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  • 1920×1080 24p progressive or 50/60i interlaced HDTV (max. video resolution) Three biggest box-office winners in 2006 (Sony, Disney, Fox) all supports Blu-ray. When you consider that those three successful studios will be delivering last year’s successful box office in home video this year, then that's an enormous advantage. Other groups: game, music
  • 1920×1080 24p progressive or 50/60i interlaced HDTV (max. video resolution) Three biggest box-office winners in 2006 (Sony, Disney, Fox) all supports Blu-ray. When you consider that those three successful studios will be delivering last year’s successful box office in home video this year, then that's an enormous advantage. Other groups: game, music
  • 2006 62.85% 37.15% 2007 41.41% 58.59%
  • 0) According to a recent survey by Sony Computer Entertainment America (SCEA) of over 10,000 PS3 owners, 80 percent indicated they will buy Blu-ray movies and 75 percent said they use the PS3 as a primary device for viewing movies. 1) 1:1 on software sales, but hardware is 5:1, so HD DVD still has adv. 2) which means that titles such as Pirates of the Carribean and Cars will only be available for Blu-ray.
  • Slide 1

    1. 1. High-definition DVD Format Wars March 14, 2007 Saud Al Shamsi Vikas Bhargava Karen Hsu Josh Palmer Mark Schelbert Edmund Wong Strategic Computing
    2. 2. Introduction Blu-ray vs. HD DVD <ul><li>In recent years, high-definition (HD) television and HD optical discs entered the market </li></ul><ul><li>Two HD formats have appeared in the DVD market, both claiming to be the rightful successor to the DVD throne: </li></ul><ul><ul><li>Blu-ray (developed by Sony/Phillips) </li></ul></ul><ul><ul><li>HD DVD (developed by Toshiba) </li></ul></ul><ul><li>Measured by most performance metrics these two technologies are the same, except that Blu-ray has significantly larger capacity (66%). </li></ul><ul><ul><li>However, Blu-ray appears to have greater network support </li></ul></ul>
    3. 3. Blu-ray vs. HD DVD Future <ul><li>While the format war rages on, entirely different outcomes are possible: </li></ul><ul><ul><li>LG has introduced a dual-format player and drive </li></ul></ul><ul><ul><li>Internet may replace the DVD as a movie delivery vehicle </li></ul></ul><ul><li>International view: Japan (96% Blu-ray), Europe (pushing for open licensing of both formats), China (proprietary HD format), India (small $ market), South America (unknown); Xbox 360 but still no PS3) </li></ul>
    4. 4. History of Format Wars <ul><li>Before HD, IBM arbitrated a standard DVD format intended to avoid a format war, but the outcome favored Toshiba regarding royalties, leaving Sony unhappy </li></ul><ul><li>In response, Sony began developing the next generation of high-definition optical media </li></ul><ul><ul><li>Toshiba followed suit with its own HD technology </li></ul></ul><ul><ul><li>While there were many “peace talks”, neither party reached agreement </li></ul></ul><ul><li>Comparison: VHS vs. Betamax War </li></ul><ul><ul><li>Despite Beta’s superior quality, VHS won the war because of its strong “content” network </li></ul></ul>
    5. 5. Outcomes of Similar Format Wars <ul><li>Certain format wars were never won, but instead compromised with the introduction of multi-format technology </li></ul><ul><li>DVD-R vs. DVD+R </li></ul><ul><ul><li>Multi-format DVD drives accommodate both </li></ul></ul><ul><li>CDMA vs. GSM </li></ul><ul><ul><li>Can make/receive calls regardless of technology </li></ul></ul><ul><ul><li>Both prevalent around the world </li></ul></ul><ul><li>Flash Memory Formats </li></ul><ul><ul><li>Over 50 different kinds of flash memory </li></ul></ul><ul><ul><li>All-in-one readers handle most types </li></ul></ul>
    6. 6. Tech Comparison <ul><li>Most performance metrics of these two technologies are the same </li></ul><ul><li>Blu-ray storage capacity is more practical for HD movies </li></ul><ul><ul><li>One high-definition movie (~20GB) fits on just one Blu-ray layer (25GB); while HD DVD requires two layers (2x 15GB) </li></ul></ul>* Sources : ProActionMedia, WesleyTech; single layer. 15GB (2 hrs of HD video) 25GB (5 hrs of HD video) Storage (single layer) $500 - $800 $500 (PS3) - $1000 Disc Player Price ~$0.097 ~$0.064 Cost/GB* ~$1.45 ~$1.59 Cost/Disc* 30GB (5 hrs of HD video) 50GB (9 hrs of HD video) Storage (dual layer) HD DVD Blu-ray
    7. 7. Network Comparison <ul><li>While both formats have support from various large companies, Blu-ray has greater support from content providers that are critical to achieving a network effect </li></ul><ul><li>Consumers will follow the format of the CONTENT providers </li></ul>LG, RCA, Toshiba LG, Phillips, Samsung, Sony Player Network Paramount, Universal, Warner 20th Century Fox, Apple, Dell, Disney, LG, Lion’s Gate, Paramount, Philips, Sony (Columbia and MGM), Warner Content Network Microsoft Xbox 360 (external) Sony PS3 (integrated), Electronic Arts (EA) Gaming Network HD DVD Blu-ray
    8. 8. Security, Durability & Other <ul><li>Digital Rights Management </li></ul><ul><ul><li>Blu-ray promises BD+, which allows encryption keys to be modified when they are hacked </li></ul></ul><ul><ul><li>AACS is the copy protection scheme used by both HD DVD & Blu-ray. Took years to develop, but broken in weeks </li></ul></ul><ul><li>Blu-ray more prone to error due to high aperture </li></ul><ul><li>Without protective hard-coating, Blu-ray is easier to scratch (data layer is closer to surface) </li></ul>Disc Aperture Settings DVD 0.6 HD DVD 0.65 Blu-ray 0.85
    9. 9. Current Market Share <ul><li>Sales trends illustrate Blu-ray gaining dominant market share </li></ul>
    10. 10. Why Blu-ray is On the Rise? <ul><li>Availability of Hardware (players) </li></ul><ul><ul><li>Blu-ray (with PS3) : HD DVD = 5 : 1 </li></ul></ul><ul><ul><li>Blu-ray sales up 700% since the launch of PS3 and other players </li></ul></ul><ul><ul><ul><li>687,000 PS3 sold in US </li></ul></ul></ul><ul><li>Availability of Content </li></ul><ul><ul><li>19 of the “Top 20” DVDs in 2006 were released by studios supporting Blu-ray </li></ul></ul>
    11. 11. Business Model HD Optical Disc Format Competitors Complementors Customers Suppliers Disc Replicators / Factories Machinery Providers Entertainment Industry HDTV Media Players Game Consoles Consumers Retailers / Distributors Licensees Internet VHS TV On Demand (VOD) Flash Memory <ul><li>There are several players in determining a dominant network </li></ul><ul><li>However “Content is King” and will largely determine the victor </li></ul>
    12. 12. Current Marketing Strategies ESTIMATED ANNUAL REVENUE 2006 IN U.S. $3.6 Billion $12.5 Billion $35 Billion <ul><li>Key players with influence in the format war between HD DVD and Blu-ray: the film industry, the adult film industry, and the video game industry </li></ul>Video Game Industry Film Industry Adult Film Industry XXX
    13. 13. Current Marketing Strategies <ul><li>“ The Look and Sound of Perfect” $150M advertising campaign </li></ul><ul><li>Xbox 360 supports external HD DVD player </li></ul><ul><li>Pornography industry experimenting with HD DVD </li></ul><ul><li>“ War is Over” advertising campaign </li></ul><ul><li>PS3 internal Blu-ray player </li></ul><ul><li>Sony cutting player prices from $1K to less than $500 </li></ul><ul><li>Future Blu-ray car players </li></ul>HD DVD Blu-ray <ul><li>Blu-ray has adopted a “pre-emptive strike” marketing strategy with its “War is Over” advertising campaign </li></ul>
    14. 14. Future Drivers <ul><li>What are the drivers that will determine the future of this format war? </li></ul><ul><li>Associations - Blu-ray, BDA; HD DVD, DVD Forum </li></ul><ul><li>Europe –European Commission (EC) seeking open technology </li></ul><ul><li>Storage Capacity – Blu-ray greater capacity </li></ul><ul><li>Security – Promising dynamic BD+ encryption </li></ul><ul><li>Durability – Blu-ray offers proprietary coating to prevents scratching </li></ul><ul><li>Content – Blu-ray has greater support </li></ul><ul><li>Price – Similar pricing </li></ul><ul><li>Complementors - HDTV supports both formats </li></ul><ul><li>International View – Japan sided with Blu-ray </li></ul>Regulatory Performance Economic
    15. 15. HD vs. Standard: is it worth the hype? <ul><li>Resolution (NTSC) </li></ul><ul><ul><li>640 x 480i pixels </li></ul></ul><ul><li>Audio – Stereo, 44kHz </li></ul><ul><li>Resolutions </li></ul><ul><ul><li>1920 x 1080p </li></ul></ul><ul><ul><li>1920 x 1080i </li></ul></ul><ul><ul><li>1280 x 720p </li></ul></ul><ul><li>Audio - AC-3: 48 kHz sampling rate, up to 8 channels, up to 18 Mbit/s </li></ul>Standard High Definition <ul><li>TV remains the Limiting Factor for the time being </li></ul><ul><ul><li>High-definition provides far superior resolution; however, without HD televisions the improvement in quality will go unnoticed. </li></ul></ul>
    16. 16. HDTV Sales Trends <ul><li>HD TVs expected to increase from 4M HHs in 2006 to 52M HHs in 2009 </li></ul>
    17. 17. Has HD Optical Media Crossed the Chasm? <ul><li>With the PS3, Blu-ray is quickly approaching the chasm… </li></ul>…but HD-DVD is lagging behind.
    18. 18. Possible Compromises <ul><li>Dual-disc / Dual-player </li></ul><ul><li>LG Super Multi Blue Player and Drive </li></ul><ul><ul><li>Supports playback of both formats </li></ul></ul><ul><ul><li>Available now for $1,199 </li></ul></ul><ul><li>Warner Bros. Total HD </li></ul><ul><ul><li>Single disc compatible with both players </li></ul></ul><ul><ul><li>Available 3Q 2007 </li></ul></ul><ul><ul><li>Costs marginally more than current discs </li></ul></ul><ul><li>Internet / Flash </li></ul><ul><li>Internet/flash memory may replace DVDs as the dominant media delivery vehicle for movies </li></ul><ul><li>“ DVD format will be irrelevant” – Bill Gates … may be replaced by flash memory or Internet </li></ul>
    19. 19. Thank You <ul><li>Blu-ray is positioned to win the format war because </li></ul><ul><ul><li>Stronger sales in the US and Japan </li></ul></ul><ul><ul><li>Larger studio network providing film content (promise of superior security BD+) </li></ul></ul><ul><ul><li>PS3 integrated Blu-ray players </li></ul></ul><ul><ul><li>Larger capacity of 25GB (vs 15GB) </li></ul></ul><ul><li>Questions & Answers </li></ul>