CES 2008: Warner Bros. Goes Blu-Ray Exclusive Toshiba Is Surprised

January 4, in SACD News

CES 2008: Warner Home Video dropped a bombshell today in the High Definition Video Disc market by announcing that it will going to Blu-Ray Disc exclusively for its High Definition Video Disc releases starting at the end of May 2008. The announcement follows a year where we saw retailers like Blockbuster Video and Target move towards the Blu-Ray format while Paramount and Dreamworks moved from a dual format release program to an HD-DVD only program after a rumored $150 Million incentives package was provided to the studios according to a story in the New York Times.

High Fidelity Review readers know that we have been following the story of the two high definition video disc formats (Blu-Ray and HD-DVD) for some time now (see earlier stories, linked below). In 2005, there was hope that the two formats would come together as happened with DVD Video. Unfortunately that did not come to pass.

Instead, we have witnessed a lively format war between Blu-Ray and HD-DVD in the intervening time. Both formats have come to market and have touted features and advantages that they feel elevates their format above the competition. Blu-Ray and HD-DVD both support new lossless audio technologies from DTS and Dolby (DTS Master Audio and Dolby True HD) and the Blu-Ray studios have released a number of movies and music concert discs that actually offer uncompressed 5.1 PCM Audio, skipping even the lossless codecs. So this arena is of key interest to the high resolution audio community.

The Warner Announcement & Blu-Ray Exclusivity at New Line Cinema
The announcement of the Warner move to Blu-Ray was sent out to the media and was also posted prominently on both the Time-Warner Corp. Newsroom web site and the Blu-Ray Disc Association web site. In the formal announcement, Warner Home Video says:

«In response to consumer demand, Warner Bros. Entertainment will release its high-definition DVD titles exclusively in the Blu-ray disc format beginning later this year, it was announced today by Barry Meyer, Chairman & CEO, Warner Bros. and Kevin Tsujihara, President, Warner Bros. Home Entertainment Group.

«Warner Bros.’ move to exclusively release in the Blu-ray disc format is a strategic decision focused on the long term and the most direct way to give consumers what they want,» said Meyer. «The window of opportunity for high-definition DVD could be missed if format confusion continues to linger. We believe that exclusively distributing in Blu-ray will further the potential for mass market success and ultimately benefit retailers, producers, and most importantly, consumers.»

Warner Home Video will continue to release its titles in standard DVD format and Blu-ray. After a short window following their standard DVD and Blu-ray releases, all new titles will continue to be released in HD DVD until the end of May 2008.

«Warner Bros. has produced in both high-definition formats in an effort to provide consumer choice, foster mainstream adoption and drive down hardware prices,» said Jeff Bewkes, President and Chief Executive Officer, Time Warner Inc., the parent company of Warner Bros. Entertainment. «Today’s decision by Warner Bros. to distribute in a single format comes at the right time and is the best decision both for consumers and Time Warner.»

«A two-format landscape has led to consumer confusion and indifference toward high definition, which has kept the technology from reaching mass adoption and becoming the important revenue stream that it can be for the industry,» said Tsujihara. «Consumers have clearly chosen Blu-ray, and we believe that recognizing this preference is the right step in making this great home entertainment experience accessible to the widest possible audience. Warner Bros. has worked very closely with the Toshiba Corporation in promoting high definition media and we have enormous respect for their efforts. We look forward to working with them on other projects in the future.»

The Warner Home Video announcement was followed by a similar announcement by New Line Cinema that they too would be moving to a Blu-Ray exclusive program for their High Definition movie titles this summer. Since New Line Cinema is owned by Time-Warner this wasn’t a big surprise, but it furthers the impact of today’s announcement.

Warner’s comments about ending consumer confusion is a key here. With DVD sales suffering their second straight year of decline, I’m sure that studio chiefs are beginning to get nervous about the packaged media business. After seeing what is happening to the sales of the audio CD, they are likely concluding that if high definition video discs are to succeed at all, the time is now to make that happen.

Toshiba Expresses «Surprise» at the Warner Move to Blu-Ray Exclusivity
The folks at Toshiba, the main player in the HD-DVD format was clearly surprised at the news of Warner Home Video leaving the HD-DVD camp. An hour after the announcement from Warner Home Video, Toshiba’s Tokyo headquarters issued this rather terse and prickly news announcement to the media via the PR Newswire service:

«Toshiba is quite surprised by Warner Bros.’ decision to abandon HD DVD in favor of Blu-ray, despite the fact that there are various contracts in place between our companies concerning the support of HD DVD. As central members of the DVD Forum, we have long maintained a close partnership with Warner Bros. We worked closely together to help standardize the first-generation DVD format as well as to define and shape HD DVD as its next-generation successor.

We were particularly disappointed that this decision was made in spite of the significant momentum HD DVD has gained in the US market as well as other regions in 2007. HD DVD players and PCs have outsold Blu-ray in the US market in 2007.

We will assess the potential impact of this announcement with the other HD DVD partner companies and evaluate potential next steps. We remain firm in our belief that HD DVD is the format best suited to the wants and needs of the consumer.»

In light of Toshiba’s work with Warner on both the DVD Video (DVD) and later DVD Audio (DVD-A) formats, I’m sure the move by Warner Home Video is a bitter pill to swallow. The Toshiba reference to «contracts in place» is also interesting as agreements like this and their contents tend to be kept confidential in the industry. One wonders whether Toshiba is merely saber rattling here or if they are serious about continuing on with Warner support of the HD-DVD format through legal avenues.

HD-DVD Promotion Group Cancels CES Press Conference & Reception
The excitement continued later Friday evening when members of the media were notified that the HD-DVD camp’s «HD-DVD Promotion Group» was cancelling their annual press conference and reception at CES which was scheduled for Sunday evening. This event was to be held in the evening, after the day-long CES Press Day. The announcement was strangely absent from the group’s web site. Instead, it came in an email to the media which said:

«Based on the timing of the Warner Home Video announcement today, we have decided to postpone our CES 2008 press conference scheduled for Sunday, January 6th at 8:30 p.m. in the Wynn Hotel. We apologize for any inconvenience this may cause.

We are currently discussing the potential impact of this announcement with the other HD DVD partner companies and evaluating next steps. We believe the consumer continues to benefit from HD DVD’s commitment to quality and affordability – a bar that is critical for the mainstream success of any format. We’ll continue to keep you updated on new developments around HD DVD.»

What Comes Next?
This is certainly a fascinating development on the eve of CES. While it was widely rumored that Warner Home Video would make the move to Blu-Ray releases in January, I expected that the announcement would occur at or shortly after the show — not right before it.

There have been rumors that we might see the first Apple Mac Computers with integrated Blu-Ray drives announced as soon as this month’s Mac World Expo event at the Moscone Center in San Francisco. While Apple was an early member of the Blu-Ray Association, their entry into the market might further the momentum that the Blu-Ray format continues to gather.

As to what happens with the major movie studios that are still releasing HD-DVD movie titles (Universal, Paramount and Dream Works), this will be an interesting area to watch. They could stay with HD-DVD exclusively and prolong the format war. Or they could move to a dual format approach as Warner Home Video had been pursuing since day one of the High Definition Video saga. That would give the Blu-Ray format even more momentum but would also appease Toshiba’s desire to have the movie studios honor their legal agreements with Toshiba on HD-DVD releases. Either way, the days and weeks ahead promise to be quite interesting! We’ll be watching with interest.

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