Too early for high-def, say retailers

FROM VSDA: Some predict format to take off in 2007

By Susanne Ault -- Video Business, 7/13/2006

JULY 13 | LAS VEGAS—High-definition enjoyed its Home Entertainment 2006 coming out party last year. But there was a disconnect between the studio fanfare and the business realities of many attendees.

Sell-through and rental retailers don’t believe it makes much sense to invest heavily in ordering Blu-ray Disc or HD DVD titles for customers who largely appear still satisfied with standard-definition DVD. And indie suppliers, who tend to make up the largest convention product presence, lack the big studio resources to generate high-def titles.

“We are in high-tech central, and we aren’t buying anything yet,” said Brian Dunleavy, co-owner of San Francisco’s Noe Valley Video. “We haven’t had one person ask about it. I just don’t think the average consumer wants to deal with this, because they feel like they just switched over to DVD [from VHS]. It’s going to be a good year and a half out before this gets going.”

But convention-goers did prove to be curious about Blu-ray and HD DVD.

The Blu-ray Café, which held product demonstrations for the format on the hour Tuesday and Wednesday, drew a healthy 400 to 500 people Tuesday, according to Sony Pictures Home Entertainment estimates. Sony and 20th Century Fox Home Entertainment were among the studios showing off movie trailers in Blu-ray on Samsung and Sony Electronics players.

“The retailers here are very important to us,” said Rich Marty, Sony VP of new business development. “Some of them are getting their first look at [Blu-ray], and we want them to get educated. Once they see the picture, it speaks to the format, [and retailers] will see it’s the right thing to do.”

Universal Studios Home Entertainment and Warner Home Video were among the studios holding frequent HD DVD format demonstrations within their respective hotel suites.

During the HD DVD group’s Tuesday press event, studios estimated that consumer excitement will be evident by this fourth quarter, when more hardware and software items become available.

“DVD isn’t dead,” countered Bart Saunt, Virgin Entertainment divisional merchandise manager. He believes the studios needed to be louder cheerleaders for the high-def formats if they expect them to be truly embraced.

Finalized street dates have been trickling out for new releases, as major releases have been delayed due to quality concern issues. Batman Begins should street before fourth quarter on HD DVD, though Warner had originally expected it earlier this spring. A number of studios, including Fox and Buena Vista Home Entertainment, have yet to announce initial Blu-ray releases.

“Both retailers and studios are taking a wait-and-see approach, which is weird,” Saunt said. “I would think that the studios would be ramming this stuff down our throats. I’m surprised they are not pushing Blu-ray or HD DVD harder.”

The HD DVD camp will be pounding out a $150 million marketing campaign, underscored by a touring 18-wheeler home theater truck, through the end of this year.

“Inevitably, this all is the future of home entertainment, but it won’t be the saving grace in 2006,” Virgin buyer Chris Anstey said.

Magnolia Home Entertainment has slated Steven Soderbergh film Bubble for HD DVD release. The company is one of the few indies to announce high-def plans at this point. But the supplier has yet to commit to a street date.

“The technology is risky, and it’s holding us back from being certain about when things are going to be ready,” said Randy Wells, Magnolia chief. “This is all in its infancy, and [glitches] are going to come up.”

Magnolia’s high-def manufacturing costs are kept down because much of the anticipated content has already been shot on high-def film and has run on sister cable network HDNet. But the same can’t be said for the rest of the indie supplier community, Wells added.

He estimates that a very basic HD DVD authoring project, which excludes any of the format’s much-hyped interactive capabilities, can run less than $20,000. Yet some high-def mastering can soar as high as $50,000 to $60,000 per title.

“This is definitely going to block some of the suppliers from participating,” Wells said. “This is until costs can drop. It’s very pricey technology.”

Wells added, “Things might start in the fourth quarter, but it won’t be a factor until 2007.”

Convention-goers do remain open to the high-def formats.

“We’re in a rural area, and no one has really asked for it,” said Jeanne Chamberlain, co-owner of Wisconsin’s Video Plus. “But I do cut out articles and try to give some education to our employees.”

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