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Who Will Win The HD format War Sony Or Toshiba?

By David Richards | Sunday | 14/10/2007

As Sony cranks up marketing for its Blu-ray offerings in Australia, it has been revealed that the next generation of the Sony PlayStation is set to incorporate new Blu-ray management features as well as new software for the storing and management of content in the home. Don Eklund, executive VP of advanced technologies for Sony Pictures Home Entertainment let the cat out of the bag at a recent conference in the US.

Sony is adamant that Blu-ray will win the HD format war and as such is each quarter rolling out new features and upgrades. However GfK research shows that Australians are not adopting the new HD formats quickly, particularly if one takes out the PS3 Games Console and the attached Xbox 360 HD DVD player.

PS3 is expected to soon offer a firmware upgrade to boost its Blu-ray interactivity functionality, noted Sony's Eklund.

The Managing Director of Sony Pictures Michele Garra claims that Sony will win the Blu-ray Vs HD DVD war, however several analysts and Toshiba General Manager Mark Whittard disagree. Last week Whittard dropped a time bomb under Sony's plans by dropping the price of the entry level HD DVD player to sub $500. Sony is expected to follow Toshiba's lead.
And while supporters of the HD DVD and Blu-ray Disc high-definition formats lock horns all participants ultimately agreed they were heartened by the fact that consumers are adopting high-def discs, even slowly.

"The chances are pretty slim" that high-def won't succeed, said Don Eklund, executive VP of advanced technologies for Sony Pictures Home Entertainment. "There are obstacles in getting consumers to appreciate it, but it's inevitable.
When it was put to Michele Garra that fast broadband and an abundance of downloadable HD content from the web may impact both Blu ray and HD DVD in the future she said "It could do but no one knows. What is key to the battle is content and the support of movie studios for Blu ray". 

Currently, high-def stand-alone players comprise a 5% unit share within the total DVD player market, according to DisplaySearch. Although that is small, that share has significantly improved in recent weeks. Between April 2006 and August 2007, next-gen set-tops totalled just 1.3% of the overall DVD player market.

By year end, this could change with the introduction of a low cost Sony PS3 at $699 and a sub $500 HD DVD player.
On a global revenue basis, next-gen players carved out a 27% share of the overall market during the month of August. That marks a rise from next-gen's 11% share between April 2006 and August 2007.

Software is in a similar boat, selling a relatively small amount within the greater home entertainment landscape, with $150 million in cumulative Blu-ray and HD DVD revenue to date. Unit sales are at 4.5 million at this point. Research comes from a combination of findings from sister companies DisplaySearch and NPD Group.

"Without a format war, adoption might be higher," said Ross Young, founder and president of DisplaySearch. "But [high-def] is coming." 

Russ Crupnick, VP and senior industry analyst for NPD, said just 11% of people surveyed by NPD said they planned to purchase a next-gen set-top in the next six months.

Also, PlayStation 3's dominance within the high-def player field has not yet translated to strong viewing of compatible Blu-ray titles. Less than half of PS3 users are watching Blu-ray films.

Plus, standard-definition up converting DVD players, still attractively priced below high-def players, are growing faster in overall DVD market share than next-gen players. Up converting player's command 27% of the market on a unit basis, dwarfing high-def's 5% share.

But Crupnick believes that once people try high-def packaged media playback, they will become cheerleaders for the new formats.

"How do we go from confusion to forecasts that say that in a few years half the market will be high-def?" he asked. "It's the experiences of people with next-gen. About 90% [of those recently polled] said they were extremely satisfied with their next-gen player purchase. You don't usually see those kinds of numbers."

High-def hardware owners said that every two of three packaged media purchases were next-gen, according to NPD research.

Despite proof of some progress, studio executives remain concerned over the format war stifling sales. According to NPD polling, 54% of people said they didn't want to go high-def because of the format war.

In the name of eventually ending it, Blu-ray and HD DVD executives tried to convince conference-goers of the superiority of their respective camps.

HD DVD participants were quick to needle the Blu-ray folks over PS3 gamers' measured use of the system's Blu-ray player. They also claimed victories in software, as the only Web-enabled titles released to date are on HD DVD. Universal Studios Home Entertainment's Evan Almighty, which was released on Tuesday, is the first home entertainment title to extensively offer e-commerce.

Striking back, Blu-ray supporters insisted that consumers adopt high-def because of great content resolution, not bonus features. Regardless of gamers' film activities, Blu-ray titles are out-selling HD DVD titles by a two-to-one ratio.

Warner Home Video's 300 HD DVD titles, one of the first releases to offer Web-based interactivity, sold half as many copies as the 300 Blu-ray versions, which lacked those advanced features. Also, Warner VP of high-def marketing Dan Silverburg primarily credits PS3 users for what the studio believes are an impressive quarter of a million units sold of 300 on Blu-ray.

"For people who buy HDTVs, the intent is not to interact with it—it's so they can have high-definition viewing," said Andy Parsons, senior VP at Pioneer Electronics and chair of the Blu-ray Disc Assn.'s U.S. Promotion Committee. "Interactivity is nice, but it's not causing people to say I won't watch the movie [if it's absent]."

However, HD DVD's interactivity best mirrors the lifestyle of today's growing YouTube, MySpace and Facebook fan base, countered Alan Bell, executive VP and chief technology officer at Paramount Pictures.

"Each of the formats creates great picture and sound, but we need something more to sell next-generation," he said. "For younger folks, their choice of entertainment is to interact with others. Also, [Web interactivity] is an exciting transition between playing DVD and five to 10 years from now when things are digital."


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