TALKBACK

Paramount supports HD DVD exclusively

By Jennifer Netherby -- Video Business,08/20/2007

AUG. 20 | In a surprise move sure to shake up the high-definition format battle, Paramount Home Entertainment said today that it will exclusively support HD DVD beginning with Aug. 28 release Blades of Glory.

Paramount said that all movies from Paramount Pictures, DreamWorks Pictures, Paramount Vantage, Nickelodeon Movies, MTV Films will be released in high-definition on HD DVD only worldwide. Films from DreamWorks Animation, which hasn’t yet released any films on high-def, also will debut on HD DVD only, except those from director Steven Spielberg, which have been aligned to one format exclusively.

The move is a coup for the HD DVD camp and comes despite Blu-ray’s two-to-one software sales lead over HD DVD during the first half of the year. That set off speculation as to why the studio would side with HD DVD.

Paramount execs didn’t immediately return calls for comment, and DreamWorks referred calls to Paramount. In the release announcing its decision, the studio cited HD DVD’s low manufacturing cost and “market-ready technology” as a reason for its support.

“Part of our vision is to aggressively extend our movies beyond the theater and deliver the quality and features that appeal to our audience,” Paramount Pictures chair and CEO Brad Grey said. “I believe HD DVD is not only the affordable high quality choice for consumers, but also the smart choice for Paramount.”

DreamWorks Animation CEO Jeffrey Katzenberg cited HD DVD’s commitment to put out low-cost players (read about the formats' buy ratios in Variety's story) and a significant number of titles as a reason for the studio’s decision to side with the format.

“We decided to release Shrek the Third and other DreamWorks Animation titles exclusively on HD DVD because we believe it is the best format to bring high quality home entertainment to a key segment of our audience—families,” Katzenberg said.

But Blu-ray backers quickly went into spin mode, calling Paramount's motives into question and releasing a flood of announcements about upcoming Blu-ray releases.

Andy Parsons, head of the Blu-ray Disc Assn. of North America, said he didn’t understand why Paramount made the decision, saying “it’s odd to walk away from a format that’s clearly outselling the other.”

One Blu-ray source implied that the studio is still contractually obligated to release a certain number of movies on Blu-ray over the next two years, but Parsons said he wasn’t aware of that.

Others are speculating that Paramount and DreamWorks are being given blockbuster incentives by HD DVD backers. On her Deadline Hollywood blog, LA Weekly’s Nikki Finke quoted sources as saying Paramount would receive $50 million in promotional consideration for HD DVD exclusivity, while DreamWorks would get $100 million. The New York Times reported that payment was given in cash and promotional guarantees, including Toshiba's use of Shrek the Third in its promotional campaigns.

Speaking for the HD DVD Promotional Group, Universal executive VP of marketing and head of high-definition Ken Graffeo said the group isn’t giving them any money, but said he didn’t know if other HD DVD backers might be. He said the decisions of Paramount and DreamWorks were “a real testament to the format itself,” and added, “this is more about being able to market the format to the consumer, to show all the advancements HD DVD provides.”

Paul Erickson, director of DVD and high-def market research for NPD research firm DisplaySearch, said money likely paid a part in the decision, noting that backers of both formats have given studios monetary incentives to exclusively side with their format. But he speculated that profit margins also could have played a part if Paramount and DreamWorks thought HD DVD would provide a better pay off in the long run.

Originally a backer of HD DVD, Paramount switched to support both formats before their debut last year.

Today’s move, means that Warner Home Video is the only studio releasing films on both formats.

“We will continue to support both formats,” Warner senior VP worldwide for high-definition Steve Nickerson said.  “This doesn’t change our approach to the market at all. We have a responsibility to put product out in high-definition, and there happens to be two formats.”

Paramount joins Universal Studios Home Entertainment as exclusively in the HD DVD camp.

The switch will put both formats on more equal footing in terms of content as they head into the fourth quarter. Blu-ray had a content lead with films expected from all studios except Universal. Now, it will lose Paramount’s stellar slate, which includes Transformers and Shrek the Third, both of which will debut on HD DVD.

The studio cited HD DVD’s low price as a reason for its support.

DisplaySearch’s Erickson said the move almost certainly prolongs the format war.

“Before, Blu-ray had the uncontested advantage on the content side,” he said. “Now it’s not quite so clear.”

Best Buy spokesman Brian Lucas said the announcement doesn’t change much, aside from making the format war even more confusing to consumers. The retailer doesn’t believe consumers will buy either format in large numbers until one format is the clear winner.

“Our position is we support both, our customers look for both when they come into our stores,” he said. “Until a resolution to the format war comes about, these things will only confuse customers more.”

Amazon.com spokeswoman Tammy Hovey said the move doesn’t change anything for them either.

"We're really agnostic in this particular situation,” she said. “ For us, it's not really about who wins out. Ultimately, we want our customers to be big winners. If it's Blu-ray, that's great; if it's HD, that's fine as well."

Susanne Ault and Ned Randolph contributed

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