There are several reason why Blu-ray won the format war, but it might not matter in the long run. Here is why.
Many retailers have been piling on what has been a long string of bad news for the HD DVD camp and announced they were going to stop selling HD DVD players. Most recently, Best Buy and Netflix indicated they would be dropping HD DVD. Then, one Blu-Ray customer figured out he had been screwed by the Blu-Ray side and started a class action suit against one of the major Blu-Ray companies, something that is likely to accelerate.
As we went into the 4th quarter of 07, Toshiba and the HD DVD camp was certain they had this wrapped up. Their player prices were well below the Blu-Ray offerings, they had picked up several new studios and Sony’s PS3 was looking more like an anchor on Sony’s future than a help to Blu-Ray. In addition, they seemed to believe that Time Warner was going to go exclusively HD DVD shortly after the end of the year and had planned a massive announcement with Microsoft for CES.
The word “surprised” seems to be an inadequate term to describe what happened to them in January while their executives were in route to CES and Warner came out in favor of Blu-Ray, turning what was expected to be a victory for HD DVD to a route. Let’s chat about overconfidence and what happened.
Nintendo
With numbers showcasing that the PS3’s world wide sales went up sharply in the 3rd quarter there should be little doubt that much of this gain was due to extreme shortages of Nintendo’s Wii. The Wii had been on constraint for much of the year and Nintendo failed to bring on-line adequate manufacturing resources to meet demand, and the end result was that parents who wanted something for their kids were left with the Xbox 360 or the PS3. While both the Xbox and the PS3 seemed to benefit in the US, in Japan the Xbox underperforms Japanese sourced products sharply and it appears almost all of this demand went to the PS3 which turned in massive numbers according to Sony.
It was unlikely that parents in North America or Japan were going to buy their children two game systems and due to price advantages alone the Wii should have had much of this business, but you can’t buy what the stores didn’t have and premiums being paid for the few Wiis that did exist took the systems close to Sony prices which favored Sony.
The PS3 Advantage
Currently, Sony is feeling its oats and claiming they will bypass the Xbox 360 in Europe and, according to them, they are now outselling the Xbox 360 there 3 to 1. Given this is a 4th quarter market and we are likely in the slowest period for Game system sales I’m not sure I would connect those dots yet myself, but there is no doubt that Sony’s product is doing much better.
With the war all but decided it appears the Blu-Ray drive in the Sony is starting to become an advantage particularly given that the PS3 is currently the only affordable Blu-Ray offering that is likely to support the coming Blu-Ray 2.0 specification coming out early next year. So if you want a Blu-Ray product that won’t soon be obsolete you have to get an updatable product and that leaves you with the PS3 for the closest thing to a set-top box solution right now.
But, overall, you can’t deny that PS3 sales were a huge advantage for the Sony camp as the year closed.
Toshiba: Overconfidence Helped Defeat
Sony was between a rock and a hard place, if they lost the Blu-Ray fight the PS3 would have been collateral damage and the impact on Sony financially might have been terminal. This means that Sony, much like anyone fighting for their life, was willing to do almost anything to ensure they didn’t fail.
Toshiba, on the other hand, was so confident they were winning they felt no need to really push hard in the 4th quarter and let prices actually drift up for their HD DVD players which started the quarter with sub-$100 sales for older products and sub $200 prices for newer products but ended the quarter with prices drifting well above $200.
One thing you learn about pricing is that it is easy to go down but the market will probably not move with you if you go up and this was a significant tactical mistake. Now, given how strongly the PS3 ramped I’m not sure that keeping the prices low would have changed this outcome but letting them drift up did make the Blu-Ray win more certain.
Why Time Warner Called the Fight
Supporting two formats wasn’t doing anyone any good and the market was clearly signaling it was going to move to downloads long term and, particularly with the writer’s strike, Time Warner couldn’t wait 5 years. Blu-Ray movie sales stayed marginally ahead of HD DVD sales throughout most of the 4th quarter and the PS3 numbers clearly indicated there was a massively larger potential future opportunity for Blu-Ray. Add to this that Sony was likely willing to give Time Warner almost anything they wanted while Toshiba didn’t think they had to, and you get the recipe for the decision that Time Warner made. Though, I think it came too late.
Should You Buy a Blu-Ray Player?
With Blu-Ray 2.0 on the horizon you are still better picking up a PS3 if you will use it for games and can live with the Blu-Ray library. If you can use a PC solution and because there are still a lot of HD DVD movies, I’d suggest one of the new super hybrid-drives. Gateway just brought out a PC with one and Addonics has one that I’ve been using and like (and it works with a laptop but not on an airplane). This is because there are still a lot of movies both out and coming which will be HD DVD only for awhile.
Of course with the market moving towards downloads, if you have a high speed connection you may want to wait a bit and see what your cable , DSL or PC company is going to bring to market.
In the end the lesson here is don’t back a company up against the corner unless you are willing to do what it takes to deliver the killing blow and overconfidence isn’t the path to victory. Toshiba is clearly learning both lessons the hard way this year.
The End for Both
With the early adopters of both HD DVD and Blu-Ray (at least those that don’t have a PS3) likely really upset about their choices right now. Both (except for PS3) are looking at premature obsolescence which, as I mentioned in the opening, is likely to lead to more legal action before we are done. And with Microsoft, Apple, Cisco, and virtually all of the movie studios now moving to downloads (along with folks like Netflix) it just seems like the market is going to move on to me. Right now, if you want to watch movies on a plane or in a car, you really can’t easily use Blu-Ray anyway (few laptops, none of them Apple laptops, have it as an option) and buying several copies of the same movie, on top of the Blu-Ray premium, just seems excessive to me. Now there is an alternative HD format entering the segment that addresses the portability issue and, clearly another format isn’t going to help folks choose.
The real question in my mind is whether the folks like Apple will get this right first (the libraries are very limited) or the Cable companies will simply own this segment. Cable companies move slower but they subsidize the hardware which cuts down dramatically on the cost. I simply don’t see anything to suggest, including the PS3 sales numbers, that we are going to have enough Blu-Ray players in the market before downloads go mainstream and Blu-Ray will go the way of the Laser Disk as a result. Of course Blu-Ray could live on as a kind of wicked mini-lightsaber.
Seriously, if you look at this in-depth review of HD downloads, if the download side can get the content and people have the bandwidth, it truly is now good enough and far more convenient.
Showing 36 comments
RSSDownloads are great if you want to watch something like Friday, get stoned, and forget that you ever saw it. That way when your 24 hours of owning it are up you can feel good not knowing where it came from.
I am very happy with my purchase and it plays normal dvd's aswell (i can use the other side of the disc in a NORMAL DVD PLAYER TOO!) ... something you CANNOT do with bluray. and you cant get bluray for that price.
Once I can download movies (HD MOVIES) i will move to them permanently though. That is the future.
Maybe Rob should be a bit more careful with his predictions.
Aug. 2005:
http://news.digitaltrends.com/talkback67.html
Dec. 2006:
http://news.digitaltrends.com/talkback234.html
Just saying...
In fact, I would argue that the real clincher in the format war was definitely the PS3, because it had the lowest barrier to entry. If you looked at either format, you had steep requirements to get anything out of it - an HDTV, an HDMI cable, and the unit itself. Two of those units costed at least 800 to a thousand dollars. For any average consumer, the price was ridiculous. However, the PS3 doubled as a game console, and one which had multitudes of fans. They may not have had an HDTV, but it was okay, because the blu-ray player they were using also happened to be enjoyable without an HDTV, because of the gaming ability. Right there, one of the barriers to entry was lowered. Obviously, to get the full experience, upgrading to an HDTV was necessary, but not immediately. The Playstation 3 was also the cheapest blu-ray player around (much cheaper than a good HDTV), so it had a definite advantage.
Sony, of course, used this to its full advantage. It always touted the number of players, claiming it had its format in a million and a half homes. Of course, 1.4 million of those were PS3s. ( http://tech.blorge.com/Structure:%20/2007/06/20/ps...
And while the North American adoption of the ps3 may not have been huge, it was rather large in Europe and Japan, where the rival Xbox 360 was unpopular, and where the Wii was nowhere to be found, as you stated.
In fact, it this could be best illustrated by looking at the shifting allegiances of a very lucrative industry: Adult videos. Say what you want about the adult industry, it is a perfect litmus test for a format. In the beginning, Blu-Ray tried to adopt a family-friendly stance, and banned pornography from its film repertoire. The porn industry responded by going to HD-DVD. However, companies were bombarded with requests for HD adult content on the shiny new Blu-Ray player that they got when they bought their PS3. Since there was such a market for Blu-Ray pornography, and since Sony desperately needed a way to pull ahead of HD-DVD, a compromise was found, and adult films were made in Blu-Ray HD. The point here is that once an industry which cares very little about the technical advantage of HD media decides to adopt a format, it has become desired by the mainstream. And, since Sony had spent an arm and a leg getting Blu-Ray players into the PS3s and into homes, the momentum for mainstream demand rested solely in the camp of Blu-Ray. ( http://www.theinquirer.net/en/inquirer/news/2007/0... I think that, while Time Warner's decision may have capitulated the change, the real underlying reason that the format war was won by Blu-Ray rested solely in the lowest barrier of entry that the PS3 represented.
Unless your TV is 60 inch and 1080p and you are sitting 2 feet away from the TV I just don't think HD gives that much. I did enjoy March of the Penguins in HD, but that's the only movie I've seen where it mattered and that didn't matter to the tunes of hundreds of dollars.
I think the main concern of the movie companies is that DVD's really AREN'T copy protected. Blu-Ray provides slightly better security in that regard.
From my viewpoint, I think the movie companies are trying to entice us away from DVD with a marginal improvement in picture quality. Let's get serious about the claimed sound improvements too... Unless you have dog hearing, you couldn't tell the difference between DVD and either HD format.
#1 - Does this mean you think the currently HD-DVD studios (Universal, Paramount, Dreamworks) should (Or perhaps will) forego delivering their content on Blu-Ray and focus instead on digital deliveries.
#2 That Microsoft will/should not put a Blu-Ray drive in a future version of the XBox 360?
I tend to believe, the Sony strategy of delivering content on hi-def packaged media AND as digital downloads seems more viable from a business perspective than focusing entirely on digital downloads. Particulary in the short to medium timeframe (5 years out).
Just think about the bandwidth issues if tons of folks started using the internet to get QUALITY 1080P content! The internet would crawl to a halt. Maybe 15 years from now if we concentrate on more infrastructure improvement the net could handle massive 1080P content downloads...but by then everyone will have dozens of movies on Blu-ray.
Yea, the PSP reads MP4 format so at first it was a pain when I realized my PSP wouldn't read Divix files like all the episodes of "Heroes", that was until I found a nifty little transcoding tool that converts divx to MP4 format and vice versa.
I don't know what video formats ipod will take but converting that 1GB "lite" version of the movie "300" MP4 into divix or wma would be a cinch.
I already have a nice little Blu-ray collection, with all the great deals going on all the time like Amazon likes to do blu-ray movies for $19 once in a while. Very tempting.
Yay!
Beers on me!
Thanks for the update which is a lot more detailed than your original post of "Did you know Blu-ray 2.0 allows you to download a 1GB portable version of the movie in MP4 format so you can put it on your PSP. Cool eh? Solves that portable problem you talk about." In that case, thats just Sony fluffing up the functionality of the PS3 and PSP and does nothing for the masses that may have an iPod or a laptop PC or some other portable media player. There goes your DRM my friend.
Nope, a moron in our language is a kind of delicacy made from sticky rice, eaten as snack or dessert. ;D
http://news.digitaltrends.com/news/story/15749/mic...
I call B.S. here (posted on it too)
HD downloads on the Xbox 360 are still way to pricey, you don't really "own" them and the quality sucks.
Ah...didn't catch that, or read all of the comments. Can I still call you a moron? :D
As I have mentioned in my 1st post, in Blu-ray 2.0 the compressed movie file is only 1GB you can put on PS3 to watch on the go. 1GB is probably your "Video On Demand" quality, however remember it still looks stellar on the PSP's 4.5" Screen. I don't think you will have too much DRM issues there.
P.S.: Rob... can you please not compare the Wii to the other three systems. Though its a crowd favorite, the attach rate is less than stellar which puts the developers in a situation of not making any money on a top selling system. Nintendo seems to be the only one really celebrating the mega success of the Wii. Developers are more willing to put games on the X360 and even the PS3 to make money... ask Activision, ask Capcom, ask Namco, but dont ask Nintendo.
Read "Wal-Mart HD DVD: To Be or Not To Be?" Talkback April 27, 2007 and you'll know what it's all about.
Commenting without knowing the details makes you the MORON!
The PS3 is now starting to showoff what Sony execs were saying 2 years ago before its release, and that is that it was designed to be future proof.
"Jeff, Eat your words! HA HA HA"
You moron.
Can I say it Loud, I TOLD YOU SO!!! Jeff, Eat your words! HA HA HA
Movie downloads will replace regular DVD movies, for the general consumer that really doesn't care about movie quality. Whether they watch it on their PC, or cownload it from their cable provider via VOD (which is already huge I might add), this will be their format of choice.
Blu-ray will be there for the true movie buffs, the trend setters and people that really help new technology take off.
Blu-ray won't be going anywhere, anytime soon.
Just my $.02 cents
Your speaking purely from personal experience. You might purchase 1-2 movies at the most a year, and rent 9.9 movies from netflix, but not everyone is like you.
In 2007 $16 billion in DVD consumer spending says so of DVD movie purchases. The sales of DVD have been one of the highest ever with a slight dip from $16.5 billion from 2006.
DVD rentals have held a $7 billion in consumer spending for several years now with no increase.
I myself purchase a decent number of movies, such as Spiderman series, 300, X-men, and Shrek to name a few(which it turns out are the top sellers of 2007). I just feel these are must own movies, I also rent from Netflix, and blockbuster when I don't want to wait from Netflix, and usually if I like the movie alot I would buy it. However, just like G4TV Attack of the show segment DVDuesdays, there are Movies many people consider Renters or buyers.
I would consider HD movie download to substitute my rentals, but I would never substitute digital downloads for actually physically owning the movie.
I'm an average white collar worker, Software Engineer, me and my co-workers talk about movies all the time, all family folks who purchase movies on a regular basis, we make up part of that populous that contribute to that $16 billion spendature.
There are many factors why digital downloads would never substitute, physical media purchase:
1) The technology for streaming is light years away; even using FIOS the HD content is still compressed not as good as HD movies on Blu-ray fully uncompressed 25GB movie. There are definite bandwidth issues especially the way America is setup right now.
2) DRM, if you want movies you can download to your DVR, then transfer them to a mediacard for portable use, how does that circumvent copyright issues? The logical answer would be the movies would be DVR locked.
3) There is a huge population that still purchases movies, more so then rent them. With Netflix you pay a flat monthly fee and rent movies, which in a way emulates how digital download would work semantically, you pay a flat fee averaging out to your usual purchase/rental cost and you can re-rent old movies if you want to re-watch it, but realistically thats not how it works in the world. Owners still purchase movies because they want to physically own them.
How many movies do you need to have on your shelf? I rent (netflix) 9.9 movies I watch and I never want to see them again, there are maybe 1 or 2 movies a year I want to watch more than once and, if I really thought about it, most of those I could probably rent. If a rental costs $4 and buying costs $20, you have to watch 5 times before you break even.
Downloads work best for rentals, you get them in about 30 seconds when things are working right if streaming, and if you want to watch them on the road you download and cache them.
So yes, its like Netflix, which is why Netflix is moving to downloads.
As far as downloading MP4, why buy the Blu-Ray first? Just download the format you want to watch. Save you a ton of time on transcoding.
http://news.digitaltrends.com/news/story/15717/bes...
What does that tell you that Best Buy will only "promote" Blu-ray? That they are phasing out HD DVD, they will not spend money on the product to promote it etc. Get a clue. And NetFlix dropped HD DVD alltogether.
HD DVD = dead man
Will I actually own the download? Like hold it with my grubby little hands, put it up on my shelf, will I actually own it? So I will pay what like $10, $15 bucks for a movie in a downloadable form sitting on someone else's server, keep it on my DVR until I run out of space and delete it, and when I want to watch it again re-download it again,... err... hmmm sounds awfully like renting much like Netflix or Blockbuster with no late fees.
Do I really own the movie?
Did you know Blu-ray 2.0 allows you to download a 1GB portable version of the movie in MP4 format so you can put it on your PSP. Cool eh? Solves that portable problem you talk about.
And, BTW, the HD-DVD did not fail because Toshiba raised the price of players in the critical purchase period before Christmas.. it failed because the only basis HD-DVD could compete was on price, and by LOWERING prices, HD-DVD alienated the very manufacturers on whom they were reliant to validate the format and drive the market. HD-DVD pricing was TOO LOW, to have ever won the war, as it invalidated th business cases of Toshiba, and their partners.
You suggest is that Blu-ray had a "marginal" lead in disc sales in 2007. If you consider between 2 and 3 times as many discs to be marginally more then what do you consider to be substantially more? Even the discs that Warner released on both formats sold better on Blu-ray than on HD DVD.
You suggest that parents searching for a Wii purchased a PS3 instead. The market research I have seen simply do not support this. In fact the research I have seen shows that the XBox 360 Arcade edition that was $270 over the holidays was by far the biggest beneficiary of the Wii shortage.
Finally you suggest that HD Downloads are going to become mainstream somehow. Currently only about half of Americans have broadband to their homes. Of that number a very minuscule number have more than 3.0 mbps. Worse is that this is time-share bandwidth so if several of your neighbors are using it then you do not get all 3 mbps. The US infrastructure just cannot support wide acceptance of HD downloads. In fact if you look at most companies that are attempting to roll this out: ATT, Comcast, etc. All of them are talking about having it ready in "a few years".
On top of the issue of there not being enough bandwidth to support the HD downloads, there is the issue of people having to purchase another set-top box for their television. How do you propose to sell this to joe-six-pack?
"Hey Joe, we have this box that lets you rent movies for $5 a piece. You only get to watch the movie once for that price though. Oh yeah, one more thing, once you start watching the movie you have to finish watching it within 24 hours or lose it. And the box will cost you $300"
Joe, "Uhm, so what is the difference between that and the PPV system my cable company offers now? It sucks and we have had it for years. Is the picture quality better than upscaled DVDs?"
"Well no, actually it is not as good as upscaled DVDs and you have to subscribe to the $70 per month Internet package to use it reliably."
Joe, "Right, I will get back to you..."