Wednesday, January 16, 2008

Did Microsoft lose the format war?

Partially major news over the past week or so. Warner Brothers was one of the last dual disc vendors for High Resolution DVD, supplying both HD-DVD and Blu-Ray versions of their movies. Now, Warner Brothers has announced that this summer they will be dropping HD-DVD and supplying High-Resolution movies on Blu-Ray only.

Sounds good then right? Well, not if you believe Don Lindich of the Pittsburgh Post. Seems Mr. Lindich believes that Warner Brothers decision wasn't really on the level. Instead he claims that Warner Brothers told Toshiba to court Fox. Sony countered Toshiba's courting and gave Fox cold hard cash to remain on the Blu-Ray format. As Fox wouldn't switch to HD-DVD, Warner Brothers wouldn't go to HD-DVD, so Warner Brothers went with Blu-Ray. I know, his theory reads like a Soap Opera.

The logic train there notes that Warner Brothers had already determined that they were going to either side with HD-DVD or they were going to side with Blu-Ray. If Warner Brothers went with HD-DVD only, nothing would really change. The current movie production camps were already tilted in Blu-Ray's favor, and going HD-DVD only would simple even the two sides out.

Ergo, in order to end the format war, Warner Brothers wanted another Blu-Ray only studio to switch as well, so that the odds would be tilted in favor of HD-DVD. So, Warner Brothers suggested that Toshiba court Fox who was currently Blu-Ray only, and was having some problems with Blu-Ray production. Old saying, go after the sick and weak, those who already have broken legs.

However, according to Mr.
Lindich, Fox decided that they'd talk with Sony about their production problems, and Sony got them straightened out. Okay, Fox is happy, everything is well, production problems sorted, no reason to switch to HD-DVD.

Okay, Fox isn't moving, so Warner Brothers determines that in order to end the war, they'll go with Blu-Ray, which will then have the most number of publishers period... which will end the war.

Now, I'm going to poke a couple of Star Destroyer sized holes in Mr. Lindich's theory right now.

The basic story might be true. I'll grant that there are some soap operas to be had in the format war, but I think Mr. Lindich overlooks quite a few factors. The first is the sales difference between Blu-Ray and HD-DVD. Warner Brothers has something close to a 5 to 1 sales advantage of Blu-Ray movies over their HD-DVD counterparts.

Ergo, Warner Brothers was already eying Blu-Ray to begin with.

So, what incentives did Toshiba offer Warner Brothers? What did Toshiba or the HD-DVD Alliance do to start with that would even make Warner Brothers consider the less successful retail product.

Now, Mr. Lindich claims that Sony handed Fox $120million to stay with Blu-Ray... after stating that Fox went to Sony about their production problems. Now, I don't know how many people have been in technical support, but obviously Mr. Lindich has not. Actually, I'm not even convinced he's in the real world.

When you buy a new car, say a Ford, and it breaks down within a couple of months. Who do you take the car to? The Ford Dealership with the trained mechanics from Ford? Or the Chevy dealership with trained mechanics from General Motors. Well, if you Mr. Lindich, you obviously go the Chevy Dealership. If your Not Mr. Lindich, you go to the Ford Dealership.

See what I'm getting at? Fox was having production problems with Blu-Ray. They went to the people who make Blu-Ray, which is Sony, in order to get assistance to solve their problems. That's what you do when something breaks and you have a contract or a warranty. You go to the vendor.

The way Mr. Lindich puts his statement about a payout then misses a crucial question. Exactly what incentives were Toshiba and the HD-DVD alliance offering Fox to begin with? Replacing all of their Blu-Ray production equipment with HD-DVD equipment isn't exactly a non-expensive proposition. So, okay, Sony gives Fox $120million. Mind telling me how much HD-DVD equipment is going to cost?

As I see it Fox placed a call to technical support, got their problem solved, and got some cash back. Hey, that's pretty good if your having to call in.

So, Mr. Lindich's story conveniently leaves out involvement by Toshiba and the HD-DVD alliance, and leaves out one other player.


Now, as I've already laid out in the post Michael Bay ain't crazy, Microsoft has a certain amount of vested interest in insuring that no single High-Resolution format really succeeds. The success of a single Disc-Based format means that Microsoft's streaming plans for Vista are put on a back burner. Never-minding that Vista has already broken the records Windows ME set for failure, Microsoft now has the face the probability that consumers will have easy access to High-Resolution video on numerous consumer devices that are not it's Xbox 360 lineup, and are not dependent on using Vista.

Fact is, Sony's managed to slice production costs on the Playstation3. It's well down from the original production cost of $800, and according to Engadget Sony can chunk a PlayStation 3 out for around $400. This is good news for the consumer since it makes a $299 version of the PlayStation 3 more likely in the US. Now, keep in mind that Sony already has a 299 version of the PlayStation 3 in the UK markets. Okay, so that version of the PlayStation 3 lacks any compatibility with PlayStation 2 games, lacks the memory card reader, and drops 2 USB ports. But, it is the same basic Blu-Ray player that you get with the higher priced models.

Now, I've stated before that I don't think Sony can get away with selling the PlayStation 3 as a Blu-Ray device only. I still stand by that statement. I think Sony is making a horrible blunder by not shipping the PlayStation 3 with Compiz-Fusion enabled desktop, Open Office, FireFox, and Thunderbird. I think that if Sony can get it into their heads that they still have the chance to completely smash Vista to pieces by turning the most powerful home console you can buy into the cheapest and most powerful Linux Computer you can buy, sales will effectively detonate.. Seriously, the cheapest system I sell is $600, and at that price point? It's not even a contest.

So, again, getting back to Microsoft. Did they lose the format war? Well, yes, they lost this part of the war. But keep in mind that Microsoft already was planning exit strategies back when the Xbox 360 launched. There is a Blu-Ray drive coming for the Xbox 360. There has been software support for Blu-Ray in Windows for quite a while. The dream of Microsoft to abolish the disc-based formats and move everyone onto streamed DRM movies with Vista?

It's back in the gutter where it belongs.
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