There's no longer any question as to who's keeping the hi-def format war alive, or why.
It's Universal Studios and the top home entertainment exec, by his own admission.
I had been hearing over the last few days that various Blu-ray Disc manufacturers have been offering Universal plenty of incentives to join the parade but that Universal was walking away from the table every time without any reasonable objection.
Now we know why.
Universal president Craig Kornblau told me this week that the studio actually wants the format war to continue.
He also said Universal is getting financial incentives to create exclusive HD DVD features such as the Xbox Live component for the upcoming "Heroes" release.
"I’m not going to tell you that we don’t cut financial deals with people every day," he says.
But he has rationale for all of the above.
Kornblau says Universal does the same as every other studio in cutting deals to utilize another company's technologies and services.
But Kornblau says Universal's position is not driven by deals but by a long-term and consumer-focused strategy that is supported by Universal parent NBC and corporate owner GE. Universal never initially wanted a war, he says, which is why the studio made a decision years ago to back only one format.
Of course, that's the same position taken by Disney as well as Fox; the only difference being they individually chose the opposing format for a number of their own reasons, not the least of which is that each independently told me from the beginning that they believe that Blu-ray will ultimately offer the most consumer satisfaction and that the technology represents a full step forward in technology -- not a half-step -- to ensure the longest-term value for consumers. And, most importantly to Fox from the outset and now others as well, an extra layer of protection against piracy.
However, now that the market has evolved as it has, Kornblau says the hi-def format war has been "the very best thing that ever happened for consumers, retailers, and, frankly, studios" -- everyone except consumer electronics manufacturers -- because it has driven prices down further and far more quickly than would have been the case if there had been only one format in the market. (CE manufacturers are no small exception since they were among the primary groups driving the introduction of hi-def discs in order to restore the profit into their business that long ago evaporated with $49 DVD players from China. The format war has already forced some manufacturers to start subsidizing their hi-def players.)
Without the format war, Kornblau believes that even after more than a year in the market, the lowest-priced players would still be priced out of reach of most consumers at more than $1,000 and they would only drop to $800 or $900 over the next year or two.
Of course, that's impossible to know for sure and it's a bit of a faulty premise if you consider that PlayStation 3's, which play Blu-ray Discs and are by far the top-selling hi-def disc player of either format, were introduced last November at $600. As for the cause and rate of price declines in players, 10 years ago the cost of DVD players dropped about 20% in the first year and another 30% in the second year without any format war, according to "CE Historical" at the Consumer Electronics Assoc. web site
www.ce.org.
With Universal the only holdout in sticking with HD DVD exclusively, Kornblau reluctantly concedes that HD DVD's position is just fragile enough that if Universal decided to release in Blu-ray now, it would have a serious, if not life-threatening impact on the future of HD DVD. So in addition to weighing how his decision will impact the studio, he now must also factor in the potential demise of the HD DVD format entirely if Universal would opt to release its movies in Blu-ray.
For now, that's not something Kornblau is willing to risk. He says Universal chose HD DVD initially because it offered the least expensive hardware and software manufacturing costs and immediate across-the-board interactivity and connectivity in all HD DVD players. "To this date, nothing's changed," he suggests.
Kornblau believes interactive and connected features are essential for the success of any hi-def disc platform, especially as more and more consumers realize that they can buy a DVD player for $129 that upconverts their DVDs to near-hi-def quality.
"DVD would not have grown to a $16 billion market if all we did was put movies on a disc," he said. Enhanced features are even more critical for the success of hi-def discs, which do not offer as many revolutionary distinctions from DVD as did DVD over VHS.
In fact, Kornblau says the lack of comparable interactivity and connectivity in Blu-ray as compared with HD DVD at this point is why Universal refuses to go the same route as Warner and Paramount in releasing in both formats but being forced to offer less interactive and connected features on the Blu-ray versions, such as Warner's new "300."
Hmmm, with the notable exception of the "U-Control" interactive feature that Universal introduced on several titles last year, the studio hasn't exactly been blazing many trails of innovation with content that couldn't be delivered on Blu-ray Discs and even DVDs in many cases. Warner has been leading that charge with web-enabled features introduced on "Blood Diamond" and continuing through last week's "300." After about a year-and-a-half in the market, Universal's first web-enabled feature will come courtesy of Microsoft on the Aug. 28 release of "Heroes."
And, not for nothing, but early results of "300," at a record 250,000 copies sold in the first week, show that at least 65% of those sales went to Blu-ray. Some expected the numbers to skew even further in favor of Blu-ray given it's appeal to the PlayStation 3 demographic.
Meanwhile Blu-ray promises even more dynamic connectivity features with its new "BD Live" component in Blu-ray players and titles coming as early as this fall, as well as further enhancements to its "BD-J" interactive technology.
Kornblau, who was kind enough to speak with me very frankly in the midst of a hectic time, also conceded that Universal could not have picked a worse time to be carrying the torch for HD DVD in terms of strong releases to help support its position and the platform.
Although Kornblau referred to his studio's weak movies over the past 9 months, Universal's release slate has been pretty dismal for the last several years. The studio had only two theatrical films in the top 30 at the domestic box-office in 2005 and it's lone top 20 title last year was 18th-ranked "The Break-Up," with $119 million, according to Boxofficemojo.com. After suffering through the first six months of this year with its biggest hits being the sleeper romantic comedy "Knocked Up" and the financial disaster "Evan Almighty," Universal is finally enjoying a solid franchise hit with last weekend's "The Bourne Ultimatum" opening with $69 million.
Kornblau sees all that as setting up a big fourth-quarter for his studio on the home entertainment and hi-def fronts, starting with "Heroes," followed by four $100 million-plus titles, "Knocked Up," "Evan Almighty," "I Now Pronounce You Chuck and Larry" ($92 million after 3 weeks), and "Bourne Ultimatum."
But that's pretty much the highlight for the rest of the year as far as programs available exclusively on HD DVD.
Almost everything else will be on Blu-ray, either exclusively or along with HD DVD, including everything from Steven Spielberg's first hi-def disc release, "Close Encounters of the Third Kind," exclusively on Blu-ray, to most of the top-grossing movies of the year, such as "Spider-Man 3," "Pirates of the Caribbean: At World's End" (both only on Blu-ray) "Harry Potter and the Order of the Phoenix" (not announced as yet); "300," "Blades of Glory," "Ratatouille," and "Wild Hogs" (the latter two only on Blu-ray). And as soon as Fox rejoins the BD party with its MGM distribution in tow -- which everyone hopes will be soon -- that studio could release its trio of summer hits exclusively on Blu-ray, "The Simpsons Movie," "Live Free or Die Hard," and "Fantastic Four: Rise of the Silver Surfer."
Even if, for the sake of argument, you go along with Universal's belief that the format war is driving prices down more quickly, Kornblau admits that there is only a limited window of time for which this situation can be interpreted as beneficial for consumers, retailers, and studios. He says that window will start to close when players drop to a price of $200 and consumers start making their choice, which is what will guide Universal's ultimate course.
So that’s the story. Universal did not want the format war and Kornblau believes the studio did not initiate the war, but he and the studio are now intentionally and strategically keeping the format war alive for what they believe is for the good of the consumer, retailers and studios while awaiting a clear consumer preference for Blu-ray or HD DVD once prices drop to $200. Universal chose HD DVD because costs were lower and it had about a year’s head-start on some interactive features and web connectivity.
Okay, Kornblau has always been straight with me so I have no reason to believe he doesn’t truly believe most, if not all of that.
But if consumers are already showing a 2-1 Blu-ray preference for every movie released in both formats months before Blu-ray introduces its more sophisticated web-connected and interactive features and even while HD DVD is riding a low-price advantage of about $150 - $200, it’s difficult to envision consumers becoming less interested in Blu-ray when all those features debut amid a flurry of the year’s biggest movies exclusively on Blu-ray.
When that point comes, on behalf of those of us who don’t believe that prolonging the format war is a good thing, I hope that Kornblau and Universal are quick to respond to the will of consumers and end this war.
In the meantime, I guess those customers who are already choosing Blu-ray will have to live without hi-def versions of "Knocked Up," "Evan Almighty" and "I Now Pronounce You Chuck and Larry" for awhile.
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