Fuzzy picture

Consumers will soon be able to purchase DVD players and discs that take better advantage of their high-definition televisions. Beyond that, lies complication.

Consumers will soon be able to purchase DVD players and discs that take better advantage of their high-definition televisions. Beyond that, lies complication.

In every circle of friends, there is the oft-mocked mate who has a TV from 1996 and a sizeable stable of VHS tapes from an era where the Brat Pack was relevant. This friend, who will claim to be a card-carrying member of the Luddite club, will stick to his or her dial-up-rigged, coffee-damaged PC while the world updates and upgrades. Perhaps this individual has a Betamax hiding in his or her closet, a reminder to how committing to one format in an undecided market can burn. So forgive that person if he or she breathes a sigh of relief in not having to deal with the next-generation DVD market, where two competing standards, backed by industry heavyweights, stand to battle for supremacy.

The final round of the battle for the next-generation DVD market began in April, when Toshiba, chair of the HD DVD camp, launched its first player, supplemented by three movie offerings: Phantom of the Opera, Million Dollar Baby, and The Last Samurai. HD DVD, backed by industry heavyweights such as Microsoft and NEC, has about three months as sole provider of next-gen DVDs before Blu-Ray, the competing standard backed by Sony, Apple, and Panasonic, launches its competing format sometime in the summer.

Impartial experts agree that, in principle, the two formats are similar. Specifically, they agree that the difference in quality of the picture is negligible; Blu-Ray has an edge on capacity; and HD DVD has a lower price point. All marvel at how much better both offerings are over the current DVD quality.

"We're not talking about two really different formats; if you want something that's cheaper, available, and ready to go," HD DVD is the best bet, says Wayne Hickey, Weber Shandwick VP and lead on HD DVD Promotional Group account. The Blu-Ray Association could not be reached by press time.

Studios have also chosen sides, further irritating would-be users. As the environment currently stands, HD DVD users would not get to purchase Sony Pictures DVDs like Stealth and Hitch. Although LG Electronics is rumored to be working on a DVD player that would play both formats. Further compounding things again is how video games will fit into this, as Microsoft is rumored to launch the HD DVD add-on capability to its Xbox 360 console at this year's E3 in May. Sony expects to ship its PlayStation3, with Blu-Ray capability, in November.

Consumers looking to the media for help will not be comforted. Headlines like "Next-Gen DVDs' Blurry Picture" (BusinessWeek, March 27) and "Industry divided on high-def video" (Salt Lake Tribune, April 30) are the norm.

The generally accepted figure is that 14% of US homes have high-definition televisions. Cable networks have been slow to roll-out HD channels, so despite the fact all of the movies have been out since 2005, retail stores were reporting sell outs of both the Toshiba player and the DVDs. While that is heartening to the HD camp and all next-generation players, marketers involved in the industry still worry that the B-word lingers.

"People are going to look at this as being the VHS-Betamax situation we all remember," says Heather Stammer, account supervisor for Lane Marketing's Ultimate Electronics account. "All anyone can do is educate consumers about each format, and consumers will need to decide what works best for them."

Christian Averill, account director at Text 100, head of its digital lifestyles group, and lead on the Fujifilm account calls the Betamax analogy apt. Fujifilm is making optical media for both formats.

"Every time a new [offering] comes around, there is a wrangling about formats," Averill says. "The two different camps stuck to their guns, and let the markets and marketing budgets come out [and decide]."

Don Patrican, EVP at Maxell, which, like Fujifilm, will manufacture recordable media for both formats, says Blu-Ray versus HD DVD is reminiscent of the VHS versus Betamax wars of the late 70s, save for one crucial detail.

"The last 'scrape' was so much smaller and insignificant compared to what could happen today," Patrican says. "Back then, VCR penetration was in the teens. And the amount of content available was minimal. The stakes are much greater today than 25 years ago."

While shades of Betamax remain, Averill notes that all the industry settled on one format for the first-generation DVD offering. In a lot of respects, the split boils down to business reasons, something that could sour consumers on rushing to purchase one format or the other.

"A lot of them have vested interests, depending on what they manufacturer or what markets they support. It's all about intellectual property," says Rich D'Ambrise, Maxell director of technology.

Both sides came together for a much-publicized Camp David-like summit, but couldn't emerge with a consensus.

The war heats up

The roll-out for the next-gen DVDs took a multi-year, languid stroll through the media, and for awhile, industry watchers were convinced that Blu-Ray, despite is higher price point, would run away with the competition - a point that which even Hickey candidly concurs.

"If you go back to October last year, they were declaring HD dead," Hickey says. "Sony had this thing wired. It was a battle of the words, and they were communicating a lot better."

Hickey says that was partially due to the consortium focusing nearly solely on the tech-enthusiast outlets, while neglecting the business and consumer press. He says that HD's communications team refocused during the Consumer Electronics Show (CES) with the implicit goal to impel the media to declare the format war a draw by the end of the show.

"We turned the tide slowly. If you look now compared to last fall, there is a lot more positive HD DVD coverage," Hickey says, while adding, "It's a lot easier to fight against an... opponent when you have a product on the market."

Who is the real enemy?

Industry marketers all lament that the format war takes away from the most important task: explaining why consumers should upgrade their current DVD player and movie collection to the next-generation offerings.

"We have to go back to discussing what the difference is between DVDs now and what's coming next," Averill says.

During CES, when HD DVD made its turnaround, Hickey says the consortium decided to focus on that point, not the "war" with Blu-Ray.

"We wanted to say it wasn't just a pissing match between two formats, that we had to convince people [about the benefits in next-generation DVDs] before they switch over," Hickey says.

Patrican laments, "The two formats [issue] will take the focus off the real objective of creating a better high-definition world."

Hickey says that HD DVD camp even limited its outreach to reporters that may have published erroneous information about the format.

"We picked our battles on things by focusing on the focused on the misinformation that hurt the most," Hickey says. "If we knew an expert was writing the article, we contacted them and said, 'Even you don't correct this article, just so you know for future ones."

Averill warns that both sides must ensure they are speaking credibly, realistically, and authentically about their products capacities, prices, and launch dates.

"The temptation now [in the heat of the battle] is to say what they need to say to get into the mix," Averill says. "The danger here is for both camps to either oversell their own technologies or get into [differing] issues that may never matter to the end-user."

Meanwhile, the silent competitor lost in the shuffle is the burgeoning video-on-demand and other non-disc-orientated movie delivery market. It won't matter what the formats offer if everyone has decided to store their movie collection virtually on a hard drive.

"That's growing in popularity, but it's still a small niche," Hickey concedes, while reminding that people still like owning physical copies of their DVD. "In the foreseeable future, there will be a place for both."

Everyone's involved

Lane's Stammer says the agency is helping position Ultimate's staff as impartial experts in the next-generation DVD market.

"The Ultimate staff is full of early adopters," Stammer says, "They can get their arms around [the situation] and explain it to the general consumer and the media."

Lane is going to national consumer electronics magazines and the local media in the nine states Ultimate operates in to position staff as experts.

"It's a really competitive market, so the more they can position themselves as an authority," the better, Stammer says.

Maxell is communicating often with its retail partners.

"Retailers are going to want the two recordable formats," Patrician says. "Clearly no one knows today what's going to happen. It's going to be very confusing for consumers and retailers."

Most of the experts that PRWeek spoke to did not feel comfortable predicting an end-scenario or winner. While most people do expect there to be a winner-takes-all scenario, Hickey, citing the digital audio market (with mp3s, Microsoft WMAs and Apple AACs), says, "There are examples where people are living with different formats."

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