The DVD Factor

2/08/2008 7:00 PM Eastern

Looks like we have a winner. The Sony-backed Blu-ray Disc format last month gained the upper hand in the high-definition battle for supremacy against rival HD DVD, when Warner Bros. announced it would release titles only in the Blu-ray format as of June 1.

The Warner move prompted industry analysts to call the bout in favor of Blu-ray. Toshiba’s HD DVD format still has supporters, but several manufacturers of HD DVD players have since slashed prices.

In any event, Blu-ray is expected to pick up momentum in 2008, with manufacturers shipping as many as 6 million players — including 4 million PlayStation 3 consoles — this year, according to estimates by 20th Century Fox Home Entertainment. That would bring the number of devices that can play Blu-ray DVDs to around 10 million.

Optical-disc format designed for HDTV:
SOURCES: Blu-ray Disc Association, Multichannel News research
Capacity: 25 Gigabytes single layer, 50 Gb dual layer
Video codecs: MPEG-2, MPEG-4 Advanced Video Coding, VC-1
Major manufacturers: Sony, Panasonic, LG, Phillips, Sharp, LG, Samsung, Thomson
Major studios: Walt Disney, MGM, Warner Bros., 20th Century Fox, Lionsgate
Pricing: Movie titles are $25-$30, versus $15-$18 for regular DVDs

The question for cable operators is, now that Blu-ray appears ascendant, what effect might it have on consumer expectations for HDTV services? Some believe subscribers will become even more demanding on HDTV, while others said the comparison is apples to oranges.

Blu-ray supports the 1080p high-definition standard found in most HDTVs sold today. That provides 60 frames per second at 1,920-by-1,080 native resolution. Cable HDTV services typically deliver video in 1080i, which has half the frame rate.

Plus, Blu-ray can provide video encoded at up to 40 Mbps in MPEG-2 format. That’s more than twice the rate cable operators use to deliver even their highest-quality HD signals.

“Blu-ray will raise the bar on HD quality because you’ll be getting very, very high bit rates with that,” Motorola senior marketing director Marty Stein said.

Cable operators may be driven to offer a similar HD premium service, with higher picture quality at 1080p, said Matthew Goldman, vice president of compression systems technology for Tandberg Television.

“Tiering of different HD services based on picture quality is plausible,” he said, noting that standard DVDs are at a lower price point than HD discs.

But Leichtman Research Group president Bruce Leichtman, for one, said he doesn’t see Blu-ray having any impact.

“It’s not an 'either/or’ between HD service and Blu-ray discs,” he said. “Consumers will expect more from Blu-ray … and I think will view it as superior, rather than cable and [satellite] HD as inferior.”

Similarly, Starz Entertainment executive vice president of affiliate sales and marketing Ed Huguez said that neither high-definition DVD format should have a significant effect on the ability of cable operators to market HD services.

“For most consumers, the picture quality of HD channels and HD on-demand services is terrific, and video service providers have the ability to ratchet up the bandwidth as needed,” he said.

Analyst James McQuivey at Forrester Research agreed that cable or satellite HD services will not compare poorly “since most people don’t have the visual sophistication necessary to know the difference, especially when even poor HD is so much better than standard definition.”

He added, though, that cable operators’ HD video-on-demand services may be “endangered” by Blu-ray. That’s because, in McQuivey’s opinion, buying or renting a Blu-ray DVD will be far easier than ordering VOD.

The opportunity for cable companies, he said, is to improve the VOD experience before high-definition DVD technology gets entrenched and consumers “permanently shift” away from today’s regular DVD.

“It’s actually easier to pop out to Blockbuster for a DVD and maybe a pack of microwave popcorn than it is to wade through the slow and tedious VOD menu,” he said.

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