Format war almost over. Who lost? We did. (part 1)

It was mere days before CES 2008 and the already announced HD DVD press conference, when Warner Bros. shook the industry with its announcement of their exclusive support for the Blu-ray format (from May 2008 onwards). Early adopters and industry pundits everywhere wasted no time in declaring the format war over.

Sure, HD DVD PRG cancelled their press conference and released a couple of muted press releases, voicing their disappointment with Warner. Sure, Blu-ray has clear advantage when it comes to studio support once Warner stops releasing HD DVDs – but HD DVD is not dead yet. At least, I hope it’s not. And if you’re at all interested in High Definition, you should hope the same.

HD DVD still has the backing of Universal, Paramount, Dreamworks, Toshiba, Microsoft, the DVD Forum and several other, smaller companies. The format war is not over until Toshiba and the DVD Forum give up on HD DVD. And Toshiba has deep pockets, much deeper than Sony. It remains to be seen how badly Toshiba wants to win the war.

No matter what, one thing is certain: if Blu-ray wins, the consumer loses. Granted, Blu-ray’s the better of the two competing formats from a strictly technical point of view. Higher bitrate ceiling and larger disc capacity are certainly nothing to be scoffed at. But it’s also much more difficult and way more expensive to manufacture than HD DVD. And Sony has been, and still is, losing money hand over fist in their quest for HD format dominance.

The companies behind Blu-ray have spent billions of dollars in R&D and production facilities. PlayStation 3, Sony’s successful Trojan Horse, is sold at a loss. Blu-ray discs are slow to replicate and the yields are still dismal compared to DVD and HD DVD. Sony’s replication factories are also losing money since they charge studios less than the actual cost of replication; make no mistake, Sony has been subsidizing BD replication since the beginning of the format war. Sony has been (until Warner’s announcement, at least) making large monthly payments to Disney so they remain BD exclusive. And despite Warner’s press releases, it’s clear as crystal that both the BDA and HD DVD PRG were taking part in an aggressive bidding campaign for Warner’s exclusive support.

Then there’s the issue of replication capacity. Blu-ray factories are thin on the ground. Very thin. Sony owns most of them, and most are busy replicating PlayStation 3 games. Remember a while back when a bunch of Warner’s Blu-ray titles missed their release date? Not enough production capacity, pure and simple. It costs tens (hundreds, according to some sources) of millions to build a new state-of-the-art (and it has to be that, since Blu-ray’s tolerances are so tight) factory equipped with a bunch of Blu-ray production lines. Current DVD lines can’t be upgraded to produce Blu-rays, you see. On the other hand, practically all new DVD lines installed in the past couple of years can replicate HD DVDs at a flick of a switch. Another flick of the switch and the line replicates DVDs again. Now, imagine if Blu-ray wins and the format experiences a sudden rise in demand. The production capacity for that does not exist, so new factories and large investments need to be made. (I also wonder if studio execs have given any thought to the fact that most BD replication capacity on the planet is controlled by Sony, who happens to own a number of Hollywood studios…)

So what does all of this have to do with the consumer losing if Blu-ray wins? It’s staggeringly simple. None of these companies are in this game out of the goodness of their hearts. They’re in it for the money and nothing else. The format war has so far cost Sony & BDA billions upon billions and that expense WILL be recouped. And you know who’s going to foot that bill, don’t you? Indeed, we, the consumers.

The format war has been good to us, so far. Players have come down in price faster than anyone could have guessed 18 months ago. BDA and HD DVD PRG have sponsored several Amazon.com discount campaigns. They’ve also offered several free titles with purchase of a player. If HD DVD dies out, you can kiss goodbye to discounts, free titles and cheap players. It won’t happen overnight, but expect to see a slow and steady price increase of Blu-ray hardware and software if competition vanishes. Actually, now that my fever has gone down momentarily (I’ve got a very nasty flu), I can see things aren’t quite so bleak after all. Even if HD DVD dies out, Blu-ray will still have competition – in form of DVD. As studios love to charge premium for a new format, it will take a while for software prices to drop anywhere close to DVD, however. It’s up to the player manufacturers to drive down their prices to the point where Joe Average will rather buy a Blu-ray player instead of a new DVD player.

There are folks out there who believe the format war is to blame for the slow mass adoption of HD. Warner’s press release puts it like this:

The window of opportunity for high-definition DVD could be missed if format confusion continues to linger. We believe that exclusively distributing in Blu-ray will further the potential for mass market success and ultimately benefit retailers, producers, and most importantly, consumers. A two-format landscape has led to consumer confusion and indifference toward high definition, which has kept the technology from reaching mass adoption and becoming the important revenue stream that it can be for the industry.

Personally, I don’t believe that for a second. There are some people out there who’ve been sitting on a fence, waiting to see which format survives. But they are a very small minority. They don’t matter in the large scheme of things. The format war is nothing compared to consumer apathy and ignorance. The masses are not on a fence – they don’t even know there’s a fence. They think they’re viewing HD simply because they purchased an HDTV. Yup, all their DVDs are now High Definition! They’ve got a proper HD feed coming over the cable, but their HDTV is hooked up to the SD feed. And they are satisfied with the image, because they just don’t know there’s something better out there. And then there’s the apathy. “DVD is good enough for me!”, they say. “You mean I have to buy a new TV and a new player to see HD? Nuh-uh, not me, buddy!”

Apathy and ignorance. Moving to a single HD format will not get rid of either one.