DVD Battle Raging

Time Warner Inc. and partner Toshiba Corp. shoved Sony Corp. and Philips Electronics aside last week to capture the high ground in the battle for the future of homevideo entertainment. TW/Toshiba’s digital videodisc (DVD) format won key endorsements from Japanese hardware manufacturer Matsushita, along with Paramount, MGM/UA and Turner Home Entertainment.

The endorsements came in a rare display of international corporate muscle at a nine-company joint announcement Jan. 24 in Los Angeles, including top execs from consumer electronics giants Hitachi Ltd., Victor Company of Japan (JVC) and Thomson Consumer Electronics.

Statements of support also came from Mitsubishi Electric Corp. and Nippon Columbia Co.

The move was a strong rebuff to Sony Corp. and Philips, who bowed their DVD format last month. Statements by Sony/Philips saying they would stick with their own format seemed to herald a fierce format war reminiscent of the VHS-vs.-Beta battles of the early ’80s.

Afterwards, remarks attributed to high-ranking Sony execs seemed to indicate a softening of Sony’s position and hinted at an open door to TW and Toshiba. But that door was shut by Sony president Norio Ohga in a speech Jan. 26 in Tokyo, when he said Sony “was not considering participation” in the TW/Toshiba alliance.

Despite the massing of some Hollywood studios on the opposing side, Ohga seemed to be pinning his hopes on Disney Studios, which has not endorsed either platform.

“It is dangerous to choose (a format),” said Ohga, without hearing from Disney.

The DVD is a 5-inch compact disc capable of holding full-length movies in Dolby Stereo Surroundsound, several languages and multiple screen ratios. It will be available to consumers as a medium for home entertainment next year. Sony, together with Dutch electronics company Philips, controls the major patents for the compact disc. Their format for DVD adheres closely to those patents, using a single-sided disc that holds up to 135 minutes of high-resolution digital video with stereo sound and up to three language tracks.

In the battle to establish their respective formats, each side has sought to sign up major Hollywood studios as suppliers of movies.

While 20th Century Fox was a no-show and a no-comment and Paramount was hedging its bets by saying it was open to releasing product on other formats as well, Disney was most conspicuous in its absence. “We’re pretty much neutral right now,” said a Disney corporate spokesman.

Disney’s strength in the homevideo sell-through market makes it a powerful ally.

The brisk show conducted at the Nikko Hotel before a packed audience of journalists and industry observers gave a clear look at the disc, the player and the manufacturing process at Warner’s pressing plant in Olyphant, Pa., via videotape.

Among top execs at the demo were Terry Semel, co-chairman and co-CEO of Warner Bros; Sid Sheinberg, president/COO of MCA; Richard Cohen, president of MGM/UA Home Entertainment; Joichi Aoi, chairman of Toshiba Corp.; Richard Kraft, president of Matsushita Electric Corp. of America; Alain Prestat, chairman and CEO of Thomson Consumer Electronics; Gerald Levin, chairman and CEO of Time Warner Inc.; Seiya Matsumoto, president of Pioneer Electronic Corp.; and Richard Cohen, president of MGM/UA Home Entertainment.

Frank Mancuso Sr., MGM/UA chairman, delivered his endorsement, ironically, via videotape. MCA co-chairman Lew Wasserman and actor-director-producer Clint Eastwood were in attendance, and introduced by Semel facetiously as “our enforcers.”

Warren Lieberferb, who as president of Warner Home Video was credited by sources as instrumental in leading the technical and political efforts that resulted in the Jan. 24 conference, said it was significant that the studios had cooperated in delineating acceptable standards for DVD in advance of the product being introduced to consumers. “This is a reversal of the normal process by which consumer electronics are brought to market,” said Lieberfarb.

The Financial Times of London reported Jan. 26 that Sony and Philips are talking about meetings between senior execs and engineers from both sides of the format war, but Philips issued a flat denial.

But an unnamed Sony executive was quoted in the Jan. 26 edition of the Asahi Shimbun, a major Tokyo daily newspaper, as saying the company would abandon its DVD format if Toshiba and Time Warner put their rival DVD format on the market first. The Mainichi Shimbun, another leading newspaper, reported a senior Sony official had privately acknowledged that Sony was already considering releasing its films on the Toshiba-Time Warner DVD format.

A Sony spokesman in Tokyo denied the reports: “They are not true, they’re only written on the basis of speculation,” he said.

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