Warner joins Blu-ray camp

Cardwell announced Thursday that Warner will release movies in the Blu-ray Disc format, the rival of competing platform HD DVD. Warner has been, and remains, the biggest studio proponent of the HD DVD platform.

Warner execs feel they did all they could to avert a format war by working to unify the two camps before it ultimately opted to join the board of the Blu-ray Disc Assn. and release all its programming, as well as that of distributed labels New Line Home Entertainment and HBO Video on Blu-ray as well as HD DVD next year.

“We made a decision to support HD DVD. We tried to bring the two sides together,” said Marsha King, executive VP new business development. “We were unable to do so.”

When it became clear that Blu-ray was launching at the very least as a component of PlayStation 3 regardless of the plans or support for HD DVD, Warner execs decided they wanted to have input into Blu-ray.

They got that through a couple of important concessions from Blu-ray. The format will now include a low-cost red-laser option that will allow studios to create a Blu-ray version of the DVD-9, a “BD9.” Cardwell said that since the costs of manufacturing blue-laser-based Blu-ray discs “are unknown to us,” Warner wanted to ensure there was some level of expenses the studio could more accurately project.

The option is essentially the same one Warner proposed to both the Blu-ray and HD DVD camps more than three years ago, but which Blu-ray previously rejected.

The studio plans to use the red-laser option for shorter programs that don’t require all the storage capacity of a blue-laser disc or for budget-priced titles that might not justify the higher costs.

Warner also received assurancesthat Blu-ray’s additional layers of copy protection would not compromise the basic AACS copy-protection standard that the studio plans to use.

“This gives us more options,” said Sony Pictures Home Entertainment president Ben Feingold of the concessions. “And options are good.”

King said Warner would still love to see unification of the formats, but Cardwell was firm in the studio’s resolve to release product also for Toshiba’s HD DVD format. Toshiba, which has been aware of Warner’s impending decision for more than a month, is planning to go forward with its launch.

Cardwell denied industry speculation that Warner and Paramount Home Entertainment, the latter of which announced earlier this month that the studio would also publish in both formats, are simply keeping a foot in the HD DVD camp in case Sony cannot deliver on its promises. One studio exec said that engineers re-evaluated the Blu-ray technology as recently as this week and concluded that it will not be ready to offer everything Sony promises for two more years.

“We’re committed to HD DVD,” Cardwell said.

King said Warner has not decided that one format is better than the other.

“We feel the market will decide. Both will be incredibly good products.”

Said one studio exec when he heard the news, “The studios have decided to allow consumers to decide, and that’s a shame.”

Feingold said it makes no sense to release two incompatible platforms and estimates such a scenario could slow overall sales by 60% as the situation confuses consumers and retailers.

Suppliers must pick one format, he said: “This is not dating. There are real issues at retail in terms of shelf space.” He also said consumers are far less likely to buy either of two formats for fear that the one they pick could become obsolete.

Many still believe that only one product will come to market, and that Blu-ray clearly has the stronger position.

“This is something the HD [DVD] camp cannot recover from,” said one executive close to the negotiations.

Toshiba isn’t backing down yet, however. Last week, the company said it had begun licensing Chinese manufacturers to begin producing HD DVD players for the export market.

The move seemed designed to ensure that relatively inexpensive players would be available in volume at the time of the format’s launch as part of a strategy to put price pressure on the Blu-ray camp.

Blu-ray players are expected to be more expensive than HD DVD players because the Sony format incorporates more new technologies.

“We recognize Warner Bros.’ participation in the Blu-ray Disc Assn. represents the studio’s understandable commitment to listen to broad array of opinions and to continue to make technical evaluations of each format, and we are more than confident this will not affect timely introduction of HD DVD content to the market,” Toshiba said in a statement. “Toshiba strongly believes the HD DVD format will eventually win broad support as the more superior format, and in cooperation with our partners, we are committed to bringing HD DVD products first to market early next year in the U.S.”

Top brass at Blu-ray soloists Buena Vista Home Entertainment and 20th Century Fox Home Entertainment issued statements saying Warner’s decision will lead to a single standard.

“The continued dramatic momentum toward Blu-ray makes us more optimistic than ever that a format war can be avoided,” said Buena Vista Home Entertainment president Bob Chapek.

“These latest developments are the categorical shift needed to avoid a format war and ensure the successful launch of Blu-ray and secure the future of high-definition pre-recorded media,” said 20th Century Fox Home Entertainment president Mike Dunn.

Ironically, Warner’s decision came on the same day that Blu-ray board member Hewlett-Packard tried to bring the two formats closer together by announcing it would ask the Blu-ray Assn. to consider adding two key HD DVD technologies to the Blu-ray format, a mandatory “managed copy” system and “iHD,” both enthusiastically supported by Warner. Managed copy allows consumers to make legitimate copies of their high-def movies and play them anywhere around the world.

iHD, an interactive layer developed by Microsoft and Disney, enables new interactivity with standards-based development tools and technologies.

Sources said it is highly unlikely that Blu-ray will agree to H-P’s requests and that H-P knew that in advance but wanted to make a gesture to appease Microsoft.

H-P said that if its proposal is rejected, the computer maker “may have to seek alternatives” to Blu-ray.