[opendtv] News: As growth slows, Hollywood faces a DVD standoff
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Mon, 11 Jul 2005 08:34:57 -0400
http://www.iht.com/articles/2005/07/10/business/dvd11.php
As growth slows, Hollywood faces a DVD standoff
By Ken Belson The New York Times
MONDAY, JULY 11, 2005
CENTURY CITY, California The Hollywood studio executives who gathered
here at an annual home entertainment summit meeting last month were
all chuckles and backslaps. In front of several hundred industry
managers, analysts and reporters, they talked breezily about hit
movies, DVD sales and prospects for the holiday season.
Then, with a few minutes left, the moderator asked the question
everyone had been waiting for: Can the studios break the deadlock
between the rival camps developing the next generation of digital
videodiscs, players and recorders?
The question was not academic. Hollywood has been unable to decide
between two new formats, Blu-ray and HD DVD. Tens of billions of
dollars in potential sales hang in the balance.
Before anyone could answer, Thomas Lesinski, president of home
entertainment at Paramount Pictures, jumped in and said it would be
"counterproductive" to discuss the issue while negotiations were
going on behind the scenes. Stunned by the response, the audience
responded with nervous laughter, and the other executives fell silent.
Lesinski's testy reaction was a sign of how touchy the debate over
the competing formats has become. To just about everyone's regret,
the studios are split over which group to support. Sony's studio and
Disney, with 39 percent of the DVD market, back the Blu-ray group,
which includes Sony, Panasonic, Hewlett-Packard and others. Warner,
Universal and Paramount, with 43 percent of the market, support the
HD DVD standard developed by Toshiba and NEC.
Fox, MGM, Lion's Gate and others that together have the remaining 18
percent of the market have yet to declare their allegiance.
Since the rival discs are largely incompatible, the studios have
been unable to persuade the manufacturers to reach a compromise.
Players for both are expected to be compatible with the current
generation of DVDs, however.
Studios, retailers and electronics, computer and video game makers
are still gearing up for a format war over the new technology, which
promises high-definition video, enhanced audio and numerous
interactive features.
In the fourth quarter, consumers will start seeing high-definition
DVD players and movies in stores. But because there is no foreseeable
end to the format fight, retailers and studio chiefs say they expect
shoppers to shy away. After all, the equipment could quickly become
obsolete, just as the Sony Betamax home machines faded in the 1980s
after losing out to the VHS format.
With no great pleasure, Lesinski said in an interview that if the
rivals released competing discs and players, each would probably
generate half as much revenue as only one new format would.
"Both sides have so much vested in their technology that no one
wants to blink, given the potential upside," Lesinski said.
Paramount, along with Warner and Universal, will release 89 movies
this year in the HD DVD format.
The three studios have backed the HD format because the technology
is essentially an upgrade of existing DVD technology, so it requires
less investment and time to produce. Toshiba says it can make the
discs now for just a few pennies more than today's discs.
Yet, as Blu-ray advocates love to point out, their discs are capable
of offering better-quality video because they hold more data, about
50 gigabytes versus 30 gigabytes for a double-layer disc. (Current
DVDs hold less than five gigabytes.) Blu-ray also gives the studios
and game makers more room for interactive features. These goodies,
they say, will make it more attractive to consumers, who will have to
pay about $1,000 for the first machines.
"Some of these things chew up a lot of capacity," said Bob Chapek,
an executive with Buena Vista, a unit of Disney.
But to get all that, the Blu-ray companies are creating production
techniques that are taking a lot more money and time. Though Sony,
Panasonic and others now sell Blu-ray recorders and rewriteable discs
in Japan, they are still testing the read-only discs that the
Hollywood studios need.
The issues of cost and time to market would not matter much if sales
of the current generation of discs, players and recorders were
booming. But there are plenty of signs that they are not.
The studios know that the percentage of U.S. homes with a DVD player
is nearing the saturation point, 80 percent, and that the latest
converts typically buy fewer discs. While sales of discs are expected
to rise 13 percent this year in the United States, the days of 30
percent to 40 percent annual growth are just a memory.
High-definition DVDs give them something new to sell.
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