Third alternative to hit U.S., Europe in September

As if high-def DVDs weren’t already a consfusing enough sell to consumers.

Starting in September, home media buffs in the U.S. and Europe — Denmark, Finland, France, Poland and Sweden, specifically — will have a third HD disc format to choose from, the HD Versatile Multilayer Disc (VMD).

Debuting a full year and a half behind HD DVD, the fledgling HD VMD — being championed by U.K. technology company New Medium Enterprises — is starting almost from scratch in the U.S. in terms of both distribution and content.

No major U.S. studio has aligned itself with HD VMD yet (although one indie has). And so far, just one U.S. retailer, Web site PCrush.com, has formally agreed to sell the HD VMD player.

However, as the HD DVD and Blu-ray camps — which have backing from major studios as well as support from a global array of huge computer and consumer electronics companies — begin to expand their focus outside the U.S., they may see that VMD has become a factor.

New Medium Enterprises — which touts former Warner homevid topper Jim Cardwell as an adviser to its board of directors — has recruited a number of foreign content distributors to bow films in the HD VMD format outside the U.S.

Notably, it forged an agreement with Icon Film Distribution to street “Apocalypto,” “The Descent,” “The Queen” and several other pics on HD VMD in Australia and New Zealand this year.

Overall, NME has partnered with international distributors for about 5,000 slated HD VMD releases, including Bac Films (titles include “Pulp Fiction”) in France, Scanbox (“Saw II”) in Scandinavia and Germany’s VCL Communications (“Hostage”).

Based on “red-laser” technology, HD VMD utilizes conventional DVD manufacturing and authoring processes, so production costs are lower than those of HD DVD and Blu-ray.

According to Charles Adelman, who heads Indie Anthem Pictures — HD VMD’s sole U.S. content supplier — the format’s production costs are about $1 per unit, slightly higher than standard-definition DVDs.

“Blu-ray is running $3.40 a unit, and HD DVD is $2.50 — it’s hard as an indie to get into that marketplace,” Adelman says. “It’s coming down to manufacturing, and we think HD VMD is a fantastic format.”

New Medium Enterprises prexy and CEO Mahesh Jayanarayan believes these kinds of value enticements will be hard for some content creators to ignore.

“In the first six months we are giving free authoring tools to studio partners to make our content popular in the format,” he says. “Many production houses can’t make the investment with (Blu-ray or HD DVD). We want to make the industry feel comfortable with high-def.”

Of course, consumers have to feel comfortable, too — New Medium plans to debut its HD VMD players at under $200, with European retailers, including Tesco in Poland and Boulanger in France, selling the device from $150 to $199.

However, with both the Blu-ray and HD DVD camps also cutting prices — an entry-level HD DVD player can now be had for about $250 — analysts are skeptical as to whether this third entry can use price point and Euro connections as a way to gain a toehold in the hi-def disc market.

“HD VMD players are cheaper by pennies than HD DVD,” said Richard Doherty, research director at the Envisioneering Group. “It’s not going to be enough to cause a shift of any kind. And most of the big studios are pushing HD DVD and Blu-ray.”

For his part, Jayanarayan doesn’t necessarily envision HD VMD stealing the bread basket from the Goliaths — but he thinks it can grab a slice.

“I would be happy if we took just one-third of the global market, and then worked to penetrate the rest,” he says. “Next year we are looking at Brazil and South America. But I would be very disappointed if we couldn’t break into the U.S. as well by third or fourth quarter.”

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