Blu-ray vs HD-DVD in Next Generation Game Consoles
August 27th, 2007
Daniel Eran Dilger
While the war between Microsoft’s Xbox 360 and Sony’s PlayStation 3 to deliver the next video game platform is being overshadowed by the success of Nintendo’s Wii on the gaming side, Microsoft and Sony are also fighting to deliver the next HD replacement for the DVD.
Blu-ray vs HD-DVD.
The two HD disc formats differ enough in their technology implementations to be incompatible, but both the Sony/Philips designed Blu-ray and the HD-DVD from Toshiba/NEC are very similar in what they offer: a next generation candidate for the DVD with higher definition and new DRM.
Where DVDs use MPEG-2 video coding on 8.5 GB discs using CSS–a DRM method that has been broken–both of the newer HD formats expand to add support for more sophisticated MPEG-4 H.264 compression, at least four times more capacity, and new forms of DRM that are more difficult to break and easier to reestablish after being hacked.
[Apple TV: Using DVDs and other Video Sources: Beyond DVD: An Ugly Vista]
More Alike than Different.
HD-DVD is supported by the DVD Forum and uses technology similar to existing DVDs. Blu-ray is based on Sony’s high-end PDD pro format. The actual details between the two are so similar that the two formats’ differences are really just a problem for consumers.
Despite the Blu-ray name, both of the HD formats use the same blue-violet wavelength laser, as opposed to the red laser used in DVD or the infrared laser used in CDs. The shorter wavelength lasers can read information packed closer together, but are also more expensive to produce. High volume manufacturing will help bring that price down.
The HD-DVD side is working to advertise being backwardly compatible with DVD, but all Blu-ray players also play existing DVDs, and some–like the PS3–play CD and SACD formats as well. Currently, hybrid players able to play both HD formats are still quite expensive. That leaves the potential for consumers to be torn between the two formats, and wary of investing in a platform and its movies that may end up obsolete. In reality however, there is little to fear, as noted below.
Analyst Carl Howe of Blackfriar’s Marketing wrote in July that Sony wasn’t dropping its PS3 console price just to compete against the Xbox 360, as Nintendo’s Wii was still half the price of the high end PS3. The real battle for Sony is adoption of its Blu-ray HD movie format.
Microsoft offers an optional HD-DVD player for the Xbox 360. Bundling it in would raise the price of the 360 to match Sony’s console, but being optional means far fewer people have chosen to buy it. While Microsoft is aligned with the HD-DVD side, it has less to gain because it lacks Sony’s movie business.
Microsoft managed to get its VC-1 codec–the company’s proprietary variant of MPEG-4, which it pushed through the SMPTE standards organization to rival the ISO’s actual MPEG-4–specified as part of both formats, while Sony has all of its chips behind Blu-ray.
Howe reported that just 103,000 standalone Blu-ray players have sold, apart from the 6.2 million Blu-ray equipped PS3s Sony has shipped (and stuffed the channel with). In comparison, only 310,000 HD-DVD players have sold, even including the optional HD-DVD drives sold for the Xbox 360.
If it weren’t for Sony’s efforts to push Blu-ray in the PS3, its format would be behind; instead, it is far ahead, creating a market where Blu-ray movies outsell HD-DVD titles by 2 to 1.
Sony’s movie arm, which includes Sony Pictures and MGM, is distributing its HD movies exclusively on Blu-ray, as are Disney, 20th Century Fox, and Lionsgate. Warner Bros. and New Line Cinema support Blu-ray, but not exclusively.
Blockbuster Video and Target have also aligned with Blu-ray, offering and featuring it exclusively in the majority of their stores.
In the computing world, Blu-ray is supported by Sun, which contributes toward its Java-based interactive menus, as well as manufacturers including Apple, Dell, HP, Samsung, and LG. The last three have also supported HD-DVD.
Apple has not produced any Blu-ray products, despite having announced its support for Blu-ray in early 2005. Dell, HP, and Sony have released PCs with Blu-ray drives.
Apple on the HD Fence.
The rumor mill widely predicted Apple would ship Blu-ray drives in Macs this spring, but none showed up. While Apple has been on the Blu-ray board since 2005, it has also announced support for both formats, but delivered hardware for neither. There are multiple reasons for this:
- First, HD disc players add significant cost and risk. Low early adopter sales of HD disc players indicate that the market isn’t yet ready to throw away DVDs, and the warring between the two camps is helping to keep prices high and buyers worried about which format will deliver the most content.
- Second, HD playback requires extraordinary new levels of DRM. Unlike DVDs, which simply playback with special restrictions in a software player and can be output from any video port on a PC, the new HD formats both require a specially secured video card and a specially secured display using Intel’s HDCP DRM. If any link on a system–from the player to the display–fails to pass the HDCP security check, the video either won’t work or it can only be viewed at the limited resolution of a regular DVD.
- Third, Apple has its own plans for video distribution in iTunes and Apple TV, which delivers at downloads that currently have “near DVD” quality, and have the potential to deliver better than DVD quality, 720p video. While not directly competitive with the HD discs offering 1080p video and digital sound, iTunes also lacks the over the top DRM and is much less expensive.
- Fourth, while Apple is currently pursuing its own strategy in consumer playback, it is also involved with professional production, and that market suffers none of the price and DRM penalties affecting consumers. Apple’s Compressor and DVD Studio Pro both provide support for HD-DVD authoring, but give no future outlook for Blu-ray authoring.
Microsoft and HD-DVD.
Microsoft’s support for HD-DVD on the Xbox 360 and in Windows Vista was intended to push PC makers toward HD-DVD, but the small installed base of HD-DVD players in PCs isn’t turning any tide. In fact, the HD-DVD format has been looking like the clear loser.
As is the case with Apple, PC users face the same set of problems surrounding HD discs’ price, compatibility, and DRM. The vast majority of Xbox 360s sold don’t have an HDMI port, so even with an HD-DVD player, they can’t output an HD signal from movies policed with HDCP DRM. Users with Vista PCs can’t easily play back HD-DVD movies in the living room without buying a whole new HDCP-compliant system, including a supported display; many existing HDTVs don’t handle HDCP.
The main reason Microsoft is backing HD-DVD is because it wants to promote its VC-1 codec (also known as Windows Media 9) over the industry standard AVC MPEG-4 H.264. The majority of HD-DVD discs currently use VC-1, and both the Xbox 360 and Vista include VC-1 support as their preferred playback codec.
However, since the specification of both Blu-ray and HD-DVD players requires support for VC-1, Microsoft doesn’t need the HD-DVD format to win in the way Sony desperately needs Blu-ray to come out on top. That’s why Sony is trying harder. Microsoft is primarily working against H.264, a battle it can continue to fight on Blu-ray even if HD-DVD dies.
The practical barrier of the limited installed base of HD-DVD players–installed mainly in PCs, rather than players cabled to HDTVs–is preventing HD-DVD from gaining against Blu-ray in most territories outside of Europe. There, particularly in Germany, the lack of DVD-style region control makes HD-DVD more attractive.
While DVDs set up 6 regions around the world to create artificial trade territories and prevent DVD releases from beating theatrical releases to markets outside the US, HD-DVD has no region code system.
Blu-ray has three regions; it places Southeast Asia and Japan in with the US, but Europe in with Africa and Australia, and the rest of Asia with India and Russia.
That essentially makes the US and Japanese market “region free” while segregating Europe into its own zone, ensuring that Europe will get popular Blu-ray titles later and likely at higher prices.
However, apart from Europe and the Windows Enthusiast group waiting for Vista and Xbox 360 sales to take off, the world has largely aligned behind Blu-ray.
It was therefore a surprise that Paramount and DreamWorks recently announced efforts to exclusively support HD-DVD, joining Universal and reigniting what was considered to be a war that was nearly over. Paramount’s move resulted from a $150 million incentive from Toshiba and the HD-DVD consortium, which Blu-ray supporters naturally described as a desperate bid to keep the war going and as a move bad for consumers.
How About Both?
Warner Bros. is supporting both formats, and credits its dual HD format strategy with earning it 30% market share in HD disc sales. Is there room for two? Unlike the VHS vs BetaMax wars of the early 80s, the Internet has removed the set of barriers that killed Sony’s format back then, including finite shelf space, tape length, and movie rental availability.
It’s also unlikely that HD media purchased today will languish without a player even if one side wins out, as a number of hardware makers a working to drill down the manufacturing prices related to dual format players. Warner Bros. is pioneering an effort to deliver “Total Hi Def” discs, with Blu-ray on one side and HD-DVD on the other.
Apart from Sony, most studios would be happy selling either format. Apart from Toshiba, NEC, Microsoft, and others heavily invested exclusively in HD-DVD hardware, most hardware manufacturers would be happy selling dual format players.
One of the reasons for Sony’s PS3 push–beyond establishing an overwhelming majority platform for Blu-ray–is to help drive down the manufacturing cost of Blu-ray player components through high volume sales. Sony is banking big on the success of Blu-ray, which is potentially more important and valuable to the company than the gaming side of the PS3.
How About Neither?
However, the success of the Wii over the Xbox 360 and PS3 indicates that mass market consumers aren’t ready to empty their wallets to acquire a new game and movie playing platform featuring stronger DRM simply to watch enhanced quality HD films and play more impressive looking versions of previous years’ games.
That bodes well for Apple’s online video delivery strategy for iTunes and the Apple TV, iPod, and iPhone, which looks past the shiny cutting edge of HD to see that more consumers are interested in lower priced video at acceptable quality.
Low price and acceptable quality has commonly beat out high price and exceptional quality, from VHS vs BetaMax, to videotape vs LaserDisc, to CD vs SACD and DVD-Audio.
By offering progressively improved, low priced video content, Apple can avoid the excessively restrictive DRM quagmire associated with the HD disc formats and benefit from a wider entertainment market that targets not just HDTVs, but mobiles, iPods, and standard TVs. It just needs to talk the studios into playing along.
Thinking Outside the HD Box.
Apple has made deals with Google’s YouTube to deliver content directly to the Apple TV and iPhone, and lined up a wide variety of commercial TV content and free podcasts, but it has had a harder time getting movie studios to sign up. Apple debuted movie titles from Disney last fall, then added Lionsgate and MGM, boasting “over 500 titles.”
Oddly, iTunes also only lists 25 independent movies for sale. Apple should really target a wider range of content. By pushing to deliver a broad library of content, Apple could circle around the HD disc wars and end up as the delivery content medium replacing the DVD itself, following the pattern of Nintendo’s Wii to outplay the HD game consoles.
Apple is likely to announce more iTunes content deals at its next event rumored to be just a couple weeks away.
The Low Priced Content Game.
There is also a clear opportunity in gaming Apple should take advantage of for the iPhone and a new generation of similarly OS X-based iPods coming out soon. Through low priced game downloads, Apple will be able to deliver a new casual gaming platform of users eager to pay for new software.
Even better, Apple will be able to sell software itself rather than being forced–as most software developers are–to steeply discount its titles in order to sell them through retail stores. That means the company can offer low priced software titles and still make a sustainable profit through direct sales in iTunes.
Apple has already committed to releasing regular new software updates for the iPhone for free, and its $5 games for the iPod, 99 cent iTunes, and $1.30 DRM free iTunes Plus offer an assurance that the company understands the value of low software prices to drive volume sales. Competing against Verizon Wireless’ $2 ringtones and $5 monthly game rentals, it appears Apple has lots of potential to clean up in the mobile arena.
The remaining question is how well Apple will do with its Apple TV hobby. Paired with nearly a million iPhone users, tens of millions of video iPod users, and hundreds of millions of iTunes users, Apple’s installed base in iTunes video delivery is far larger than HD-DVD and Blu-ray combined.
Continues: Origins of the Blu-ray vs HD-DVD War
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