Lessons From the HD Format War

mlimber writes "The New York Times' Freakonomics blog asks a panel of experts, 'Is the battle between HD-DVD and Blu-ray really over? What can we learn from it?' The panel suggests, among other things, that Sony achieved a Pyrrhic victory because high-def DVDs will be outmoded before they reap enough profits to make up for what they (and Toshiba) paid out for both product development and bribes to win the support of content providers."

Comments

Lesson #1

[morari]

No one really cares.

Re:Lesson #1

[jollyreaper]

No one really cares. Agreed. Doesn't really matter what source it was ripped from, so long as the torrent's seeded. :)

What I learned

[Naughty Bob]

The lesson I draw is that content providers are wholly opposed to consumers interests, and that open, collaborative standards are the only healthy way forward.

Re:What I learned

[RingDev]

content providers are wholly opposed to consumers interests I wouldn't go quite that far. I would say that content providers are wholly interested in making a profit, and the consumers have a strong interest in getting the greatest possible value for their money.

-Rick

Re:What I learned

[gstoddart]

And up until now they'd have gotten away with it. But computer and internet technology is proving to be a great leveler.

Sadly, so is the ability to lobby for copyright extension, have that written into international trade agreements, and argue that police should use the pretense of stopping piracy to combat terrorism when they don't have enough real evidence for a warrant.

The internet may have a natural tendency to push us towards an equal playing field and the like, but the ability to get the lawmakers to entrench your business model seems to push back against that.

But, me, I'm just cynical about the whole damned thing nowadays. The future is not utopian ... it's far more dystopian than we've hoped. :-P

Cheers

Re:What I learned

[Cajun Hell]

I would say that content providers are wholly interested in making a profit,

This isn't clear. With music, DRM is just about dead now: the content providers are really focusing on creating usable/buyable products. That is, they are trying to maximize their profit, rather than, say, Apple's or Pioneer's.

With video, though, DRM is far from dead. They are still trying to lock people into using specific players and monitors. This is perhaps a move to maximize profits, but not necessarily for the content providers. When you have big players like Sony, who sells both media and the equipment to view that media, things get complex. It looks like there's an effort to maximize profit for the equipment manufacturers and proprietary software companies, rather than the content providers.

It's accepted that you can now listen to music on whatever you want. (If I sell MP3s or CDDA/wav, I don't have to worry about who can buy it.) But with movies, there's still a fight over what customers should be allowed to watch the movie on. They're still acting like they don't want a free market in playback devices, even if that costs them content sales revenue.

When the content providers start moving to maximize their own profits (or the profits of their content division, in cases like Sony), you'll know it. It'll be about selling bytes to as many consumers as possible, instead of limiting their sales to the subset of movie watchers who have bought the "right" player products.

Re:What I learned

[DrgnDancer]

While there may be an argument that the "Music Industry" is at least partially redundant, and that the ability of everyday artists to sell themselves in a brave new digital world will eventually weaken or even kill the record company's strangle-hold, I feel this is much less likely with movies. There are two points to consider:

1) While it is possible to make a pretty good audio recording in a basement with a laptop, and possible to make a studio quality recording for a few hundred bucks of rental time in a studio, it is nearly impossible to make a movie with anything less than hundreds of thousands of dollars. That's for an independent film made on a shoe-string. For a studio quality movie, you're talking a few million minimum. People don't have the money to make video "content" without the backing of large studios. This isn't going to change, these expenses aren't (mostly) going to be affected by technology. They're related to the inherent expense of getting a lot of people and equipment together in one place, feeding them, paying them, making costumes for them, etc. Even if Apple announced tomorrow that it was offering free Power Macs with Final Cut Pro to movie producers, and special effects costs dropped to zero over night, it would still cost millions to make a good movie. Studios are more than middle men, they financiers.

2) Unlike music, which existed before the modern age, and has business models that could survive an EMP taking out every piece of electronics on the planet; movies are a whole cloth product of the "middle man" era. The studios "own" movie making in a way that the record industry can never "own" music making. I can go to a local bar an see a decent unsigned band, I could learn to play an instrument and make my own music if I wanted. I could never do this with movies (at least beyond the "slightly edited home video" level"). Even "independent" film makers are the owners or employees of studios, just smaller studios. The entire process of making movies, from the production to the distribution is tied to the studio model.

I just don't see "content" being separated from the "middle man" in this particular industry. At least not any time soon.

simple

[ILuvRamen]

If someone would have made a cheap combo player fast enough that could play both formats, they could have both been making profits instead of one losing money and the other probably still losing money from so many bribes. It's sort of like a betting on a drag race and then spending $20,000 to upgrade your car while the other guy spends $25,000 and the bet is only $1000 so that's all you win. By the time they start turning a profit on blu-ray, the next format will be released.

What?

[longacre]

Is the battle between HD-DVD and Blu-ray really over?

January called, it wants its question back. Also, streaming video is the future, but the distant future. Until the cable companies begin delivering libraries of 1080p on-demand content through their set top boxes, Blu-Ray will pull in plenty of cash.

And these are experts?

[hedwards]

Why is it that the move to digital only for movies is considered a forgone conclusion?

I understand that all the cool kids are badmouthing physical media, but we aren't there yet. Full DVD quality movies aren't commonly available for download through licensed stores. It still takes a relatively long time to download the movies that are available. And services like netflix aren't doing a lot of streaming compared to the number of customers that are eligible for service.

We aren't yet to the point where we, at least Americans, are considered to have the right under the doctrine of fair use to put all of our movies, songs, etc., onto a single device at home, let alone streaming it over the net to just the person that paid for the files.

The way that things are moving, I hardly think that we've gotten to the point where Sony and the Blu-ray camp can't turn a profit on the format. Sure they can't turn the profit that they would have turned had they been able to settle this quickly, but I see no reason to assume that they won't manage to turn a profit on it.

There isn't any real reason why people need more resolution than either format provides. The only reason to have more resolution is to view it bigger at a closer distance, and with current HD technology, the size of the room required to properly view are getting ridiculous.

Lesson #2

[Anonymous Coward]

The merits or flaws of either side can be overcome by paying people off

Early Adoption

[DrWho520]

1) If you have not figured it out yet, early adoption can bite you is the ass. (Just wait for DR-DVD v2 to render every player but the PS3 obsolete.)
2) If you shell out enough cash to content producers during early adoption, the market never has a chance to affect the outcome.
3) Giving away the razors (PS3 compared to vanilla BR-DVD player) and selling the hell out of the blades is still a viable business model.

The only thing that remains to be seen is whether on-demand streaming content will come to market soon enough and be enticing enough to defeat BR-DVD before Sony sees a return on its investment.

Will it ?

[aepervius]

When I was young, the number of people which did not have a TV was very small, and mostly it was due to economic reason. Now I don't have one, I know a few people which don't have one (colleagues, friends). Mostly due to lassitude reason (nothing worth to watch), some of us due to more ideological reason. Me I just did not watch it anymore. Entertainment ? I get a better quick "just" hanging out with friends. it is as time consuming but far funnier. Films/series ? Download or rent from video-club. Information ? TV is more biased than any other source, and nowadays the net fulfill that better than Tv will ever do. And I see an increasing number of people joining our rank. TV don't cut it. Internet replace it. TV might never totally disappear but it is getting less relevant as the central "point" of the family.

So when you say QUOTE "There will be one, if not two, iterations of the "next next generation" of this technology before you get one that gets adopted as widespread as DVD was. The amount of people with next-gen displays is too small, and too many people are now leery about the next "new hotness" that they'll stay away even more now." ENDQUOTE
Well I disagree. I think new generation teck will NOT bring anything more than DVD brought us. And if it will, it will be at a great loss of liberty (DRM) from a format which for all purpose can be considered to be DRM free so cracked it is... No what i think is that next generations will increasingly go toward the net and drop tv more. IMHO on the "film" playing device field, DVD is the last usable format, and HDDVD/Bluray was the last war. Unless a leap in TV teck happens (3D for example) there won't be any incencitive to really enhancethe format more.

Re:Will it ?

[gstoddart]

Download or rent from video-club. Information ? TV is more biased than any other source, and nowadays the net fulfill that better than Tv will ever do. And I see an increasing number of people joining our rank. TV don't cut it. Internet replace it.

I don't disagree that within some segments of the populace, the TV is trending down. But, more people have TVs than have computers and broadband connection, let alone the savvy to use them for that. It's going to take a long time for that to tip over.

Between the media companies trying to make sure you'll be able to do less on your PC, and the sheer advantage TV has in terms of installed base, we might eventually get where you're describing, but I see that as being a slightly longer term view than what happens with TV and formats.

Well I disagree. I think new generation teck will NOT bring anything more than DVD brought us. And if it will, it will be at a great loss of liberty (DRM) from a format which for all purpose can be considered to be DRM free so cracked it is... No what i think is that next generations will increasingly go toward the net and drop tv more.

Well, again, I don't think that any new format is going to catch up to DVD in terms of installed base. But, I also don't see as wholesale a shift towards internet as a medium. It's gaining, but a lot of people can't afford computers/don't know anything about them. The TV has such an overwhelmingly huge install base as to put it way out front in terms of what any new technology will have to catch up to.

I don't see that we're fundamentally disagreeing -- I see your vision of moving towards the internet being a more central part of everything happening in parallel to whatever is happening in the TV world. A lot of people in North America still live and die by their TV, and a computer isn't even an equation.

In either case, the media companies will try to assert greater control over how we use the stuff they sell us. They're going to try to reap as much payment from every time we're exposed to it as they can. And, they're going to try to tell us what it is we really need next so we'll be good little consumers and go out and buy their stuff.

Unless a leap in TV teck happens (3D for example) there won't be any incencitive to really enhancethe format more.

Never underestimate the ability of a marketing department to try to convince us we need the next incremental change as much as we need air. :-P But, since I'm ignoring the whole HD thing, I agree 100% with that statement.

Personally, I find myself moving away from both the TV and the internet as forms of entertainment as time goes on.

And, if either of us could really meaningfully predict how technology will evolve, we'd be getting paid too much money as consultants to post our WAGs here. ;-)

Cheers

Outmoded?

[GroundBounce]

CD's were outmoded 10+ years ago but are still the dominant format for music distribution. Likewise, standard DVD's will be around for a long time to follow. The large installed base of players and other equipment will ensure that any format that gets widespread adoption will remain in use (and presumably profitable) long after it is technically outmoded.

So annoying...

[wamerocity]

I get really annoyed every time this gets brought up with the claims that any benefits Bluray gives will soon be overshadowed by HD download services. HD download services are great, except I see a few problems with it.

1 - Heavy DRM - Yes Bluray has DRM too, but you can TAKE IT WITH YOU. The technology is still prohibitively expensive to start making portable bluray players, and in dash bluray players for cars, but there is NO HD download service I'm aware that lets you burn the files and keep them forever to watch. They are mostly rental services - basically you download them on your Apple TV or computers, watch it in a 24 hour period and its gone. In time, those devices will be made cheaper, and will become reasonably priced.

2 - Downloadable content doesn't look nearly as good a trueHD stuff does. I realize that for many people it doesn't matter, because the majority of TV's that were purchased early on (and therefore a big chunk of the ones in households) are only 720P. But 1080 displays are becoming the new standard and fewer 720 displays are being made. a 3GB 720 file doesn't offer much more clarity than just a standard DVD. Yes I know, many people are going to shout that DVD's are GOOD ENOUGH. Fine. VCR tapes were GOOD ENOUGH too. So are YouTube videos for some people. Big whoop. Watching low quality 720p on a 1080 display just doesn't look as good as a true 1080 picture with 25-35Mbit quality.

3. To get a decent quality picture, you need to have download a big file, and that requires fast internet connections. American download speeds are pitiful compared to the rest of the world. If you wanted to download a 5GB movie, that's going to take you SEVERAL hours to complete, as opposed to just driving a few miles to the nearest blockbuster r RedBox (which WILL be getting bluray discs inevitably)

4. Bluray adoption has taken off faster than DVD adoption did. I somehow doubt people are going to give up on buying discs they can KEEP and watch OVER AND OVER, with a download service that offers inferior quality, short watching time, and long waits to watch. But who knows, maybe in 2 years from now I'll be eating those words, but I doubt. Anything you can say about HD downloads applies to SD quality movies as well, and DVD sales aren't really being eaten into like people predicted it would downloadable content. Begin modding me down...NOW!

Re:So annoying...

[D4MO]

1. The rental services will come, quicker than bluray in dash players for cars. Until then, renting\buying DVD's that you can TAKE WITH YOU and will work in all that hardware that people have already invested money in will remain the status quo for some time. Expect amazon to build a kindle for movies.

2. Yes they are GOOD ENOUGH. TruHD does look better, but not BETTER ENOUGH. People don't really care. I don't really care if I watch Lost at 480p, 720p or 1080p, and I'm not mr.average.

3. There are solutions to this: The 360 will allow you to play the move while it's being download. Sky+ allow you to record a program via your phone, so expect ways to tell your provider to start content delivery so it's there when get home. Also expect them to be Tivo like and pre-deliver content based on your preferences. The top 20 rentals may already be downloaded. Episodes may already be download as soon as they are reldased. I hope to be just sitting there and a message pops up on my TV - "Latest episode of Top Gear ready for viewing". I imagine the content delivery will come from caching service on ISP's own network too. Downloading 5GB is already faster than buying from an online store and waiting for it to be shipped. Alternative is to get in the car and go to a store that may not even have it, and anyway I couldn't be bothered getting off the couch when I can order it with my remote.

4. Adoption for new tech is much faster now than in 1995, the lauch year of the DVD. Most people didn't have internet connections then. Information flows faster, people are more informed. The movie ownership facility will come too, just like MP3 stores today with no DRM.

New physical media and new hardware for digital distribuion will have a very short lifespan.

(Why can't I just download new 360 games? Because MS doesn't want to sour releationship with retail channel who are pushing the hardware, god damnit.)

Re:So annoying...

[amRadioHed]

Yes I know, many people are going to shout that DVD's are GOOD ENOUGH. Fine. VCR tapes were GOOD ENOUGH too. DVDs are good enough for most people. VCR tapes aren't instant access. They wear out and lose quality over time. They are much bigger and harder to store than DVDs. These are the reasons why people would never give up their DVDs for tapes again, it has little to do with resolution.

Bluray OTOH has nothing to offer but resolution as reason to upgrade from DVD and that's not enough for me and many other people.

Re:So annoying...

[king-manic]

HDMI makes that hard. It handshakes with the player and TV. Someone might make an intermediary but the format was made to make intermediaries expensive. Just wait another month while DVD jon breaks BD as thoroughly as he broke DVD. The weakest link in DRM is that the person you are keeping out has both the key and the lock under his physical control.

Who cares about HD movies? We need data storage.

[200_success]

This format war was fought through movie studios, but interestingly most consumers don't really care what discs their movies come on. Whether on HD-DVD and Blu-Ray, the movies play essentially the same way. Hell, DVDs are good enough for movies -- the resolution is good enough, and the run-time of a DVD is longer than the length of time that you can sit still on your butt.

On the other hand, DVDs will soon become obsolete as a data storage medium. Remember when an entire OS came on a CD-ROM, and you could back up your hard drive onto a couple of DVD+-R? Now operating systems come on DVDs, and only sane backup medium for most consumers is another hard disk. For that, I'm glad that the higher-capacity Blu-Ray standard won, and hopefully Blu-Ray burners will be cheap enough by the time the need arises.

I wouldn't be surprised if Blu-Ray movies never replace DVDs, but Blu-Ray burners become standard on computers.

Re:Lesson #3

[Anonymous Coward]

Lesson #4 PROFIT!

Re:So does anyone buy Blu-Ray DVD players?

[ivan256]

I actually consider the selection of actively seeded torrents on The Pirate Bay to be pretty poor. New releases are popular and easily available.. And a few classics... But other than that it's fairly weak.

What I learned from the format war

[hudsonhawk]

I learned that the kind of insane balkanization of consumer products that we see with gaming consoles is spreading to other areas. That the us vs. them rhetoric that was once only found in the realms of religion and politics is now bleeding into online flame wars about which corporate-backed digital movie format is better.

Nobody will learn a damn thing

[EmbeddedJanitor]

Electricity wars (AC vs DC), tape wars (VHS vs BETA, 8 track vs cassette) or HD Format wars are nothing new and if nobody learnt then, why should anyone learn this time around?

Whoever sells the most blank discs

[rla3rd]

HD-DVD does not necessarily have to become a niche product. I have had a DVR-R burner in my PC for a few years now, and I only use it for backing up data. I don't own a HDTV, so having a commercial HD player doesn't make much sense. Just because the major multimedia companies are all backing blu-ray does not mean that HD-DVD loses. The first format that offers me a HD writer at a reasonable cost for both the DVD writer and blank media will get my wallet.

War. What is it good for? absolutely nothing.

[techstar25]

It appears that the analysts agree that both sides lost, and that Sony and Toshiba just should have agreed to work together from the start. While they were battling it out, wasting time and lots and lots of money, their enemies got stronger (download services got better, and upconverting technology improved).
I guess, after all, a format war is just like any other war - there are no winners, only losers, but one side loses a little less.

Re:What's going to replace Blu-Ray?

[shmlco]

"People like to hold things in their hands."

Actually, I'd say that "some" people like to hold things in their hands. Look at music. Some people may want CDs and covers and liners, while others are perfectly happy having their entire music collection in MP3 on their iPods. Some people print photos and then stuff them in albums and shoeboxes. Others use iPhoto and show people their pictures on their iPhones.

I, myself, am in the later category. In fact, I'd be more than happy to have ALL of my music and nearly ALL of my books and movies in digital formats. It's much, much, much easier to move a couple of terabyte drives than 50 boxes of books, CDs, and DVDs.

Re:What's going to replace Blu-Ray?

[The End Of Days]

The difference is so subtle as to be meaningless. What good is the best invention in the world if only two people know about it?

DVD is "Good Enough"

[dotwaffle]

Let's look at the history of media, shall we?

People moved from watching on TV to watching the VHS because you could watch it when you want.
People moved from watching on VHS to watching on DVD because you didn't have to bother with rewinding etc, and it didn't degrade over time. (ish - most people believe their CD-Rs will last for ever, let alone DVD-R)
People moved from Analogue to Digital (in the UK) because Sky and Virgin (was NTL was whatever) gave you more channels and it was free-ish.

Why would people move from DVD to BluRay? Seriously - why? My mum watches Sky TV in a low bitrate MPEG-2 from Sky TV and can't see the difference on her 42" TV versus the crystal clear analogue signal, versus one of the HD-DVDs I have.

People don't care about quality - as long as it's "good enough". Why else would people dump CDs - the ultimate in digital formats of the 20th century, for crappy 128kbit MP3s?

Well, negating the "that's all that's available" and the "they're all that they can pirate" arguments at least.

DVD is good enough. It'll be here for a long while yet. And when it does die - we'll have storage nodes in every DSLAM to handle digital downloads of all the big films.

Let the flamewar begin.

Re:Bad comparison

[slashqwerty]

You need to view it from the position of the content producers since they are really the ones picking what format they will distribute on.

- VHS vs. BetaMax: Cheaper, better system won. VHS was 'better' because the quality dropped with each copy.
- 8 Track vs. Cassette: Cheaper, better system won.
- BR vs. HDDVD: More expensive, better system won. BR is 'better' because it has an extra level of content protection.

Re:Bad comparison

[westlake]

- VHS vs. BetaMax: Cheaper, worse system won

Beta was introduced before most television sets had comb filtering or a composite video input.

It predates closed captioning, MTS stereo audio, affordable projection TV. The first Beta VCRs could not record movies or sports on a single tape.

You have to see the system and the environment as a whole.

Blu Ray entered a market where the buyer had a substantial existing investment in HD and digital audio. It began with support from almost all the major studios. That implied a major artistic and technical investment in Blu Ray content.

Blu Ray entered a market when the two-disk video or big boxed set really became popular and the 50 GB disk began to make a lot of sense and the 100 GB disk even more.

The HD-DVD video did not sell or rent at a significant discount. For the serious viewer or collector, the price of the player quickly becomes irrelevant.

Re:Bad comparison

[daBass]

Interesting, Edison (DC) did their best to show Tesla's AC was much more lethal, even electrocuting an elephant to make his point.

But the reason DC is a lot cheaper is that electricity doesn't travel very far at low (safe-ish) voltages. AC is easily and cheaply stepped down from long-distance 10KV+ lines to 120/240 at the end of your street. DC can't be stepped down with a transformer, so the system as a whole ends up costing a lot more. There were a lot of local power plants on Manhattan to be able to get DC to customers!

Ironically, at high voltages, DC is more efficient at long distances, so you will see long distance point-to point transmission lines being done in DC, rather than AC.

Re:Bad comparison

[olman]

- VHS vs. BetaMax: Cheaper, better system won. VHS was 'better' because the quality dropped with each copy.

Puh-leeze.

VHS is the better product. Why?

Because you could record an entire movie on a single tape right from the beginning. Most people do not view system where you have to change tapes mid-taping as "better".