Sweet deals do exist. But I think it was Toshiba and not Microsoft that offered the marketing incentives to Paramount and Dreamworks.
And frankly it seems to me that Microsofts enthusiasm for propping up HD DVD was already palling as they failed to get the managed copy agreements they wanted from the AACS licenses. I'm guessing Microsoft is moving on now and not really worrying as much about HD DVD.
- Tom Manfredi, Albert E wrote:
Proof enough that "sweet deals" do exist, in case anyone still wonders. When products that one would expect to see don't materialize, this is the sort of scenario I now take for granted. If it weren't for the fact that Blu-ray is clearly the better format, in terms of potential anyway, I'd find this more annoying. Bert ------------------------------------------ Lesson of high-def DVD war: It's the ecosystem, stupid Junko Yoshida (01/14/2008 9:00 AM EST) URL: http://www.eetimes.com/showArticle.jhtml?articleID=205602861 Las Vegas -- Warner Bros.' defection from the HD-DVD camp to Blu-ray Disc, a bombshell that burst only days before the opening of the Consumer Electronics Show (CES), has done irreversible damage to the market's perception of HD-DVD. The motives behind the studio's forsaking of Toshiba may never be fully revealed. But understanding how the high-def DVD format battle has unfolded is critical for those who strive to make the best technology choices. The drama underscores the dawning truism that technology alone does not a successful consumer product make. Several sources asserted last week that money had turned the tide. Others cited tensions among rival studios. Personnel moves also shifted the balance of power, as key players who had worked tirelessly to back their companies' chosen formats switched jobs or slipped into obscurity. Chris Cookson last year left the helm of Warner Bros. Technical Operations to become president of Sony Pictures Technologies. Hisashi Yamada, who stumped for HD-DVD as chief technology fellow at Toshiba Digital Media Network Co., is said to be semi-retired. "In a way, it's a sad day for EEs," said Jeff Bier, president of Berkeley Design Technology Inc., a benchmarking and consulting firm. Market success, he said, "often has everything to do with owning the whole ecosystem"; technologies do not win on their merits alone. "There is a pattern here," said Jean-Laurent Poitou, managing director for electronics and high tech at Accenture. Consumer products are "no longer about bits, features and functions, but about an 'experience.'" "You can't leave any critical elements in the ecosystem in the hands of others, hoping they will do the right things," said Toby Farrand, vice president of engineering and operations at voice-over-IP startup Ooma. "Look at Apple's iPod and iPhone." Apple controlled digital rights management, system design and software programming. It struck deals with record companies for its iTunes Store and formed partnerships with carriers and service operators. The ecosystem elements for Blu-ray and HD-DVD include cost, system design, ease of production and disk replication, and studio support for content availability. Ben Keen, chief analyst at Screen Digest (London), said the Toshiba-led HD-DVD effort had been "years ahead" in system design, cost and software stability. "Toshiba engineers delivered everything they promised," he said. Every HD-DVD player sold today comes with an Ethernet port for software upgrades via the Internet; Blu-ray players aren't there yet. Several industry sources, including contacts at Panasonic and Philips, asserted that Microsoft Corp. paid Viacom-owned Paramount $150 million last summer to get that studio and its DreamWorks subsidiary to support HD-DVD exclusively. Microsoft has repeatedly denied ever writing such a check--a denial difficult to disprove because such costs are often buried in marketing or promotional expenses, said Paul Gluckman, New York bureau chief for Consumer Electronics Daily. Gluckman added, however, that it is "hypocritical" of the Blu-ray camp to criticize the software giant for allegedly muscling its way into the format battle, since Blu-ray's promoters have essentially "done the same thing" by talking Warner Bros. into switching sides. Indeed, the rumors flying at CES last week included speculation that Sony may have shelled out as much as $400 million to bring Warner Bros. over to Blu-ray, though a Sony executive denied such a deal had taken place. Sony had paid only $250 million to acquire a portion of MGM, the executive noted; $400 million to convince Warner to shift allegiance "would be too much money." Still, some industry observers mused that any Sony outlay, whatever the amount, to bring Warner Bros. into the fold would have been money well spent. "Every business Sony owns today--Playstation 3, Vaio computers, A/V entertainment systems, Sony Pictures and its disk replication business--hinges on the success of Blu-ray," said Frank Simonis, senior director at Philips Intellectual Property & Standards. Others said the changing climate in Hollywood had made Warner Bros.' move inevitable. Universal, which has been quietly feuding with Paramount ever since the latter's acquisition of DreamWorks, apparently has expressed misgivings about its support of HD-DVD, they said. But in the end, the battle has boiled down to "Microsoft vs. the rest," said Accenture's Poitou. With every Japanese consumer electronics company "playing to win," Poitou said, "everyone took sides" instead of seeking consensus with backers of the opposing format. 'Magic' vs. pragmatism Picking the right format often creates an early-mover advantage, especially for chip companies. Sigma Designs (Milpitas, Calif.), for example, managed to plug its media processor into every Japanese Blu-ray system sold this past holiday season except for the Playstation 3, noted Ken Lowe, vice president of strategic marketing at the company. Sigma capitalized on the tendency among Japanese companies to move in a common direction as a group; in the case of Blu-ray, the only Japanese abstainers have been Toshiba and NEC. In contrast, Samsung and LG developed universal players that supported both formats. And both South Korean companies went with Broadcom silicon, as Toshiba did for its first HD-DVD player. How had Sigma divined Blu-ray's dominance? As it turns out, the company's direction had less to do with "magic" than pragmatism, said Lowe. Sigma realized early on that it didn't have to develop a new chip specific to either format; instead, it went with a chip it had initially done for an Internet Protocol TV set-top. When the design win for Toshiba's first-generation HD-DVD player went to Broadcom, Lowe said, Sigma went to the Blu-ray contingent and found a sponsor willing to compensate it for development of Blu-ray software. By contrast, Broadcom rode the fence and ended up spending huge sums on software development for both formats. Universal players have gone nowhere in the market, stymied by their price tag of nearly $1,000. The OEM bill of materials for a universal player is $150 higher than for a dedicated player, covering the costs for two software licenses, two royalty arrangements, two read heads and twice as much flash storage. What's more, universal players "never solved consumers' problem," said Sigma's Lowe: Since it was a virtual certainty that one format would ultimately dominate, and since no universal player would last forever, consumers would still have to gamble when stocking their libraries, hoping they picked the format that would prevail. Allan Jason, marketing vice president at LG Electronics USA, suggested the universal player would become a relic of the format war. "Compared with a year ago," he said, "the balance of power has tipped." Microsoft has gone with HD-DVD thus far as the high-def option for the Xbox 360. Asked how Warner's announcement affects that, Pat Griffis, senior director for media interoperability at Microsoft's entertainment and devices division, said, "It hurts." But he quickly added, "There will be a growing opportunity for electronic [movie] delivery and peer-to-peer." At a CES press event, executives from Toshiba, which launched its third-generation players in September, reaffirmed their confidence in the HD-DVD format but gave no word on subsequent generations. "This is a difficult morning," said Jodi Sally, vice president of marketing for Toshiba's digital A/V systems. "It's difficult to hear people say HD-DVD is dead. But we have been declared dead before." Sally said Toshiba had sold 1 million units and 49.3 percent of all high-def DVD players to date, followed by Sony (29.4 percent) and Samsung (13.7 percent). -- Additional reporting by Rick Merritt All material on this site Copyright 2008 CMP Media LLC. 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