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Corporate Conglomerates Compete for DVD Domination

Marty Schroeder | Wednesday, April 26, 2006

Hitting the U.S. markets in March 1997, DVD players and discs ushered in a new era of watching movies at home. Greater clarity in sound and video marked a drastic improvement over the existing VHS video format. Small, compact, disc-sized units could hold more information and present the consumer with a better viewing experience. DVD has since become the industry standard in releasing feature-length films into American households. But a new system is on the horizon and it seems the transition will not be so easy. The end of the DVD is nigh and, in its place, the High Definition-DVD (HD-DVD) and Blu-ray systems battle for position. The fight will not be only over movie buyers, but also video game players and computer users.

On Nov. 19, 2003, a consortium of software, hardware and media companies dedicated themselves to the research and advancement of DVD technology. Known as the DVD Forum, the group announced that HD-DVD would be the high definition successor to the DVD. The DVD Forum is known for its focus on consumer electronics and the Japanese market. It is also responsible for the licensing and specifications of DVD technology and several of its founding members include Sony, Toshiba, Phillips and Time Warner. These companies would later become chief players on both sides of the HD-DVD/Blu-ray divide.

In response to the DVD Forum’s decision to back HD-DVD, the Blu-ray Disc Association announced on Oct. 4, 2004 that it would support the rival Blu-ray technology. This organization is the successor to the Blu-ray Disc Founders and includes Apple, Hitachi and 20th Century Fox. Also, DVD Forum founding member Sony has joined the Blu-ray Disc Association. This is significant for two reasons – the Playstation 3 (PS3) home game console will be using Blu-ray technology and since Sony owns the entirety of the massive MGM film library, all new home releases from this extensive catalogue will be released on Blu-ray instead of HD-DVD.

HD-DVD and Blu-ray are moving forward by improving on already existing DVD technology. Where DVD players use an infrared laser to read and write on the discs, HD-DVD and Blu-ray use blue-violet lasers. The key difference is the size of the laser. Where DVD technology uses a 650 nanometer (nm) laser, HD-DVD and Blu-ray use 405 nm lasers. This reduces diffraction and allows the smaller laser to read information on the disc at a higher density, increasing the capacity of the disc.

The multi-layer capacity of the DVD is also being used. HD-DVD is currently able to store 15 gigabytes (GB) on a single layer as opposed to 8.5 GB for dual-layer DVDs. Dual-layer HD-DVDs in development are already moving the capacity to a ceiling of 30 GB. Blu-ray, on the other hand, is able to hold 25 GB per layer. This means 50 GB for the already developed dual-layer. One hundred GB four layer and 200 GB eight layer discs are also in development.

Sony is arguably the most high profile member of the Blu-ray Disc Association with its influence in the home console market. In only five years and nine months of its release, Sony had shipped 100 million Playstation 2 (PS2) units. This broke the previous record of nine years and six months held by the first Playstation. The PSP hand-held console has also helped Sony garner brand loyalty and open its markets. As a result of the dominance that began in 1995 with the release of the original Playstation, companies interested in Blu-ray are paying attention.

Of all the major Hollywood studios, only Universal has said it will support HD-DVD exclusively. Paramount and Warner Bros. are in non-exclusive deals with both and will be releasing their titles on both formats – claiming this will give the consumer more choice in the matter. Sony Pictures, MGM, 20th Century Fox and Disney, on the other end of the spectrum, have joined the Blu-ray camp exclusively. As aforementioned, the PS3 is expected to be the first high definition DVD player in most homes. Due to this, Hollywood studios will be sure to note market trends, as they want to make sure the world is watching their respective movies.

The software companies are also throwing up their banners in support of one or the other. Video game behemoth Electronic Arts (EA) – known for its sport gaming titles – has supported Blu-ray technology. Sports gamers form a large section of the video game market so fans of the NCAA football, NFL football and other series of sports games should take note. Square Enix, makers of the famous “Final Fantasy” series of role-playing games, is releasing Final Fantasy XII exclusively on the PS2. This seems to indicate the series is returning to releases only on Sony platforms that began with Final Fantasy VII and was only interrupted by the multi-platform Massively Multiplayer Online RPG (MMORPG) Final Fantasy XI.

However, HD-DVD is not without its backers. PC goliaths Microsoft and Intel have announced their support for HD-DVD. Microsoft – estimated at having 90 percent of the client operating system market – is a giant in terms of the computer market. With their Windows operating systems and software suites such as Microsoft Office, they are an inescapable software developer. Also, their foray into the gaming world began with Xbox and has continued with the Xbox 360, which was released earlier this year. While having nowhere near the clout that Sony has in the home console arena, they have developed a niche using online systems that enhance the gameplay of titles such as “Halo 2.”

As far as release dates are concerned, HD-DVD has hit the market first. Toshiba has released a HD-DVD player and Warner Home Video has released “The Last Samurai” and “The Phantom of the Opera” – among several other titles – into the US market. On the Blu-ray end, Sony has claimed difficulties in the development of their Blu-ray technology and has delayed the release of the PS3 in the United States to fall of 2006. In light of this, the rest of the Blu-ray Disc Association has delayed the release of Blu-ray products until June 2006.

With no clear-cut front-runner, it will take a major release to give one the advantage over the other. This will come with the PS3 and, once it is released, the two groups can gauge the market response and a clear frontrunner will emerge. If the PS3 has the success that its predecessors had, it may well be that Blu-ray DVDs will become the basis of American home entertainment.