Underdeveloped market key to victory

Spreading counterintuitively in regard to most global conflicts, the war to determine which high-def disc format will take over the world began in the U.S. before moving to the Western European home theater.

As the largest region in the worldwide homevid market, accounting for around 40% of all DVD households, Europe proved crucial in cementing the standard-def disc’s stature over the last decade. And in the six months since HD DVD and Blu-ray made their respective Euro debuts, both camps can claim small victories as they struggle to appeal to a broad market that encompasses dozens of languages, often favors locally produced content and remains largely without HDTV screens.

While it is, in the words of one major studio’s foreign homevid topper, a “massively important” territory in terms of both formats’ ultimate quest, it’s also relatively underdeveloped in terms of high-def TV.

Contrary to the U.S. — where one in three households already has an HD-capable TV set — Western Europe’s HDTV uptake averages only around 6% of homes, with the U.K. coming in strongest in terms of penetration, at 10%.

And in terms of their basic features — such as video input connections — the HDTVs offered to shoppers at Harrods in London or Media Markt in Berlin are as heterogeneous as the European nations themselves.

The stark differences in features frustrates the standard approach to consumer education — and hype — on high-def technology that both sides have used effectively Stateside. Indeed, in the U.S., both the HD DVD and Blu-ray marketing groups have used techno terms like “1080p” and “HDMI” as useful marketing collateral, but many European sets don’t support those standards.

What’s more, the deep price cuts from set-top makers like HD DVD champion Toshiba — U.S. consumers can readily find the company’s HD-A2 player for $250 — have yet to make their way to Europe.

And would-be firestarters like LG’s BH100 — a $1,200 set-top that plays both formats and has proved popular among cinephiles in the U.S. — haven’t set off any sparks in Europe, either.

So far, high-def adopters across Britain, Spain, France, Germany, Italy, Benelux and Sweden watch their discs more often on HD-ready PCs than set-tops — a pattern similar to the early days of standard DVD nearly a decade ago.

Envisioneering estimates that about 150,000 such disc drives — most of them Blu-ray PC units — are in use across the Continent.

Still, according to Sony, European (and Australian) households have gobbled up more than 1 million Blu-ray-capable PlayStation 3 game systems since its March release there.

Analysts agree that the PS3 — along with Sony’s Blu-ray bow of “Casino Royale,” the Euro-location-heavy return to form for MGM’s James Bond franchise — has, to some degree, piqued the region’s interest in high-def living-room entertainment.

Movies wanted

Hardware challenges aside, the only chance studios have to realize mass-market acceptance is to get their wares in front of the masses.

To wit, Eddie Cunningham, prexy for the foreign homevid arm of Universal, the top HD DVD studio supporter — and chair of the format’s European promotions group — spent the recent Cannes Film Fest in closed-door sessions with pan-European retailers lobbying for a splashy fourth-quarter presence.

U titles like “The Fast and the Furious: Tokyo Drift,” “King Kong” and “Serenity” have hit European territories on the heels of their Stateside HD DVD release, with Cunningham eyeing Q4 for regional premieres alongside standard DVD versions (aka “day and date”).

“Worldwide,” he says, “you’re very much going to see the same product.”

Just as Universal has pushed HD DVD’s interactivity envelope with “Furious,” Disney is looking to make waves in Europe with its feature-laden Blu-ray versions of the first two “Pirates of the Caribbean” films.

But as much as early Blu-ray buyers have predictably flocked to action pics, “family films like ‘The Wild’ and ‘Sky High’ have been selling way above our expectations,” says Julie Sneddon, Buena Vista Worldwide Home Entertainment prexy.

Along with day-and-date scheduling (which Disney first tried with “Deja Vu” in May), Sneddon stresses, “every studio needs to get a whole raft of titles out there, across every genre.”

Studios also are teaming up with electronics makers to bundle free discs with new high-def players, or offer Euro consumers rebates when they buy several titles at once.

Sony is sending free Blu-ray copies of “Casino Royale” to the first 500,000 PS3 owners across Europe who register with the game system’s online network.

The promo has paid off: In certain territories, the amount of new hi-def discs buyers pick up with their new players “is similar if not higher than the U.S.,” says Lexine Wong, Sony’s senior exec VP of worldwide marketing.

Such promotions have worked well in the U.S., where Blu-ray backers claim to have reached 1 million disc sales, and HD DVD group denizens purport to have sold 75,000 discs in the last week of May alone.

Post-PS3

In Europe, either format can still capture a momentary lead on breadth of titles — as HD DVD managed earlier this year with locally produced hits from StudioCanal and others.

Local retail sales tracker Media Control GfK notes that across Europe, HD DVD is still holding its own post-PS3. Still, there are weeks — depending on what’s being released — in which Blu-ray appears as if it will pull away in the race, as it has in the U.S.

With only scant HD adoption, it’s too early to predict with certainty which side will win over Europe.

Envisioneering analyst Richard Doherty awaits the big IFA electronics trade fair in Berlin the week of Aug. 31 to assess whether the European economy is strong enough, and enthusiasm for high-definition is high enough for the region to double its HDTV install-base by the start of 2008.

For now, the biggest high-def disc battles will continue to be waged in the U.S. The scale may be smaller in Europe, but as is the situation worldwide, the high-def disc war “looks to be a much longer stalemate than anybody thought,” Doherty says.

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