Blu-ray: Betamax all over again?

When Sony announced last week that the launch of its newest console, the PlayStation 3 (PS3), would be delayed, it seemed to some observers that history was repeating itself.

When Sony announced last week that the launch of its newest console, the PlayStation 3 (PS3), would be delayed, it seemed to some observers that history was repeating itself.

Sony pinned the blame squarely on manufacturing problems with the Blu-ray technology in the consoles. Blu-ray is one of two competing standards for the next generation of DVDs; the other is HD DVD, championed by Toshiba. The last time there was a major format war in the living room, in the 1980s, Sony saw its Betamax technology lose out to VHS. Now some industry experts have been left wondering whether the same thing could happen again.

The delay means Nintendo and Microsoft can battle it out amongst themselves for the console market this Christmas. Just as importantly, HD DVD companies will have an easier time promoting their technology.

It could be that Sony was simply the first to blink this time, and that others will have to admit to problems with the technology. Ben Keen, chief analyst at research group Screen Digest, says others could also have trouble manufacturing their Blu-ray devices.

“Blu-ray is more challenging on the hardware and software sides,” he says. “They are having problems making some aspects work in the short term. It certainly could be a more general problem. It’s reasonable to assume there may be delays with stand-alone Blu-ray players.”

Annus Horribilis The PS3 troubles add to an uncomfortable year for Sony. It has already had to delay the launch of its own stand-alone DVD player in the US, while its laptop PCs have been suffering from widely publicised fires. For now, Sony will say little more than that it is “disappointed” by the delays for the PS3, and it is sticking to its previous target of shipping 6 million units of the console by the end of March next year.

Japan and the US will stay on track with November launches for the PS3 but consumers in the UK and most of the rest of the world will have to wait until March next year before they can get their hands on one.

A spokesman for Sony says having Blu-ray in the console is “fundamental to PS3 and the ability to deliver high-definition movies and games”. He adds/ “It is an important part of the console, so it will be an important part of the marketing campaign.”

The PS3 delay has dented some of the momentum that had been building up around Blu-ray. The Blu-ray Disc Association has only just appointed Krow Communications to handle its UK launch (MW last week). Its marketing strategy, which is expected to include advertising, direct marketing and digital activity, is unlikely to be affected.

Sony says it will probably continue as planned with some limited marketing of Blu-ray in the autumn as well.

The major Hollywood studios are expected to go ahead with their film releases on the new formats. Twentieth Century Fox Home Entertainment was the last major studio to unveil its first Blu-ray releases, with eight planned for November, including Behind Enemy Lines and Speed. MGM, Paramount, Buena Vista, Sony, Lionsgate and Warner have all either already started releasing Blu-ray movies or plan to do so before the end of the year.

Getting consumers to buy these films will be a big task. There is no sense that people are clamouring for the technology, and the electronics giants and the studios will have to work hard to get them into the electronics retailers to see the difference compared to conventional DVDs at first hand.

Once inside a showroom, consumers will be bombarded with the promise of improved picture quality, more content and more interactivity. Blu-ray can store up to nine hours of high-definition video on one disc. HD DVD has slightly lower capacity, offering up to eight hours, but also has lower manufacturing costs. In comparison, today’s DVDs hold about two hours of standard definition video.

Late starter Early feedback from the US, where both formats are already on sale, indicates that HD DVD has been outselling Blu-ray. That is probably due to a combination of a two-month headstart in the shops, a $150m (£79m) marketing campaign developed by San Francisco-based agency Goodby Silverstein & Partners and a lower price tag. HD DVD players, at around $500 (£263), are roughly half the price of the Blu-ray machines. However, analysts say the numbers are too low to be conclusive at this stage.

Sales have been slow so far due to the lack of choice in hardware, but also because consumers are wary of committing themselves to a technology which could be redundant in a short time. Those who can remember the Betamax debacle are wary of backing the wrong horse.

The UK’s biggest consumer electronics group Dixons Stores Group (DSG) does not think consumers should worry on that score. “We are agnostic about what will happen,” says a spokesman for the group. “There is the potential for both to co-exist in the market quite comfortably.”

Keen agrees: “At the moment there’s no clear indication that either side will win. Neither has a knockout position at this stage. Unless there are many major corporate about-turns, our view is that the two will co-exist until the launch of dual-format players.”

At the moment, Paramount and Warner Bros are the only studios to back both systems, but others are expected to follow. The only studio that is not expected to back both is Sony Pictures.

In the end it might all prove to be irrelevant. In the past week Amazon, the world’s largest online retailer, has launched Amazon Unbox, a DVD-quality video download service with thousands of television shows, movies and other content. As Marketing Week went to press, Apple was expected to unveil its own movie service, based around its hugely successful online music store, iTunes.

Such services raise questions about whether there is any need for a new wave of DVD technology. With video-on-demand services becoming more common, they could prove more convenient for customers wanting to watch movies at home.

one more chance Electronics manufacturers are betting that an opportunity remains for one more physical upgrade before that happens. “Converging technologies mean that ultimately there will come a time when internet download services move into the mass market,” predicts a spokeswoman for Toshiba. “However, that is some way off. DVD players will be in our homes for a long time yet.”

The studios, knowing what has happened to the music industry in recent years, are backing these services from the start. Twentieth Century Fox, Paramount, Sony, Universal, Warner Bros. and MGM have all signed up to release films through Amazon Unbox.

Bill Gates last year called the battle between Blu-ray and HD DVD as “the last physical format war for movies”. Whoever wins might find it little better than a pyrrhic victory if people move straight online instead.

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