Warner Bros.’ support for Blu-ray deals blow to HD DVD

The so-called DVD “format wars” earlier this month shifted in favor of Sony Corp.’s Blu-ray disc whe
blurayweb.jpg

For almost two years, a cloud of confusion has engulfed consumers who no longer only had to decide which movie they should watch on Saturday nights. A follow-up to the question of ‘what movie?’ is ‘what format?’

And for those befuddled Capital Region consumers and retailers who sell or rent DVDs, a silver lining is appearing. On a blue disc.

The so-called DVD “format wars” earlier this month shifted in favor of Sony Corp.’s Blu-ray disc when Warner Bros. Entertainment announced it would exclusively release high-definition movies in that format.

The loss of Warner’s support does not bode well for HD DVD, the competing high-definition offering made by Toshiba in Tokyo. But it does for Sony, also in Tokyo. And it also bodes well for retailers, such as Trans World Entertainment in Guilderland.

“Finally, the customer has an understanding of where this is going to go and not be confused. And, frankly, we saw the confusion this whole year . . . It looks like the platform war is pretty much over,” Trans World President and Chief Operating Officer James Litwak said during a Jan. 10 holiday sales report conference call with analysts.

Warner, the world’s largest home entertainment studio, based in Burbank, Calif., had long been a neutral player in the format war by releasing movies in both high-definition formats. Toshiba countered Warner’s defection by slashing prices on its HD DVD players to as low as $149.99.

By June, Warner will stop releasing movies in the HD DVD format. That move could shrink title availability to an estimated 25 percent from 40 percent for HD DVDs, according to Adam Media Research, a home entertainment data, forecast and research firm in Carmel, Calif.

“In terms of title availability, Blu-ray is going to have a distinct advantage going forward,” said Adam Media Vice President Jan Saxton.

Although HD DVD’s biggest backers — including Paramount Pictures and Universal Studios — have not abandoned the format, Trans World hopes Warner’s Blu-ray endorsement could provide a boost to DVD sales at its f.y.e. stores. If Blu-ray emerges as the format wars’ victor, consumers might feel more comfortable buying Sony’s high-definition DVD software and hardware, which made its U.S. debut in 2006.

“That plays into our growing video business,” Litwak said.

With music sales sinking, Trans World is increasingly leaning on video sales to keep itself afloat. During the holiday season, music sales made up 33 percent of Trans World’s business and video comprised 42 percent.

Trans World could also reduce or eliminate its supply of HD DVDs in stores, cutting back on inventory expenses. But the f.y.e. stores will carry HD DVD products so long as there is demand for them, said company Chief Financial Officer John Sullivan.

“Everyone seems to be lining up behind Blu-ray,” Sullivan said.

Remember VHS/Beta?

The Blu-ray/HD DVD battle harkens back to other entertainment media technological shifts in the 1980s and 1990s. Most notable of those format wars was when JVC America’s VHS defeated Sony’s Betamax as the standard videocassette format.

“The consumers are confused. They think it’s the VHS/Beta thing,” said Video World owner Jim Carbone in Johnstown.

The latest technological shift is occurring as the federal government phases out analog television sets. Starting Feb. 17, U.S. television stations can transmit only digital signals, forcing consumers with analog television sets to buy digital replacements or digital-to-analog set-top converter boxes. By 2010, 63 percent of all U.S. households are expected to have at least one high-definition television set, according to the Video Dealers Software Association, a Toronto trade organization.

The growing prevalence of digital television sets is stoking demand for high-definition DVD players, which, when combined, enable consumers to watch films with crisper picture quality.

A standard DVD contains about 9 gigabytes of information on two layers. But a single layer on an HD DVD disc holds 15 gigabytes and a single Blu-ray layer holds 25 gigabytes, according to VDSA. The two high-definition formats both have multiple layers.

During the week that ended Jan. 6 — the week of Warner’s announcement — Blu-ray controlled 65 percent of the high-definition market. Nine of that week’s top 10 high-definition DVD sellers were Blu-ray discs, according to Nielsen VideoScan, a New York video market research firm.

“We think Blu-ray is an opportunity to extend the life cycle of DVDs,” said Randy Hargrove, a spokesman for Blockbuster in Dallas.

In November 2006, Blockbuster started testing both high-definition DVD formats at 250 of its stores. After Blu-ray greatly out-rented HD DVD at those stores, Blockbuster brought Sony’s format to an additional 1,450 stores, including at least two in the Capital Region.

Industry needs boost

“I’m on the Blue-ray bandwagon, and I want to see that take off,” said Carbone, another retailer who has lined up behind Sony’s format. His four-store Video World rental chain last year started exclusively carrying Blu-ray and standard DVDs.

Although Blockbuster and Hollywood Video stores also carry both HD DVD and Blu-ray DVDs, Carbone is one of the only local independent video rental retailers who has jumped into the format wars. Video World stores now feature about 60 Blu-ray titles.

Movie Gallery, the Dothan, Ala., parent of Hollywood, expects adoption of high-definition DVD to “reinvigorate the industry.” Brick-and-mortar video rental retailers are in dire need for such reinvigoration as online rivals such as Netflix in Los Gatos, Calif., steal more of their market share.

Movie Gallery — the nation’s second-largest video rental company — in October filed for Chapter 11 protection in a Virginia bankruptcy court. As part of its reorganization, Movie Gallery closed 520 stores, including a Hollywood in Niskayuna.

The higher cost of high-definition DVDs — compared to standard DVDs — is expected to make consumers more inclined to rent rather than buy those discs. For example, on fye.com, the price of a standard DVD version of Spider-Man 3 is $20.95 while a Blu-ray version of the film is $32.99. At its annual meeting in June, Movie Gallery said high-definition rental revenues should increase to $2 billion in 2012 from $26 million in 2006.

“That may be true down the road, but in my stores here in [Schenectady’s Bellevue neighborhood] I have no need for it,” said Paul Neubauer, owner of Crazy Nick’s Video.

At Crazy Nick’s, Neubauer said his customers have expressed little interest in high-definition DVDs, though more for HD DVD than Blu-ray. He is rooting for HD DVD to win the format wars, but he plans to stock his shelves with the winning format only when customer demand calls for it.

“I wouldn’t say there’s going to be a windfall for us. We’re going to wait,” said Lackavane Clancy, owner of Entertainment Video in Saratoga Springs.

Clancy also has held off on renting high-definition DVDs, because she does not see the format wars ending for at least another year. But she has noticed an increased interest in Blu-ray, especially among customers who own Sony’s Playstation 3, which doubles as a DVD player for the blue discs.

At the Movie Store in Ballston Spa, co-owner Glenn Hamilton said he is also sitting on the sidelines during the format wars and rooting for Toshiba. He favors HD DVD, primarily because scratches on those discs are easier to fix than damaged Blu-ray discs.

Most video rental retailers have DVD resurfacing machines that remove scratched layers and rebuff DVDs. “We see damage on a daily basis, and it just doesn’t work for us,” he said.

However, industry sources say the high-definition formats are as durable or more durable than standard DVDs.

According to VSDA, HD DVD discs have the same durability as standard DVDs. Blu-ray discs are slightly thicker than HD DVDs and feature a new protective coating developed by TDK Corp. In a 2004 product test, CNETNews.com reported TDK’s coating “survived a determined attack” with a screwdriver and Sharpie. The technology news Web site said the tough coating “promises to make scratched DVDs a thing of the past.”

But the higher cost of the next generation of DVDs still makes them riskier investments, which Clancy at Entertainment Video said she is not ready to make.

“I think we’re probably another year before everything gets resolved. I don’t think anything’s going to get resolved in a matter of months,” said Clancy.

Blu-ray vs. HD DVD

–    Blu-ray Disc (also known as Blu-ray or BD) is a high-density optical disc format for the storage of digital information, including high-definition video. The name Blu-ray Disc is derived from the blue-violet laser used to read and write this type of disc.

–    HD DVD or High-Definition DVD is also a high-density optical disc format that uses the blue-violet laser.

Their optics differ, however. Since the Blu-ray disc has a tighter track pitch (the single thread of data that spirals from the inside of the disc all the way out), it can hold more data on the same size disc as HD DVD even with a laser of the same wavelength.

HD DVD discs also have a different surface layer from Blu-ray discs. HD DVD uses a 0.6 mm-thick surface layer, the same as standard resolution DVD, or digital versatile disc, while Blu-ray has a much smaller 0.1 mm layer for laser focusing purposes.

The thinner surface layer makes the Blu-ray discs cost more; a special hard coating must be applied to them to protect the data.

Categories: Business

Leave a Reply