Blu-ray, HD DVD Battle Royal Seen For 2007

By Jennifer Netherby -- TWICE, 1/8/2007

The delays in launching both high-definition DVD formats in 2006 mean HD DVD and Blu-ray Disc will battle heartily — perhaps even to the death — in 2007, as each strives to build its installed based and deliver more movies with the ground-breaking interactive extras that will showcase a real difference over standard DVD.

2006 closed with the installed based for HD DVD, including Xbox 360 HD DVD add-on drives, at an estimated 300,000 homes. Rival Blu-ray players, including PlayStation 3 consoles, were believed to be in anywhere from 900,000 to 1.2 million homes, according to studio estimates.

Blu-ray backers are quick to say that the scales tipped in their favor in November when the installed base grew exponentially overnight with Sony's PlayStation3 debut, but movie sales were still tipping in HD DVDs favor up to year-end.

Sony Pictures Home Entertainment worldwide president David Bishop said the company is projecting a worldwide install base on the PS3 between 4 million to 6 million by March.

"HD DVD won't come close to having that install base," he said. "I think that's when you really see everything shift."

Still, HD DVD is far from being out. The format, which debuted first and has a cheaper player price, outsold Blu-ray for much of 2006. Movie sales on Blu-ray more than doubled in the weeks after PS3's debut, but through the end of November, HD DVD sales were still outpacing Blu-ray by as much as 3 to 1 at some stores.

And it's still unclear how many initial PS3 owners, mostly hardcore gamers, will use the console to watch movies. Sony included a Blu-ray copy of "Talladega Nights: The Ballad of Ricky Bobby" in the first 500,000 PS3 players out and said research the first week after the console's debut showed users were interested in watching movies on it.

Roughly 85 percent of consumers said they were more interested in buying Blu-ray movies to watch on the game player after watching "Talladega Nights" on it, Sony said.

Meanwhile, Microsoft said sales were strong for its Xbox 360 HD DVD add-on drive, released in November for $199. Sources estimate the company shipped 100,000 units at launch.

Both Blu-ray and HD DVD backers plan to continue aggressively marketing to the early adopter crowd.

"The difference is that there will really be two different sets of early adopters because of the fact that the PlayStation 3 is in the market at the same time the (set-top players) are," Bishop said. "There's the more traditional videophile we'll be marketing to, then you'll have a younger demographic that represents the gaming community."

One exec at a neutral studio said both sides could still sway the market their way. There is talk that Chinese manufacturers could start making HD DVD players in 2007, which could sell for as little as $299, wooing over more consumers, particularly if Wal-Mart were to stock them. HD DVD players are already a hundred dollars less than the cheapest Blu-ray — $499 for an entry level Toshiba player vs. $599 for a PlayStation3.

But as production ramps up on Blu-ray, those costs should start to decline. Blu-ray backers are hoping that their broad software and hardware support will convince consumers that they're the format that is here to stay.

Both sides are also rushing to add new interactive bonus features to sell consumers on the upgrade from standard DVD. Blu-ray will launch BD Live, where consumers will be able to access new bonus features like commentaries or even potentially play interactive Blu-ray movie games with other players around the world. Similarly on the HD DVD side, Microsoft is working with studios to create a server where consumers could access new high-definition bonus features like additional commentaries.

Buena Vista Worldwide Home Entertainment president Bob Chapek said additional releases and bonus feature capabilities due in the year will elevate Blu-ray in consumers minds.

"I think things will become much more clear," he said.

Retailers are anxious for the format war to end, believing some customers will hold off on switching to high-definition disc until there is a victor. During the holiday season, Best Buy employees were told to tell customers that one format may not be around long, which a spokesman said makes either player a hard sale.

"We're not lukewarm about the potential and desire for people to have a high-definition format," spokesman Brian Lucas said. "We are lukewarm about the fact that the industry hasn't come together and resolved the format war because that's tempering the interest from customers and confusing customers."

2006 Top Sellers

HD DVD*

1. Serenity

2. Batman Begins

3. The Last Samurai

4. Mission: Impossible: III

5. Apollo 13

Studio support: Sony, Disney, Fox, Warner, Paramount and Lionsgate

Blu-ray Disc*

1. Underworld

2. X-Men: The Last Stand

3. The Fifth Element