Never has so much money and debate been devoted to a market so small — or one so likely to soon be irrelevant.
While Par and DreamWorks’ pledge of exclusive allegiance to HD DVD gave the struggling high-def disc format new life in its battle against Blu-ray last week, the result will likely be consumer confusion and slower growth for both.
Already, with Universal as the only exclusive backer of HD DVD, the two formats have barely registered with consumers. Reports indicate that through Aug. 12, consumers have bought only 2.1 million Blu-ray discs and 1.1 million HD DVD discs this year, compared to almost 500 million regular DVDs (a market that is itself slowly declining).
And the longer it takes for the studios to get behind one format that consumers can feel confident purchasing, the more likely that high-def discs will be overtaken by digital delivery before they ever gain mass-market acceptance.
“If (the studios) continue to drag their feet on this, there’s not going to be this huge optical media business,” conceded DVD pioneer and current Toshiba consultant Warren Lieberfarb in an interview with Variety several months ago. “Digital delivery and VOD are moving too fast.”
Even DreamWorks Animation CEO Jeffrey Katzenberg, who is now backing HD DVD along with his company’s distributor Par, called high-def discs a “niche business” back in March, while saying the potential of digital delivery is “staggering.”
But the approximately $100 million that DWA is getting from HD DVD backers, which include Toshiba and Microsoft, is a powerful incentive to change that tune. As head of a public company, Katzenberg would have a hard time explaining to his shareholders why he turned down that kind of a payday.
Similarly, Par is getting about $50 million to switch from supporting both formats to HD DVD only.
Such payoffs are common, insiders say, with studios on both sides likely getting financial incentives from Toshiba or Blu-ray’s key backer, Sony. Toshiba, apparently, just offered Par and DreamWorks the right deal at the right time.
But some note that money may not be the only motivator. Par’s claim, which industryites say has some merit, is that after distribbing in both formats for the last year, studio officials found HD DVD more developed as a technology than Blu-ray, and cheaper to manufacture.
If you’re going to support a tiny market, after all, why not at least do it with the cheaper format?
Still others cited the influence of Par’s chief technology officer, Alan Bell, who helped develop HD DVD while he was at Warners several years ago.
Blu-ray backers, meanwhile cite the higher disc capacity and superior copy protection of their format, indicating there’s no backing down.
As the Mexican stand-off continues, meanwhile, digital delivery services are rapidly expanding. Highly touted new service Vudu is beta-testing; Apple is expected to launch movie rentals via iTunes this fall; and even Blu-ray backer Sony is working on a digital download service for the PlayStation 3.
Some have actually questioned whether some of the players in the high-def battle may ultimately be trying to boost downloads. Microsoft, after all, decided to back HD DVD when it was faring poorly against Blu-ray, even though there was no obvious business reason to do. But with the tech giant pushing movie downloads on the Xbox 360 and licensing its technology to a number of other digital delivery services, keeping the high-def disc market from unifying may well be in Microsoft’s interest.