OPINION: Price war
By Paul Sweeting -- Video Business,03/09/2007
MARCH 9 | THERE ARE AT at least a few influential people in the industry who will tell you that the Blu-ray vs. HD DVD format war has been, on balance, a good thing, because the competition is driving down prices faster than either format would have achieved on its own.
Paul Sweeting is editor of Content Agenda
It’s an interesting, albeit minority point of view, with some precedent in the old VHS vs. Beta competition, when prices also came down and features came in faster than likely would have happened with only one format.
And it’s likely to accrue further supporting evidence over the second half of 2007 and throughout 2008.
Sony Electronics recently announced that it will lower the price of its set-top Blu-ray player in June, from $999 to $599.
Companies don’t typically announce price cuts so far in advance, because it signals consumers to stop buying until the price cut takes effect.
The logical inference is that Sony wasn’t selling many $999 players anyway and is feeling pressure to narrow the price gap with HD DVD.
Some commentators have even speculated that the $599 price point is a feint and that deeper price cuts are in the works, perhaps to as low as $399 by the end of the year.
Sony certainly has reason to be concerned about price pressure.
The price cut announcement came in the same week that the Steering Committee of the DVD Forum, on which Sony sits, gave formal approval to specifications for a “China-only” version of the HD DVD format.
It also approved the licensing of the basic DVD specs for incorporation into the China-only HD DVD formats, pending the formation of an appropriate licensing entity.
THE ONLY SIGNIFICANT difference between the China-only HD DVD and the version used in the rest of the world is the codec used to encode content.
In the rest of the world, HD DVD supports VC-1, H.264 and MPEG2. The China-only version supports only the Chinese-developed Advanced Video System (AVS).
In nearly every other respect, including the physical specifications of the disc, the interactive layer and the optics, the two versions are identical.
The purpose of the China-only version is to spare Chinese manufacturers the licensing fees associated with the global codecs on decks sold in China and to help propel China into the ranks of technology developers, rather than simply manufacturers.
But manufacturing HD DVD players they will be. And once those production lines are up and running, swapping out the codecs for their outside OEM clients is no big deal.
In other words, HD DVD just secured the inside track on a potentially vast new market. The economies of scale that could result from China’s embrace of HD DVD is likely to have significant impact on retail prices in every market that sources its electronics from China—that is, the rest of the world.
WITH LOW-COST Chinese HD DVD players on the way, Sony has reason to be concerned about Blu-ray prices. Whether that cinches the argument in favor of a format war, however, is a separate question.
There are at least two serious flaws with the argument.
First, it underestimates the impact of the Blu-ray camp’s internal contradictions on price points. One reason Sony isn’t selling many high-end set-top Blu-ray players is that it’s selling $499 and $599 PlayStation 3 consoles equipped with Blu-ray drives.
The PS3 price points, moreover, are under pressure themselves for reasons that have nothing to do with the high-def format war. But as Sony looks to drive down the cost of its game system, it will inevitably put pressure on other Blu-ray manufacturers to lower the price of their set-tops.
Another problem with the format-wars-are-good-for argument is that it only makes sense if content is not exclusive to one format or the other.
In the case of VHS vs. Beta, the major studios quickly adopted a strategy of releasing titles in both formats.
That added cost for the studios and was a burden on retailers, but it spared consumers the cost of making the wrong format choice. They got access to essentially all content and enjoyed lower prices and better features.
Not so with Blu-ray and HD DVD, at least not to date. If you can’t watch the movies you want, it doesn’t really matter how cheap your machine is.
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| Submitted by: | Joe Durn (stoptheemail@gmail.com) 4/4/2007 9:24:30 AM PT |
| Location: | New England |
| Occupation: | Retailer |
Sorry posted in wrong area.
| Submitted by: | Joe Durn 4/4/2007 9:22:36 AM PT |
| Location: | New England |
| Occupation: | Retailer |
Any talk on a "Peter the Great" mini-series DVD release from NBC?
| Submitted by: | Tom Miley (tjmiley@k12.carr.org) 4/4/2007 5:54:29 AM PT |
| Location: | Maryland |
| Occupation: | Sales |
I think that there is a fundamental flaw that everyone is missing. When the whole HD-DVD vs. Blu-ray thing came up, HD-DVD proponents said it would costs less to manufacture their discs than BD. The problem is that BD discs RETAIL for LESS. If I as an average consumer see 2 identical discs, one for 39.99 (HD-DVD) and one for 34.99 (BD), which format am I going to purchase? Another issue here is content availability. My local Target, for instance only carries new releases in BD, not in HD-DVD (Happy Feet). I am an early adopter of HD-DVD and I am looking to get one of the multi-players so i can watch what i want when i want. I think the whole dual formats issues is ultimately going to kill both formats, as VOD takes off and supplants them both. I know I personally will download a movie in HD (off X-Box Live) if i can't find it in HD-DVD. Thats just my two cents.
| Submitted by: | STEVEN KIPPEL 3/12/2007 2:46:44 PM PT |
| Location: | Palm Desert, CA |
| Occupation: | Systems Designer |
The other two comments show the HD DVD support's arguments: 1) upconverting is good enough, and 2) studios will go neutral.
Well, the first argument doesn't hold any water because if upconverting was good enough there is no need for high-def media anyway. The second one is absurd because there are more Blu-ray movies selling than HD DVD, and more player son the market for Blu-ray. If increased sales would make Blu-ray studios go neutral it would be more logical to have Universal or Weinstein move to BD before Disney, Fox, and especially Sony to HD DVD. Also, the studios want to end this war - going neutral would prolong the war and yield far less profits than can be gained by going neutral.
| Submitted by: | STEVEN KIPPEL (stevenk@avir.com) 3/12/2007 2:41:50 PM PT |
| Location: | Palm Desert, CA |
| Occupation: | Systems Designer |
There is a bigger flaw in the argument than the one you pointed to: The Chinese have developed their own format called EVD that has the support of the Chinese government and dozens of Chinese companies. In December 2006 they showed over 50 EVD players and announced they were phasing out DVD by 2008 - this means this year will be when EVD will be pushed into Chinese homes. HD DVD has about as much a chance of survival in China as a chimp in space. Also, Blu-ray also has cheap Chinese/Taiwanese players coming soon. Check out Lite-On''''''''s BDP-X1 player (they also have a Blu-ray PC drive). Insides at Lite-On have said they can''''''''t get their HD DVD drive to work and they''''''''re not getting help from Toshiba to finish it. Funai is also in play bringing brands such as Magnavox and Emerson. Furthermore, the Broadcom chipset Microsoft is working on supports both formats (HD DVD and Blu-ray Disc). The HD DVD secret weapon is not as strong as some dedicated followers would hope.
| Submitted by: | William James (blondcomet163@yahoo.com) 3/10/2007 12:21:34 AM PT |
| Location: | NJ |
Price is important becauase eventually studios will go neutral and content will b ethe same for both formats.
This editor failed to admit that as soon as more HD DVD players are out there , more studios will be forced to go neutral
| Submitted by: | obsidian 3/9/2007 5:33:55 PM PT |
| Location: | vancouver.bc.ca |
Nice unbiased article.
One thing to note:
"If you can’t watch the movies you want, it doesn’t really matter how cheap your machine is."
This is true, but if the movie is not available on the HiDef format of choice, there''''s most likely the option that one can still watch it (upconverted) on SD DVD, for a lower price.
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