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The Showdown: Blu-Ray vs. HD-DVD

Alan Parsons wishes it wasn’t so. But like it or not, the senior vice president of Pioneer’s industrial solutions business group has become a wary foot soldier in the battle over the future of the DVD format. As music blares from a band playing at a nearby exhibit at the 2005 International CES, Parsons sits at a small table in a meeting room contemplating how the next couple of years might play out. He remains relatively reserved, trying not to let his passion for the next-generation Blu-Ray Disc format devolve into vitriol against rival format HD-DVD. “I don’t like the rock throwing,” he insists. “I just want to excite consumers.”

That may be true, but Parsons still finds it hard to resist getting in a few digs on the HD-DVD rival, which at about 15 gigabytes per layer has roughly 40 percent less storage capacity than the Blu-Ray format. “They might end up with something ho-hum,” he says. “They’re saying that [their capacity] is good, but people used to think that five gigs was good enough.” Parsons shrugs his shoulders a bit, wearing a look of calm but certain exasperation. “Why would we limit ourselves to a lower capacity?” he asks.

To be sure, Parsons is among several CE manufacturers backing the Blu-Ray format, which they claim is superior to HD-DVD. But the HD-DVD format has its own backers, who while fewer in numbers, are equally adamant that their format will win out because of its lower transition and manufacturing costs–as well as other technical benefits and its expected quicker time to market. Indeed, either format is a vast improvement over the current DVD design, which maxes out at about 4.7 gigabytes. Even at standard-definition quality, that’s barely enough space for a two-hour movie and a few hours of special features. And with that much space, forget about high-definition TV.

VHS vs. Beta all over Again?

Both Blu-Ray and HD-DVD discs enable HDTV reproduction because of their massive storage capacities. Using dual-layer techniques, HD-DVD can store as much as 30 gigabytes of data while a Blu-Ray disc can pack in a whopping 50 gigabytes. In the lab, techies already are working on several-layered discs that could allow more than 100 gigabytes of storage on one disc. That’s enough for several HDTV movies, special features and compelling interactive content. Or a content provider could put more than 100 hours of standard-definition quality programming on one DVD. All 180 episodes of Seinfeld on one disc, anyone?

The benefits for backward compatibility are clear: new players will be able to handle both old and new DVD formats in the same machine (outfitted with both red- and blue-laser diodes)–a major consumer benefit that manufacturers hope will drive unit sales.

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Blu-Ray and HD-DVD both use blue lasers, which operate at lower wavelengths (405 nanometers) than current red lasers (650 nanometers). That microscopic difference goes a long way. Longer wavelengths suffer more diffraction, which limits their ability to focus tightly on a surface. But a blue laser’s shorter wavelength allows it to read and write data over a much tighter surface area, which in turn allows storage of far more data on a disc that’s roughly the same diameter of current DVDs. The benefits for backward compatibility are clear: New players will be able to handle both old and new DVD formats in the same machine (outfitted with both red- and blue-laser diodes)–a major consumer benefit that manufacturers hope will drive unit sales.

But while consumers won’t have to worry about obsolescence when it comes to their old DVD collections, the format war brewing between new Blu-Ray and HD-DVD discs does present an age-old problem that evokes the VHS vs. Beta fiasco of the 1980s. The HD-DVD format–like the VHS format that won out over Beta–could become far more widely available to consumers sooner and at a lower price (at least initially) than Blu-Ray discs. That’s because the HD-DVD format utilizes manufacturing techniques very similar to those used for the current generation of DVDs. Translation: Third-party duplication houses won’t have to retool their factories significantly to make HD-DVDs a reality. That means that HD-DVD discs likely will be the first to market by at least several months, probably by the end of 2005.

On the other hand, Blu-Ray discs require an entirely new manufacturing process with transition costs borne largely by duplicators (unless Blu-Ray backers devise a subsidy system. That, along with other issues, is expected to delay the introduction of Blu-Ray discs until sometime in 2006, which could hand a major advantage to the HD-DVD format. (add hard return here) “In this kind of battle, the guy who is out there first and cheaper is going to be the winner,” says Fariborz Ghadar, director for the Center for Global Business Studies at Penn State University. “The more expensive and later one is going to be the loser.” (The Blu-Ray camp contends that it will bring manufacturing costs nearly in line with HD-DVD during the next year. Parsons says that HD-DVD’s cost advantage will amount to only “pennies” per disc over the Blu-Ray format). (add hard return here as well) “Unlike Blu-Ray discs, HD-DVD discs can be manufactured with similar equipment in the same plants that make current DVDs,” said Jodi Sally, vice president of marketing for Toshiba America Consumer Products digital audio video products.

Duking It Out

Still, the nature of the next-generation rollout itself may force consumers to take sides early. Because of the vastly different physical attributes of Blu-Ray and HD-DVD discs, it’s cost-prohibitive for manufacturers to produce next-generation players that can handle both Blu-Ray and HD-DVD formats in one machine. “You would need two pickup heads, and it would be very expensive,” explains Stephen Balogh, business development manager at Intel’s corporate technology group. So manufacturers have lined up on opposite sides of the fence, ready to produce players that only work with one or the other format. That could spell consumer confusion as buyers fear picking the wrong one and ending up with an obsolete player and content library.

Each side wants to convince consumers that they should avoid the other side’s format. HD-DVD backers are planning a “you want it, and we’re here now” marketing strategy, whereas the Blu-Ray camp largely plans to adopt a “we won’t be first, but we’ll be better” campaign designed to warn consumers away from HD-DVD.

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So what’s the breakdown of forces on each side? On the Blu-Ray side is a large group of CE manufacturers, including Dell, Hewlett Packard, Hitachi, LG Electronics, Mitsubishi Electric, Panasonic (Matsushita Electric), Pioneer, Royal Philips Electronics, Samsung Electronics, Sharp, Sony, TDK and Thomson. Some content providers also are onboard. In addition to obvious backing from Sony-affiliated movie studios Sony Pictures Entertainment and Metro-Goldwyn-Mayer, the Walt Disney Company and its home-video division Buena Vista Entertainment offered its non-exclusive endorsement of Blu-Ray in December. In addition, video gaming powerhouse Electronic Arts, along with Vivendi Universal Games, both came out for Blu-Ray at the 2005 International CES in January.

Most gaming companies have yet to pick sides, although Blu-Ray’s larger storage capacity may win some of them over. “If you show Blu-Ray to a game manufacturer and say you can have an extra 20 gigabytes of storage, it’s a drop-dead deal,” says Blu-Ray backer Richard Doherty, managing director for Blu-Ray and professional AV at Panasonic Hollywood Labs. Of course, most PC-based games haven’t even moved up to the current generation of DVDs from CDs, so it’s unclear whether most gaming companies will utilize high-definition DVD formats for some time.

The main backer of the HD-DVD format is Toshiba, which by itself has more market dominance than several CE backers on the Blu-Ray side combined, along with smaller players NEC and Sanyo. Toshiba plans to launch its first HD-DVD players in late 2005. In December, even Thomson–which is actually a Blu-Ray disc backer–announced that it also would sell HD-DVD players by late 2005. And an impressive list of entertainment content companies has thrown their weight behind HD-DVD, including Paramount, Universal Studios and Warner Bros. (along with Time Warner-owned New Line Cinema). All of these studios have already announced a significant amount of titles on HD-DVD to be available at the time HD-DVD players are introduced.

Toshiba is dedicated to the HD-DVD format and executives staunchly believe they will win the marketing battle for consumers even before Blu-Ray gets its format off the ground in 2006. “The key part of this is going to be driven by content,” says Maciek Brzeski, vice president of marketing in Toshiba’s storage device division.

He says consumers won’t care whether the disc has 30 gigabytes or 50 gigabytes of capacity–only that the content they want is ready and available at a good price. Brzeski questions the Blu-Ray camp’s ability to jazz consumers about a format that he says offers little more than a few extra gigabytes of storage. “They’re going to be marketing technology, and we’re going to be marketing products,” he says. “It’s hard to sell technology to consumers.”

“Our rich heritage in the development of DVD technology means that we are well equipped for the market transition from DVD to HD-DVD,” added Sally, who also serves as Vice-President for the Digital Entertainment Group. “With proven backwards compatibility and real software titles available at launch, we are certain that we can deliver the very best solution in HD-DVD technology for both consumers as well as the content providers.”

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In December, Toshiba and other HD-DVD backers formed the HD-DVD Promotion Group to promote the format, and to ensure early product launches and subsequent market penetration.

Other pros and cons seem to bleed together as both formats offer similar features. For example, while HD-DVD touts the ability to create discs with red-laser standard DVD format on one side and blue-laser HD-DVD standard on the other, a Blu-Ray Disc Association spokeswoman points out that JVC announced in December a disc that allows both standard DVD and Blu-Ray content on a single side of the disc. The Blu-Ray camp has argued that single-sided discs are more consumer friendly.

The Pricing Strategy

In the vital area of picture quality, both formats also have a difficult time differentiating between one another. “Either format can produce a very good image,” says Richard Dean, director of technical business development at THX Inc. “To me, it boils down to the price of the equipment and the availability of content.”

Dean, who has helped master the DVD releases of the Star Wars trilogy and other blockbuster movies, says that consumers won’t notice any real quality difference between the formats. But he says HD-DVD may end up with an advantage if it can under price Blu-Ray discs and players. “I think that’s going to play a very large role.” As for Blu-Ray’s greater storage capacity, “more space is always an advantage,” Dean says, “but the question is how much more space is really needed.” Notes Parsons: “If you start doing HD bonus features, it will suck up capacity very quickly.”

Intel executives, who first got involved in the working groups for next-generation DVD formats to help avoid a format war, already are bracing for an era of consumer confusion as a Blu-Ray-vs.-HD-DVD scenario takes shape. “We didn’t want two formats coming out,” says Balogh. “Now we have an even standoff, so neither side wants to compromise whatsoever.” Making matters worse, he says, the entertainment studios also are split between Blu-Ray and HD-DVD, although more big studios have backed HD-DVD at this point.

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“The studios will be the kingmakers here,” he says. Ultimately, consumers may struggle to figure out what kind of players and media to purchase during the next couple of years. “The most important benefit to the consumer is that the HD-DVD players that we’ll be introducing to the market this year will be fully backward compatible with the current DVDs that are already in consumers’ homes. With the Blu-Ray formats’ backward compatibility isn’t so simple,” adds Sally.

Still, many are wary. “It would be best if we went to market without two formats,” says Panasonic’s Doherty. “We’re very disappointed that we’re in a format war.” As the battle heats up in 2005 and well into 2006, consumers will decide which format will succeed.

By Michael Grebb 

This material has been adapted from VISION — a bi-monthly magazine of the Consumer Electronics Asssociation

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