Christmas may be the season of goodwill and
giving but for those giving and receiving DVDs, it may
be worth noting that a battle is on the horizon next
year over the future of those shiny, silver 4.7-inch
discs. On either side is a check-list of the world's
biggest consumer electronics companies ready to slug it
out. One camp is led by Sony, championing its Blu-ray
format, while the other is headed by its rival, Toshiba,
with its HD-DVD technology.
Both camps seek to
define the future of the humble DVD using blue-violet
lasers, which can read smaller tracks of data off discs.
The extra data that can be crammed onto the discs will
be used to create high-definition DVDs for a new
generation of high-definition TVs. But like the
VHS-Betamax fight to the finish back in the 1980s,
content is king. And with the notable exception of Sony,
it is not the Asian consumer electronic giants that will
be providing most of the content. For that, they will
have to rely on Hollywood studios. Hollywood may be the
dream factory, but it keeps a firm eye on the bottom
line, and home entertainment - DVDs in particular - are
a serious source of money for the studios. This year,
consumers will spend around US$15 billion on DVD
purchases and rentals. Films now regularly make more on
DVD sales than at the box office.
But after
growing at a compound annual rate of more than 100% for
the last five years, standard DVD sales are expected to
taper off to an average growth rate of just 17% over the
coming years. Studios are now looking for the next
growth money-spinner and hoping the next generation of
DVDs will be it. Toshiba and Sony have thus been
battling it out for support in tinsel-town. At the end
of November, Toshiba announced that it had brought
Warner Brothers, Paramount, Universal and New Line on
board to issue their movies in the HD-DVD format.
Together, these four studios represent 45% of US studio
output - a hefty amount of content.
Still,
Toshiba's successful lobbying is hardly the coup de
grace for the Blu-ray camp. Hot on the heels of the
Toshiba announcement, Disney announced it would throw
its weight behind Sony. And with its foot already in the
studio door in Hollywood, Sony has gone one step further
than Toshiba in its efforts to gain the critical mass
needed to champion its platform as the new standard. Its
acquisition of Metro-Goldwyn-Mayer was partly driven by
the desire to get access to MGM's impressive film
library and bring it into the Blu-ray camp. With MGM,
2Oth Century Fox and its own studios behind it, Sony
certainly is not out of the race.
But the
studios are not overly keen on a format war. Hollywood
thinks, probably correctly, that the tug-of-war between
two mutually incompatible formats will confuse
consumers. And none of the studios has signed an
exclusive deal with either camp, leaving them the option
of jumping ship should they end up on the wrong side.
What does concern a lot of them at the initial phase,
though, is cost. The success of either format rests on
the ability of the mainly Asian manufacturers to supply
cheap discs to Hollywood. In the initial stages of mass
production, when demand is going to be low, most of the
production costs of both formats will be eaten up by new
equipment acquisition and mastering. For either camp to
come out on top, these costs will need to be slashed as
much as possible. And this may be where Toshiba and the
HD-DVD camp have the edge. HD-DVD is essentially an
upgrade of existing DVD technology. Existing production
lines can be quickly converted to churn out HD-DVDs.
Blu-ray, on the other hand, is a whole new
kettle of fish. It requires new manufacturing equipment
and corresponding dents into profit margins, something
that does not inspire enthusiasm in optical disk
manufacturers, especially in Taiwan, and some in
Hollywood. Sony has already conceded that manufacturing
costs for Blu-ray DVDs are going to be 10% more than
current DVD-ROMs, and that's assuming an output of 10
million discs per month - the current output for DVDs,
the most successful consumer product in history.
What Sony is banking on, though, is the superior
amount of data Blu-ray technology can cram onto one
disc. Though both formats can cram 20 gigabytes (GB) of
data on a single disc, more than five times the current
capacity of DVDs, Blu-ray can definitely pack the bigger
capacity punch. With its thinner coating, Blu-ray's data
layers are closer to the surface than HD-DVD, allowing
for smaller data markings, meaning more information can
be packed onto one disc.
A single-layer Blu-ray
disc can store 23GB of information, while a similar
HD-DVD disc packs just 15GB. By dual-layering of the
disc, both camps have boosted capacity to 50GB and 30GB
respectively. Sony even has a 200GB eight-layer disc in
the pipeline. Toshiba has been quiet about packing in
more layers onto its discs, which has raised suspicions
that HD-DVD may have hit a barrier in upping capacity
for its discs.
However, superior technology does
not equal victory as Sony knows only to well, having
been given bloody noses before in format wars, Betamax
being the most obvious example. But more recently, Sony
was given the equivalent of a corporate black eye from
Toshiba, again, over the first-generation DVD standard.
While not quite the probable fight to the finish that
the face-off between HD-DVD and Blu-Ray promises to be,
Sony lost out to Toshiba back in 1995 over the standard
for DVDs. Sony and Phillips backed a platform called
MMCD while Toshiba and its allies backed a rival called
SD. Back then, Hollywood acted in relative unison and
stepped in demanding a single format. The result was
DVD, basically the SD platform but with some elements
incorporated from MMCD.
This time, though, both
camps are preparing to fight it out, and with Hollywood
split, Sony is taking no chances. It is also counting on
the PlayStation to do its part. The PlayStation 3 will
feature a Blu-ray drive to give Sony the extra push in
its battle for supremacy, and Sony will be pushing the
PS3 hard next year to give Blu-Ray the critical mass it
needs to gain widespread acceptance, in much the same
way that the PlayStation cemented the ubiquity of the
DVD. Still not to be outdone, Toshiba and the HD-DVD
camp is pushing for Microsoft to make the next
generation X-Box HD-DVD compatible.
Consumers
may be wondering if any of this matters. Well, for the
two camps, especially the consumer electronics and
computer companies on either side, a lot is at stake.
Whichever format emerges as the eventual winner will
almost certainly become the new standard, not just for
home entertainment but also for computers, consoles, and
all manner of electrical goods in much the same way CDs
and DVDs have. And that means a lot of royalties for the
winning camp. Whatever happens, one side will probably
be having a lot merrier Christmas in a few years.
Jamie Miyazaki is an observer of
Japanese and North Asian affairs, including politics,
business, economics and social trends.
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Dec 22, 2004
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