Electronic Design

HD DVD Versus Blu-Ray

If history is any indication, Blu-ray and HD DVD will soon knock DVDs off Blockbuster’s shelves and out of your home-theater racks. Only a few years ago, Blockbuster and low-priced DVD players nailed the VHS coffin shut. Sure, some consumers still insisted the video-recording capabilities of their VHS deck were important enough to keep from going out and purchasing a $99 DVD player.

But as soon as Blockbuster started moving away from VHS and offering more DVD titles, even the VHS diehards started transitioning to DVD. Each movie studio loaded its movies on DVDs. Now another shift is about to happen: the transition to HD optical formats. But this time, it won’t be as smooth as it was for DVD.

First, there are two HD optical formats—HD DVD and Blu-ray—versus just one universal standard DVD. Toshiba is pushing HD DVD with the help of Microsoft, while Sony and nearly all of the movie studios push Blu-ray. It really doesn’t matter who wins, as long as one format wins quickly, nudging on-the-fence consumers toward an HD optical format.

Second, it will take some time for HD DVD and Blu-ray players to hit that magical $99 retail price. Currently, Sony’s BDP-S1 Blu-ray player costs $999.95, while Toshiba’s HDXA1 HD DVD player comes in at $799.99. Toshiba also has a version (HD-A1) that costs $499.99.

For prices to come down, the scale of production needs to increase. But due to the conflicting formats, many consumers are waiting to purchase a player, making it difficult for production to scale up and prices to drop.

Maybe that’s why Sony incorporated a Blu-ray drive into its PlayStation 3 gaming console and still sells it for much less than the cost of manufacturing. Sony was willing to subsidize the PlayStation 3 by taking losses because the company knew that prices had to be low enough for people to buy it.

Third, the market for these HD optical players is somewhat limited to consumers who already have a capable HDTV—namely, an HDTV that can display 1080p. Blu-ray players can output 1080p encoded HD content at 1080p. HD DVD’s upper limit is currently 1080i with an upgrade to 1080p output expected in the near future. To take full advantage of 1080p, you’ll need a 1080p display.

According to DisplaySearch’s Quarterly Global TV Shipment and Forecast Report, Q3’06, 1080p shipments will grow at a 140% compound annual growth rate (CAGR), reaching a 14% share of the 2010 TV market. The 2010 TV market’s total shipments will hit just over 219 million units, making 1080p’s portion 21.9 million units.

That might look like a small number, but it’s just as large as DVD player sales volumes. The Consumer Electronics Association says 22 million DVD players were sold in 2003, a number that took seven years to achieve. In comparison, HD optical players will hit the 22 million mark in about five years, assuming most 1080p TV owners and some regular HDTV owners will purchase one. While that’s a very aggressive assumption, it isn’t impossibly unrealistic.

Some skeptics believe neither format will succeed, expecting movie download services via the Internet to render optical formats obsolete. For instance, Microsoft’s Xbox Live movie rental and download service will have HD content. With Xbox 360 consoles already connected to a TV, the problem of connecting downloaded HD content is easily solved.

However, Xbox Live requires an Xbox 360 console, a broadband Internet connection, and an HD-capable TV. Xbox 360 console sales have just hit over 1 million units—a fairly small number that will have a relatively small impact in the Internet downloading of HD content.

Even with a faster pipe at 6 Mbits/s from cable Internet, a broadband Internet connection will require several hours to completely download an HD movie. Assuming the size of a compressed HD movie is 10 Gbytes, downloading via a 6-Mbit/s Internet pipe will take approximately four hours. For 1080p content, the download will take much longer.

Not everyone has a 6-Mbit/s broadband connection. The most popular bandwidth seems to average around 1.5 Mbits/s, which will quadruple the download time to about 16 hours! Fortunately, streaming technologies will let users begin watching the movie in several minutes.

Aside from the current limitations in technology, consumers have a psychological tendency to need to have something to hold, like an optical disc. Consumers who purchase a $25 Blu-ray movie via the Internet probably also will want to have a backup of the movie on a Blu-ray disc.

Instead of downloading, then, most consumers would rather go to the store and purchase a Blu-ray disc for about the same price as an Internet download. However, they’ll get all the bells and whistles along with it, such as professional graphics on the optical disc packaged in a sturdy plastic case with a nicely printed cover.

The transition to HD optical formats is in progress. If history is any indication, it will run over DVD in a few short years. Let’s hope the battle between Blu-ray and HD DVD ends up in a quick knockout so consumers can feel confident about purchasing a HD optical player.

Jin Kim, director of TFT LCD market research at DisplaySearch, holds a bachelor’s degree from UC Berkeley in peace and conflict studies and an MBA from the Peter Drucker Graduate School of Management with a dual concentration in marketing and strategy.

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