios, MGM, Warner Bros. and New Line Cinema, look to be the smartest thus far. Meanwhile, Universal, Paramount and The Weinstein Company went the other way, throwing their support behind the HD-DVD format. None of them would currently be described as happy with the way this is going.
At the start of 2007, Sony took the initiative by trying to capitalize on the meager buzz there was for the PlayStation 3 after the holidays. They trumpeted next-gen DVD sales that indicated a roughly two-to-one advantage for their Blu-Ray technology over HD-DVD. This was particularly noteworthy given the fact that HD-DVD players had been on the market for over six months longer. Sony's president of Home Entertainment, David Bishop, went so far as to say the following: "The message that we're going to put out to the consumer now is, now it is safe to make a choice. No more fence-sitting is needed... We have a critical mass of content, we have the biggest mass of consumer electronics companies in the world supporting this format. That has moved Blu-ray into the forefront."
Ten months later, Bishop looks like a fool. Nothing has changed in the marketplace despite constant attempts by both sides to tip the balance to their side. In fact, his boss – the big boss of Sony – Howard Stringer recently emasculated him by declaring the next-gen war "a stalemate". Part of the reason is the fact that Sony's counterparts have refused to stand pat. HD-DVD started a rebate offer, giving away five free titles to anyone who made a hardware purchase of an HD-DVD player or bought the HD-DVD add-on device for the Xbox 360. A few months later, Sony acknowledged that consumers were drawn to this tactic, so they matched it with a similar rebate for five free Blu-Ray discs included with the purchase of a Blu-Ray player or PlayStation 3. HD-DVD proponent Microsoft was accused by no less than Michael Bay of bribing Paramount to become exclusive with their format. Bay's mentor, Steven Spielberg, denounced his studio's choice to the point that he refused to allow his titles to be released upon HD-DVD.
Seeking to target Sony in the one way that its competitors knew it could not compete, the makers of HD-DVD starting slashing the prices of older hardware units. Wal-Mart, Best Buy and Amazon began to offer a discontinued Toshiba unit, the Toshiba HD-A2, for only $99. With no Blu-Ray player on the market currently selling for less than $299, Sony has been unable to counteract this move as of yet. Of course, some would argue they have no need to do so. After all, how did all of this impact sales of the two formats? The most recent split of sales had Blu-Ray at 61% and HD-DVD at 39%, roughly three-to-two or, if you choose to look at it from the gallows humor point of view, not quite two-to-one in favor of Sony. We have not come full circle. We are simply at a ceaseless standstill.
Consumers were even kind enough to give next-gen DVD distributors a code red this holiday season. On Black Friday, one of the biggest days of the year for consumer consumption, roughly 600,000 DVDs were sold. A combined 57,000 units of HD-DVD/Blu-Ray hardware were sold. Billions have been spent on next-gen nonsense yet customers are buying outdated technology at a factor of over ten to one. And there is little cause for hope in the short term. Most of the same analysts who were once predicting a blow-out for Sony have come to terms with the fact that both sides are firmly entrenched in their positions. At least three noted market researchers have recently stated that they expect this format war to go on for at least 18 more months, and they are beginning to fear neither side will ever truly conquer the other. So, you can probably look forward to this once again making the list of Top 12 Industry Stories of 2008. The only good news here is that at least this format war will keep Michael Bay pissed off all year.