High Definition Market Update
An Understanding & Solutions Information
Bulletin
Commentary and analysis provided by
Jim Bottoms, Co-Managing Director,
Understanding & Solutions
Q4 in 2007 is seen by many as a crucial time
in the life of both HD-DVD and Blu-ray Disc
(BD), as it is the second Christmas period
for both formats in the USA – long
highlighted by Understanding & Solutions as
the point at which the format battle could
potentially be won or lost – and, more
importantly, where the long term success of
high definition discs will be decided.
It is also a crucial time for PS3, having
underperformed last year in the USA due to
its high price, delayed availability and the
unexpected success of the Wii, as well as
missing the European Christmas season
completely.
Though player prices are falling across the
board, there is growing concern that the
consumer does not fully understand the high
definition concept; and the confusion is
further compounded by the choice of two
different disc-based formats.
Taking everything into account, BD has been
the leader for much of the year, accounting
for close to two thirds of HD discs sold in
the US. In Europe, BD’s share is at a lower
level, but it enjoys a stronger performance
in Japan.
However, developments over the past few
weeks have the potential to erode BD’s
current lead, and there is growing concern
throughout the industry that both high
definition disc formats could be lost
completely in a world of competing delivery
options and viewing platforms.
Last month, Understanding & Solutions stated
the decision by Paramount and DreamWorks to
release exclusively on HD DVD was not in
itself sufficient to change the balance
significantly, though it was a major PR coup
for the HD DVD group and did erode BD’s
industry strength. At the same time we
expressed the opinion that the major impact
of this decision would be to prolong the
format battle, something that is not good
news for the industry overall.
These views have not changed, but a number
of additional factors have emerged that may
impact the situation and extend the current
period of uncertainty.
¨
The Blu-ray technical standards –
particularly in respect of its online
connectivity option, BD Live – are still not
finalised
>
There are no BD Live enabled players
currently on the market, whereas all HD DVD
players have connectivity (although not all
discs support this feature).
>
It is understood that PS3 consoles have the
technical capability to support BD Live with
a firmware upgrade but as yet there has been
no indication from Sony when this might be
implemented.
¨
Player pricing, whilst falling rapidly, has
not yet reached the point where it is
attractive to the mass market.
From the perspective of software and
hardware support, HD DVD has been trailing
BD. However, its two main supporters,
Toshiba and Microsoft, have been campaigning
hard to bring other content owners and CE
manufacturers on board.
¨
In late August, Paramount announced it would
release future titles exclusively on HD DVD.
¨
Chinese manufacturer Alco-Venturer has
announced a $199 HD DVD player for Q4 this
year.
Paramount’s decision may not have
significantly affected the balance between
the formats, but the landscape would change
dramatically should Warner make a similar
decision, or one of the BD-exclusive studios
defected to HD DVD or even elected to
release on both formats.
¨
Warner recently stated that high definition
software sales are sufficient in each format
to make dual support viable.
>
The average is 2:1 in favour of BD, although
‘Planet Earth’ sold more on HD DVD.
Whilst supporting both formats ensures that
the entire potential Hi Def disc market is
addressed, the additional costs involved are
not insignificant.
¨
The very different technologies employed by
BD and HD DVD, particularly with respect to
interactivity, means that each has to be
authored separately.
¨
Mastering and print costs are doubled, and
replication volumes are smaller.
¨
The only area where there is any real
commonality between the formats is in video
encoding, the result being that BD titles
released in parallel to HD DVD frequently
use the same video file and therefore do not
make full use of the format’s 50GB capacity.
Although recent developments have favoured
HD DVD, there has also been encouraging news
for Blu-ray.
¨
A number of European studios/distributors
who had previously announced that they would
release on HD DVD only, announced at IFA
that they will support both formats. Among
these are Studio Canal and Bertelsmann-owned
Universum Film.
¨
Three European replicators are adding Blu-ray
lines to meet the anticipated demand:
Infodisc, Germany (Oerlikon line); QOL,
France (Singulus line) and a third as yet
unnamed plant (also Singulus).
¨
There has been progress in developing
BD-Java authoring tools.
>
Technicolor’s in-house ‘BD-Jive’ – a
GUI-based Java compiler, which greatly
simplifies the creation of BD-Java titles –
may be made available to third parties.
¨
Chinese player manufacturer, China Huala
Group (CHLG), has joined the Blu-ray Disc
Association (BDA) as a contributor member,
enabling the company to input suggestions
for enhancements to the format.
¨
PS3 sales, whilst perhaps disappointing from
a games perspective, still add significantly
to the installed base of BD-enabled video
playback devices.
Conclusions
As we stand today, industry support for BD
across content and hardware remains the
strongest grouping and it is therefore the
format with the greatest chance of market
success, although its strength is being
eroded.
Whatever happens, continued competition
between the two groups will lead to
continuing confusion and uncertainty, and
therefore delayed consumer purchase
decisions. This in turn will lead to further
price erosion of hardware – and to a lesser
extent, software.
All this comes at a time when research is
increasingly showing that consumers are
already confused about the overall ‘high
definition’ message. Stories abound of
consumers with HD capable TVs but standard
definition cable or satellite service
thinking they are watching HDTV.
The continuing improvements in the upscaling
capabilities of standard definition DVD
players cannot be ignored as they may
satisfy many consumers needs for an enhanced
viewing experience at a competitive price.
The next six months will be critical for the
future of high definition discs. There is
significant market potential for
pre-recorded High Definition media but there
is a growing concern within the industry
that this potential could go unfulfilled.
High Definition Conference
Understanding & Solutions would also like to
announce its forthcoming conference, ‘High
Definition in Europe: conveying the
message’, taking place in Barcelona on 12-13
November. Now in its second year, this
year’s conference highlights will include:
·
Hollywood Studio panel
·
European content creation and distribution
·
The US experience and the lessons learned
·
The broadcasters’ angle: commitment and
progression
·
The impact of next generation games consoles
·
Practical experiences of live HD
broadcasting
·
Bigger venue, more attendees, even better
networking opportunities than last year
Addressing the developments in 2007 and
beyond, this is an essential conference for
content owners, broadcasters, IPTV
operators, professional and consumer
electronics equipment manufacturers, video
and games production and post-production
houses, disc manufacturers and retailers.
For more information, visit www.uands.com/events#hd.
Source: Understanding & Solutions
Further Information
For industry comment, forecasting and
trends, contact:
Andy C Watson
Head of Marketing & PR
Direct Dial: +44 1582 500169
Email:
andy.watson@uands.com
Web: www.uands.com
