2007: The Year of the High Def DVD?

Not quite, or at least not as I see it.

Despite the protestations of some e-mailers, there is nothing to indicate that 2007 is going to be the break-out year for high-def DVDs, regardless of whether they are referring to Blu-Ray, HD-DVD, or some combination thereof. I'm going to present my position as clearly as I can and I'm going to do it two ways: by the numbers and using common sense. (Note: I would LOVE for high-def DVDs to succeed, but I don't see it happening. And with the way high def downloads appear to be gaining momentum – fueled by Apple and their I-everything subsidiaries - there's less likelihood this format will ever gain traction. More on that later.)

Reportedly, about 175,000 HD-DVD players were sold last year. Blu-Ray player sales are more ambiguous, but it's probably around 700,000 (with most of those being PS3s). Being generous, let's say there were 1,000,000 high def players out there as of New Year's Day. More will undoubtedly be sold by the end of 2007. Sony believes that combined PS3/Blu-Ray player sales will top 5 million. Toshiba is betting on 2.5 million. Considering some of the low-price options for HD-DVD, Toshiba might not be far off. But Sony needs a reality check. PS3 is not being well-received by the general public and, while it's too early to label it a "failure," a "disappointment" isn't an understatement. Blu-Ray player cost (either stand-alone or as part of the PS3) is a major issue. But let's assume Blu-Ray can match HD-DVD at 2.5 million. Ignoring the fact that they are incompatible formats, there could be 6 million high def DVD players floating around by next Christmas. (For the moment, I am discounting LG's combo player which, at $1200, is not a mainstream item.)

Six million units might seem to be a lot, but consider that there are currently 121 million standard DVD players in U.S. homes. Now the picture changes. The assumption is, of course, that there will be a slow, steady ramp-up to HD format across-the-board, but this is flawed thinking. Certainly, that's what's going to happen with HDTVs - 13.5 million sold in 2006 (making about 30 million out there), 16.0 million are projected for 2007. But high def DVD players are not the same thing as HDTVs. There are many issues surrounding high def DVD - the format war, the high price point, and the average viewer's satisfaction with standard DVD - that will impede it from taking off and going into the stratosphere where the studios want it.

One year from now, with all the early adopters and high income videophiles on board, the high def DVD sellers will have to figure out how to get average Joes to buy. It won't be an easy sell. High def DVD quality is observably better than that of standard DVD, but it's not *WOW* better (I have done the subjective A/B tests for 480p vs. 1080p). And it's pricey. $400 for an HD-DVD player... that might get some takers. $700 for a Blu-Ray player... not likely. $1200 for a combo player... no chance. After spending $2000 on a 45" LCD HDTV, how many consumers are going to have another grand lying around for a new kind of DVD player? The likely refrain: "I'd let to get that high-def DVD player some time, but for now by old reliable DVD player will do just fine."

This is where common sense comes in. The portion of the population that will be amazed by high def DVD is relatively small. In part because of its price and in part because Sony has alienated a sizable portion of the console buying population, PS3 is not going to be Blu-Ray's salvation. I know a gamer who owns two Gameboys, one PSP, one PS2, one X-Box, and one X-Box 360. I asked him about the PS3 and he said to forget about it, although maybe he'll get a Wii. This isn't the kind of thing PlayStation 3 boosters like to hear about, but it's what average consumers are saying, and average consumers are going to be the ones who drive (or fail to drive) the adoption of high def DVDs.

Every day, the high def DVD/standard DVD situation reminds me more of the laserdisc/VHS situation (with a format war thrown in to complicate matters). Laserdiscs offered better quality than VHS in terms of both audio and video, but came with a price tag - a more expensive player and more expensive movie titles. Laserdiscs never attained mainstream popularity; however, they were the bread-and-butter of videophiles. How different is this from today's market? History repeats itself.

What could save high def DVD and make it a mainstream option? Three things have to happen. First, the format war has to end - and soon. Even with compromises in the works (LG's combo player may be adopted by other manufacturers and Warner Brothers has a disc format that will include HD-DVD and Blu-Ray versions of a title on one disc), there's still a big confusion factor to be overcome. Only a single unified format will eliminate that. (This is why it was crucial that DIVX – a potential alternative DVD format - died a quick death when DVD was going through its birth pains.) However, with Toshiba and Sony girding their loins for major skirmishes in 2007, that doesn't look likely. Second, the number of high profile, "I want that!" high def software titles has to expand (this will happen in 2007) and the prices have to stabilize at about the same point as standard DVDs (it's uncertain whether this is realistic – right now there's a $5 to $10 difference per title). Finally, the players need to crash below the $500 barrier, and probably get to around $200. That's not out of the question for HD-DVD but it seems unlikely for Blu-Ray or any combo player.

Given five or ten years in an uncompetitive marketplace, high def DVD might be able to catch on. But the new kid may be on the block before the end of the year. Apple's announcement of the "Apple TV" device (at about $300) makes the future a lot closer now that it will be possible to download movies and play them with little fuss on a TV. There are rumors (at this point, only rumors) that I-Tunes may begin offering high definition content before the end of the year. In that case, high def DVD could be dead before it ever really gets going, a victim in part of the corporate greed and hubris that can be accused of killing a golden calf.

---