The Big Defection
By Shane Buettner
Well, so much for being on vacation. Yes, your intrepid editor here has been attempting to get some time away from the AV rat race, but, in the words of the immortal Michael Corleone (cue the deep, gravelly voice), "they pull me back in."
Yeah, this week's defection by Paramount got me banging away of my keyboard frantically, much to the chagrine of Mrs. Editor and Editor Jr. But hey, if the format war's not taking a vacation I guess I'm not either.
Scoping around at the pieces of op/ed that heavy on the op, there are some common threads as far as the reaction goes. The story that Paramount and DreamWorks pulled the rip cord on the switch-eroo from a $150 million golden parachute has been repeated often enough to be considered Internet fact (ahem). And surprisingly reports have Paramount getting $50 million and DreamWorks taking the $100 mil balance. Hey, now we know why Shrek is green.
I'm still processing my thoughts on this, but here are some initial scattered reactions to both the announcement and some of the reaction to it. An be kind- I'm on vacation, so this isn't as coherent as it ought to be because I'm not!
First, make no mistake, this is significant. Part of the Blu-ray spin is that Paramount and Dreamworks don't put out aneough titles to shift the balance, they don't have as many big movies coming out, etc. While overall, much of this is true, this is still a big deal. With overall HD sales so low, a few huge sellers can make a big difference- and make no mistake, Transformers and Shrek 3 are the kind of titles that could have an impact.
And certainly the downside of that is that the format war is far likelier to continue longer now. We're definitely closer to parity than we were, and I'll just say it- it also makes things closer to a tipping point in favor of HD DVD. It seems possible to me that if the war looks like a long term thing after this Christmas, it doesn't seem overly farfetched to think that maybe a big studio like Disney might be more likely to also look at releasing on HD DVD.
According to my sources, Disney took part in developing the HDi interactivity layer, and according to some has been disappointed in Blu-ray's lack of interactivity (games that suck and choke up your player to boot just don't count). Just as Universal would tip the war perhaps irrevocably in Blu-ray's favor by issuing in that format, Disney could also swing a ton of momentum for HD DVD. I have no inside info on this, but if cheap Asian players really flood in and HD DVD holds its own this holiday season, who knows?
On Paramount and DreamWorks selling out consumers' best interests, welcome to the sad state of the world. In my opinion, many of the same people who are saying Paramount screwed consumers would be applauding if Blu-ray had been chosen. Anyone really think with all Sony has invested in Blu-ray, that if times get desperate, that Sony's above offering a pile of cash for support? This move is under more scrutiny now because for many it seemed that the end of the format war was in sight, with Blu-ray's yearlong dominance.
We don't really know what incentives financial or otherwise that Sony and the Blu-ray Association has given to Warner, Fox Disney or anyone else. So how can we say Paramount and DreamWorks sold anyone out any more than Disney or Fox? And another story floating around is that Disney and Lion's Gate almost switched to HD DVD last year before being brought back into the exclusive Blu-ray camp by a healthy amount of incentives of some kind or other. So, this is something going on with both camps according to some, and frankly, lousy as it is, that's what happens in a format war.
Other opinions are painting Microsoft as the bad guys, and hey, everybody seems to love to hate MS, so why not hang the black hat on Bill and Co.? Hell, I'm an iPhone carrying Mac guy myself. One line of thought here is that Microsoft ponied up the cash for the Paramount bribe and is hooking up the studios with VC-1 encoding and HDi help in exchange for exclusive download content. Tangential to this theory is that MS wants the format war to last long enough to keep consumers from mass adoption of either format so that downloads through the Xbox Live Marketplace win the format war.
I don't know that anyone really knows where or how MS is spending its money here, but one thing I do know is that the people I've come across from MS who are supporting HD DVD, VC-1 encoding, HDi intereactivity et al, are to a person among the most passionate hi-def enthusiasts I've come across. And passionate about the overall quality and features that for now are solely the province of HD on a disc, not download. If there's a conspiracy among those at MS, either the people I've interacted with are the best actors in the world or they aren't aware of it. Not saying it doesn't exist at some level just saying I haven't seen it.
And in a sense, there is some ironic humor in the idea that piracy paranoid Hollywood might inadvertently strengthen the download devil in a short-term cash grab. Download is going to be a major force in content distribution at some point, but most pundits think that time is years away, and in the meantime there's plenty of time for another disc format (or two) to make a dent. No physical media (nor two or three combined) will ever be as ubiquitous as the DVD was, but I expect one or both of these formats to be viable for years, even if it's eventually just to the quality conscious niche.
Another story being bandied about is that Paramount's Blu-ray authoring and replication costs had been subsidized previously, and once that subsidy ended and Paramount looked at the costs involved it decided that HD DVD offered more for less. BD authoring, especially in the Java environment, is supposedly very time consuming and therefore expensive, and yields are reportedly low and costs high on disc replication. Speculation I've seen (but admittedly not verified) has placed replication costs of a BD-50s (50GB dual-layer discs) as high as $4 a piece in the small runs often being done at this point, with HD DVDs coming in closer to $1.25 or so. That is substantial if even remotely correct.
On top of that, another story I read noted something I've been beating the drum on a bit here at UAV. That Paramount likes the stability of the interactivity feature set and consistency with players on the HD DVD side. Not to mention, that since even the first-gen HD DVD players are now compatible with web-enabled features that more revenue possibilities are open on the HD DVD side right now. Standalone Blu-ray players appear to be a few months out on catching up with Picture-In-Picture capability at all, and it looks like web-enabled features are another generation or two away for anything other than the PS3.
I don't know that interactivity will sell either format to the masses, but I believe the studios think it will help.
And let's not get too carried away. HD DVD still has a long row to hoe. Even with Shrek 3, Transformers and (probably) Bourne Ultimatum coming on exclusive HD DVD releases, Blu-ray is manning the ramparts with a wave of exclusive content, including Close Encounters, the Spider-Man Trilogy, Cars and Ratatouille from Pixar, Pirates of the Caribbean: At World's End and a few others. Player prices are below $499 and likely to drop more.
Still, it's going to be wild ride this holiday season.
