Posted on 06/15/2006 8:01:01 PM PDT by Lunatic Fringe
CHOICE IS A BEAUTIFUL thing, whether it's picking stocks, voting for a politician or ordering pizza toppings. However, when it comes to the ongoing battle of the high-definition DVD formats — Blu-ray Disc vs. HD DVD — choice is a burden consumers will have to bear. That is, if they opt to choose at all.
The first Blu-ray player in the U.S. is coming from Samsung next week — HD DVD players hit store shelves in the U.S. in mid-April — and I can't help but think that those early adopters who choose wrong will get burned. Recall how Sony (SNE: 42.30, +1.15, +2.8%) took it on the chin in the mid-'80s as Betamax was supplanted by VHS as the VCR format of choice. Those who are old enough to remember spending hundreds of dollars on Beta players and tapes only to watch the technology turn obsolete cringe at the choice that they made, not because VHS was necessarily a better technology but because they were asked to gamble, and they placed their bet on the wrong horse.
The new souped-up DVD formats, which allow for crisper images, mind-numbing audio and added room for bonus features like extra movie scenes or director commentary, have brought that scenario to an even grander level that has created a schism among Hollywood's studios and the electronics, PC and gaming communities. Blu-ray, a format championed by Sony, has a litany of backers including PC giants Apple Computer (AAPL: 59.38, +1.77, +3.1%) and Dell (DELL: 24.91, -0.16, -0.6%), movie studios like Walt Disney's (DIS: 29.19, +0.50, +1.7%) Buena Vista Home Entertainment and MGM, and electronics makers Panasonic and Pioneer. Among those in Toshiba's HD DVD court are Microsoft (MSFT: 22.07, +0.19, +0.9%), Intel (INTC: 18.12, +0.39, +2.2%), Universal Pictures and NEC (NIPNY: 5.16, +0.09, +1.8%). For the consumer, this means that the format they choose to buy into will determine which movies and other content will be available to them. For example, Blu-ray has "The Terminator" and "Crash" while HD DVD has "Goodfellas" and "Million Dollar Baby."
Last summer, the two camps tried to figure out a way to unite their technologies into one format and make things easier for shoppers, but the talks failed. And here we are today with the antithesis of that King Solomon parable playing out before our eyes. Instead of ensuring the welfare of the baby, the baby has been split in two.
It's no wonder then that many anxious customers are sitting on the sidelines as they watch this battle play out. HD DVD has been out for a couple of months now and sales have been sluggish at best. Michelle Abraham, an analyst at independent research outfit In-Stat, expects sales of high-definition DVD players in North America to be under 100,000 units this year and grow to three million annually by 2010. DVD players, on the other hand, were introduced in 1997, and by 1999 unit sales grew to more than four million annually, says Abraham. Not only will the market likely be limited to those with the cash to buy high-def television sets, but the costs of the players themselves will also bog down demand. Toshiba currently offers two HD DVD players at $499 and $799. Samsung's upcoming Blu-ray player is a much heftier $999.
Once customers peruse the limited selection of movies available to them — Best Buy's (BBY: 51.50, +0.10, +0.2%) web site yielded close to two dozen titles each for HD DVD and Blu-ray — they may feel less compelled to buy the players. (The first Blu-ray titles will be made available on June 20). Sales of DVDs, which in recent years were a cash cow for movie studios, are starting to slow. The new formats could help pick up some of that slack by allowing studios to offer fans more in-depth features about the making of a film or different movie endings. But Hollywood seems to be waiting for customers to start buying the players before they spend money adding these extras or putting entire movie libraries into the high-def format. "It's a chicken and egg scenario," says In-Stat's Abraham.
Unlike the state of the market when DVDs debuted in 1997, there are many different formats that high-definition DVD will have to contend with that could keep it from reaching the same commoditized level as its first generation brethren. Viewers can now order a movie via cable or satellite using video on demand, they can tape shows using digital video recorders like TiVo's (TIVO: 6.62, +0.38, +6.1%), and they are increasingly capable of downloading films off of the Internet. This could leave the high-definition DVD market in the lurch, at least for the near term, appealing primarily to videophiles with deep pockets and the yen to build an impressive home theater.
From an investment standpoint, betting on Blu-ray over HD DVD (or vice versa) is like trying to predict whether Tom Cruise and Katie Holmes are going to make it. It's just too early in the game and there are a lot of variables yet to play out. Significant delays in the release of these players do not bode well for investor confidence. Both Sony and Pioneer recently delayed the release of their Blu-ray players until August and September, respectively. The sale of Sony's much-anticipated PlayStation 3, which will be sold with Blu-ray capabilities, has been pushed to November — the brink of the crucial holiday selling period. Toshiba's HD DVD player was originally anticipated to come out late last year and didn't arrive until this spring. The results have been lackluster.
The best way to play this new field without getting burned Betamax-style would be to invest in a company that's positioned to win no matter what. Sonic Solutions (SNIC: 14.82, +0.33, +2.3%) sells its DVD-authoring software to both consumers who fancy themselves homegrown directors, and professionals, including Hollywood studios that use its technology to create DVDs and prepare them for mass replication. The Novato, Calif.-based company, with $148.7 million in sales and diluted earnings of 70 cents a share for the year ended March 31, has been selling software for both Blu-ray and HD DVD authoring since April 24 (they diplomatically released the two products on the same day). Studios have already been lining up to use Sonic's high-end Blu-ray and HD wares to create some of the first titles in the market.
Another good reason to bet on Sonic is its stock price. In a research report published Monday, Roth Capital Partners analyst Richard Ingrassia noted that Sonic's valuation "is low on almost every metric." Trading at 13 times estimated 2007 earnings, Sonic's stock is well below the 18 to 20 times forward P/E ratio of its peers, says Ingrassia, whose firm makes a market in Sonic's shares. His price target: $21.50. (For more analysis of Sonic's valuation see our June 7 Stock Screen, "A Super Small Cap?.")
A lot of power and money is being thrown behind Blu-ray and HD DVD, and the technologies themselves are impressive. But I think it's the customers and their choices that have to be watched closely, and I don't think they are ready to make those big decisions quite yet.
The new souped-up DVD formats, which allow for crisper images, mind-numbing audio and added room for bonus features like extra movie scenes or director commentary....
Alright, now here is my problem. I have a very high-quality DVD player, connected to a top-of-the-line TV and sound system (think of the mother of surround system/home-theater thingimajigs). ALright. Thus I have very crips sound (where one can hear everything from the footfall of an ant to the second coming), perfect HD picture, etc etc. The DVDs I have (like everyone elses) also have Director commentary, extra movie scenes, deleted scenes, etc etc etc (I believe nowadays very few DVDs lack such features, with some actually having more extra features than the actual length of the movie).
Question: Why then should I invest between 400-900 bucks on HD-DVD/Blu-Ray? Apart, obviously, from the need to 'awe my enemies and impress my friends' or any other tagline from the ad section of 1980s comic books? Why should I buy the next-gen DVD formats when what I currently have apparently gives me what these new things are promising?
Freeper assistance on this please?
"Holy schmoke," they sez to themselves. "We can shuffle things around and move our squatters off of half our frequencies, and then auction 'em off to the highest bidder. We'll make Millions!" (Aide whispers into Fed's ear.) "Uhh, we'll make BILLIONS!!!"
"And this digital hooey gives us the perfect opportunity to do it!"
"Crisper video" can only mean high-definition. "Mind-numbing audio" can only mean more channels.
We still have no cable and only get free air local stations. We are proud when the people faces don't warble in three different directions.
Honestly, I do believe it all boils down to Sony etc being able to make formats so complicated that it slows down home recordings. Huge amounts of data take extra time to decode and process/burn.
That would defeat the purpose.
Haven't you heard, the Federal Government is going to fund and adapter for people so they won't lose access to television once the move takes place.
Well, I may be biased since I've been watching hi-def movies and TV for almost the last year by way of digital cable, but I think the difference between even anamorphic widescreen DVD and true hi-def is clear to anyone with eyes. The detail level is just that much higher - high enough in some cases to reveal the limitations of the original film media. Also colours are better rendered in the hi def format, and more realistic. I'm not really a videophile, but I think anyone can appreciate a better quality picture. I mean, how many of the people reading this are still using a VGA (640x480) video card and monitor? And it definitely becomes noticeable when you go to large screen sizes, which are increasingly common. Everyone says the same thing: once you've seen a movie or sports on a decent sized hi-def screen (with a true hi-def feed), you don't want to go back.
I think the DMCA says you can execute someone that does that.
Technically, you're right: true HD is better - but I've found that an anamorphically-encoded DVD rendered through an upconvert engine produces an excellent picture on a reasonably-sized HDTV (42-50 inches). And - as you note, the potential for additional quality is frequently limited by the specifications of the source material. Old film prints, even digitally remastered can look grainy or fuzzy. So, as I said, I don't think HD DVD or Blue-ray is worth it at $500-$999. Now, when you can buy one at WallyWorld for a buck and a quarter (in two years' time), I'll be right there in line!
Good post. I am hooked on HD. I record alot of the movies on HBO and Showtime HD. I get the great HD picture (which is breathtaking compared to even the digital cable feed) and dolby 5.1 audio which is also available on my cable system if you invest in a fiber optic lead. I plan to do this until the HD DVD thing works itself out. I can live with the picture quality of regular DVDs until then. I would sure pay a couple of hundred bucks for Hi-Def DVD but not a grand.
I watched the replay of the US Open on ESPNHD last nite. Nothing like watching golf (or any sporting event) in HD. I hope the weekend telecasts on the broadcast network is also in HD. I have those set to record so it will be a good weekend of playing and watching.
Having an HDMI input on your display will be a prerequisite for either format.
And what percentage of monitors already sold as high definition have this feature?
I don't know the answer to this question, but I suspect a lot of people are going to be disappointed.
Definitely agree on the pricing on the blu-ray/HD-DVD players at this time. I didn't pay much more than that for my TV.
I'm pretty sure that some of the hi-def movies on the movie network are actually up-converted DVDs, but some are definitely HD transfers. And some of the original programs, like Stargate Atlantis, or Rome, look absolutely fantastic in HD.
As far as sports go, they look great in HD. I'm not even a soccer fan but I've been watching some of the World Cup series in HD, and it looks great.
Oh, btw, I watch a 34" HD tube TV from about 5-6' away, and I can definitely tell the difference, but quality anamorphic DVDs DO look almost as good as HD - just lacking a little of the crispness and detail. But then my TV "only" has a horizontal resolution of about 1000 or so (34" Panasonic 1080i widescreen direct-view tube). My next TV will probably be a flat panel (LCD or plasma or maybe one of the new technologies coming along) of 40" or more, with full HD resolution (1920x1080).
I'm fortunate in that I waited to buy an HD set until the need for HDMI with HDCP became clear. Although at this time my cable co's HD PVR will output all programming in the clear at full HD resolution on the component output.
I moved from VHS to DVD because of the size of the storage medium, clearly better quaility of picture, and the bonus material found on DVD.
That was a lot of extras for swtiching from one technology to another. I do not see the same advantage for moving from DVD to either of these new technology. I am happy with what I have now, I can affort to wait.
All this and no mention of the differences in how the formats will use content restrictions to kill fair use and possibly make that shiny new HDTV you just bought obsolete.
"I've still got my Sony Beta. It's the best format, you know."
I used to have one and I loved it. They just stopped carrying the Beta tapes.
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