Next Gen DVD Standard Fuels Format War

An industry group has approved a standard for the next generation of DVD players, but the move could be just the first skirmish in a future format war.

The Tokyo-based DVD Forum has given its nod to a design for “blue laser” DVD players proposed by Toshiba and NEC. Blue-laser players use DVDs that store five times the data of current DVD discs. That allows them to store up to three hours of high-definition video, which will be important as more HD TVs begin appearing in homes in the next five years.

Sony Group Shunned

The Forum had previously announced that it would only approve one blue-laser standard so it appears that the group has rejected the “Blu-Ray” standard submitted to it by a consortium that includes Sony, Matsushita and Philips.

That rejection could light the fuse to a format war similar to the one that created the existing multiple-format DVD market with R/RW, +R/+RW and RAM all competing for adherents. During that war, the Forum, a group of some 220 electronics and media companies, came down on the side of R/RW, which didn’t seem to put a kink into +R/+RW sales.

“I don’t think it matters,” said Jerry Brown, a spokesperson for the +RW Alliance in Denver, said of Forum approval. “It’s like Honda not approving of Ford cars.”

What is important, he continued, is having major players behind your format. In the +R/+RW case, those players were Dell and HP-Compaq, which represent about one third of all PC sales in the world.

Consumers Will Decide

Marketing muscle alone, however, won’t determine the survivor in a standards war. “The real decision gets made by what consumers will buy,” he told TechNewsWorld.

But when it comes to DVD players, there’s another element that’s very influential in determining what consumers will buy, and that’s the movie industry. Whatever standard is backed by Hollywood is sure to be the winner in a format shootout, and, according to analysts, the film industry will be backing only one standard and avoiding the consumer horror show that resulted during the VHS-Beta era.

Content Protection

Right now, though, the movie business is less concerned about what standard is adopted than it is about what will be included in any standard advocated by anyone.

“We have met with nearly all the format developers to convey the importance of content protection in these new formats,” Motion Picture Association spokesperson Matthew Grossman told TechNewsWorld. “But we don’t have a public position on one format over another.”

What’s at stake for manufacturers if format strife erupts is how much licensing revenue they will garner during the next wave of DVD development. Always known as a low-margin industry, licensing has been used by consumer electronics companies to boost thin margins. Philips, for instance, expects to double its 2 to 2.5 percent margins with licensing income.

Chinese Wild Card

While licensing income might bring smiles to companies collecting it, it’s another story for those paying those fees. In China, royalty fees can add as much as $10 to the cost of a DVD unit, which might be why that country has elected to become a wild card in the DVD format saga.

Late last month, a group of Chinese companies and government agencies announced their own high-definition DVD standard for domestic consumption: Enhanced Versatile Disc (EVD). The technology, which uses a red rather than blue laser pickup, is seen by some as a direct challenge to the work done by the Forum and the Blu-Ray consortium.

While several Hollywood studio executives were reportedly at the unveiling of EVD at the Great Hall of the People in Beijing, they remained mum on the industry’s high-definition direction.

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