iHollywood

The Retail Nightmare Before Christmas

The next generation format war is in full swing, and Paramount has just realized every retailer's worst dream with the announced simultaneous release of Mission Impossible 3 on standard DVD, Blu-ray, and HD-DVD.

A few keys points can be gleaned from this

• Hybrid is not the saving grace. Before the format war became a reality, the HD-DVD group stated that three SKUs of content would become unnecessary because retailers were very interested in the hybrid disc with HD-DVD on on side and standard DVD on the other. It appears retailers have realized that only offering a hybrid disc, which would result in increased prices for consumers does little to help an already softening market. The three format release has and will continue to be a reality.
• Mass consumer confusion. If retailers choose to stock next gen DVDs with standard DVDs there will inevitably be mass consumer confusion. Movies may be purchased by buyers unware multiple formats even exist not allowing them to realize they made the wrong purchase. This could lead to frustration with retail stores and longer return lines come the beginning of next year. Additionally, with multiple formats on the market, gift buyers will probably stick with standard DVDs to ensure the gift getter can actually play the content. Needless to say, consumer will be confused and retailers will bear the brunt of that frustration.
• Lack of retail shelf space. With three formats on the market and multiple DVD sets of TV shows continuing to appeal to the public, retailers will inevitably experience shelf space constraints. Will this lead to retailers only offering one format before the year ends? Or will retailer have less of each title on the shelf which could lead to constant restocking during the busiest time of the year. Will separate sections be created for Blu-ray and HD-DVD. Placing the next gen DVDs with the standard DVD will certainly lead to the problems mentioned above.
• No winner yet. The decision to release a DVD in multiple formats indicates that Paramount is making good on its promise to deliver multiple formats of the same title while demonstrating that no format has pulled ahead yet.

The final question is, will consumers really be willing to spend the $500 or $1,000 for a new player and pay a significant premium on next gen titles? How will studios truly differentiate their offerings? For MI:3, Paramount is offering a 1080p version on both next gen titles, while the HD-DVD version will also offer an on screen commentary by those involved with the film. The feature will supplant audio commentary played over a movie and is possible because of iHD, the interactive HD-DVD element. However, is seeing JJ Abrams talk about the movie while watching it worth the upgrade from simply hearing him? Is this feature enough to convince consumers to buy HD-DVD over Blu-ray? Probably not yet, but it does bring into question of how studios will incorporate special features in their next generation titles to convince users to upgrade from standard titles, because watching JJ Abrams isn't enough.

LG is True Blu Once More

Earlier this year LG announced that it will release a Blu-ray only player. Today, the same plan rings true. The curious thing is that in the intervening months, LG had planned to release a hybrid player in lieu of a Blu-ray-only player. It appears those plans have been scrapped.

There a few reasons why LG could have decided to once again go Blu:

• Ricoh - Announced that it was developing a hybrid player with a single drive that can play both Blu-ray and HD-DVD discs. This development, due in late 2007, may have prompted LG to halt development of a hybrid player. Such a player may have required two separate drives for each disc. Ricoh's announcement may reduce the overall development cost of such a hybrid player by eliminating LG's own R&D and create a product that will be cheaper, more aesthetically appealing (by only having on drive), and more palatable to the consumer. This could allow LG to develop a hybrid player in late 2007 instead of now.
• Price - With Blu-ray players already screeching past the $1,000 price mark, perhaps LG reasoned that a dual drive would cost too much to even be appealing to the early adopters who are the primary target at this stage of market development.
• Content - After evaluating the content available for each format, and noting that Blu-ray had considerably more studio support, LG  should have realized that developing a hybrid disc to ensure NBC Universal's discs would be Blu-ray compatible (all other studios support Blu-ray, or Blu-ray and HD-DVD) would not be valued enough by the consumer to justify the premium price of a hybrid player.

LG's decision to release a Blu-ray only player helps to swing momentum towards Blu-ray, in need of it after continued product delays, Samsung's problems with video playback on its first generation Blu-ray player, and the high price points of Blu-ray hardware. Even with this announcement and new momentum for Blu-ray the market for next generation DVD will continue to be hampered by the format war and lack of perceived value the upgrade offers consumers. The latter can be corrected through marketing efforts but the former will continue to present an obstacle for adoption, which even a hybrid player would not be able to fix.

Choose Your Own Adventure DVD

Not a major announcement, but something to note nonetheless.

Choose your own Adventure, a collection of books allowing children to choose the path(s) a story takes, is becoming interactive. While good news for the series, the interactive version may also provide a boon for the DVD market as well. As more and more children migrate from the TV/DVD to the PC, video games, etc. it is necessary for DVD makers to develop creative options to bring kids back.

This is a match mixing gaming, choice, and a linear experience that should capture the interest of children. Utilizing a brand with decades of experience entertaining children may entice parents who grew up reading the books to introduce their children to the DVDs. Having the support of major studios and star's willing to participate in the DVDs will also help their appeal.

The most important thing to take from this announcement is the recognition that studios are beginning to realize they must become more appealing to maintain the interest of children. This may be the beginning of other attempts by studios to create more interactive DVDs to win back the hearts and minds of children.

Samsung's Blu

Samsung released a statement to explain why reviewers were getting substandard video quality from their BD-P1000 Blu-ray DVD Players. According to Samsung, the problem lies with an incorrect setting on the noise reduction chip. The good news is the problem can be fixed via a firmware update. The bad news is the fix won’t be available until September.

The biggest cause for concern is that Samsung initially delayed its player to convert it to 1080p output, providing an advantage over Toshiba’s first generation HD-DVD player which offered a maximum output of 720p. This announcement indicates that consumers cannot be sure that a device they purchase will in fact offer such an advantage until September.

This is problematic for the Blu-ray format which only has the Samsung player on the market. Consumers must be persuaded that the technology offers substantive advantages over existing or competing technology to justify the premium price of Samsung’s Blu-ray to Toshiba’s HD-DVD of $1,000 to $500 respectively. With managed copy not supported in first generation players, a substandard picture on the Samsung player, and continued hardware delays from other Blu-ray manufacturers this could shake consumer confidence in the format. With the format war already responsible for a soft market, continued problems could further inhibit adoption of Blu-ray and next generation DVD overall.

Samsung should attempt to offer a fix for this problem sooner than September while Toshiba must take advantage of Blu-ray’s missteps to better position its technology.

Netflix offers subscribers NBC Fall Preview

According to a report from The Beta News, NBC has partnered with Netflix to allow subscribers to rent a DVD with the premier episodes of two NBC series, Studio 60 on the Sunset Strip and Kidnapped. This partnership reflects NBC's continued experimentation with varied distribution and promotional outlets.

For NBC this deal is a win-win as it attempts to convince the early adopters/influencers that the programming is worthwhile which could result in grass roots word of mouth promotion for the programming. This promotion could combat the audience erosion NBC has been facing by introducing new content to this targeted audience.

The only downside is that episodes could be ripped and illegally distributed over the Internet weeks before their actual broadcast date. However, even such an instance could build buzz and interest in the new programming continuing the grassroots effort NBC is hoping to mobilize.

For Netflix, a direct agreement with a studio achieves two goals.

1. It allows Netflix to offer unique value to its subscribers that its competition cannot match (assuming NBC doesn't partner with Blockbuster online as well).

2. Developing relationships directly with studios and building an audience for them may provide Netflix the ability to demonstrate its value. This could help Netflix argue that an on-demand STB service could also offer advantages. To date, its efforts to offer such a service have been hampered by legal issues and lack of studio support. This could be the start of addressing the latter of those issues.