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One to One Magazine

March 2008

Blu-ray blue ribbon?
With Warner’s announcement to go Blu-ray for high-definition DVDs, various players in the replication world take this time to assess their current strategies.

Joy Zaccaria gauges the reactions with a cross-section of the industry, views taken before the Oerlikon BD technology was taken over by Singulus

Blu-ray has taken a perceived lead with Warner Bros Entertainment’s decision to release DVD titles exclusively in the Blu-ray disc format, as opposed to HD DVD. The consensus among those in the industry is that time is a factor and there is no immediate winner to the race. Still, most players look forward to the day when one or the other takes the position as the high-definition standard so they can equip their facilities accordingly.

Here are some voices in the industry in reaction to the recent announcement and how they see it playing out in the industry and affecting their own business practices and strategies. Since Blu-ray means all new equipment to produce its discs, this should mean more business for the equipment and printing manufacturers, thus a stimulated economy on one side and grand expenditures on the other.

Marianne Sernevi, vice president Sales and Marketing, AudioDev
For the short term, those that had planned for investments in HD DVD will take a hit, and will be scrambling to seek a new strategy. “To go from planning for investment in HD DVD when you already have DVD lines that are compatible for HD DVD, it’s less of an investment compared to that for Blu-ray,” says Marianne Sernevi. “For example, in Europe, there has been more investment for HD DVD and some more were planned. But of course how many of these investments will actually take place now?”

That is Sernevi’s expectation while acknowledging that it’s too early to say for sure. “But the wind is definitely blowing in that direction. This could be the thing that establishes the Blu laser business,” she says. “For the consumer, the confusion goes away.”

Sernevi sees the announcement affecting AudioDev positively in two ways. “I think it will make the demand for Blu-ray discs go up sooner rather than later. Also we will be able to focus our efforts on one format rather than to spread our R&D resources on two formats. That is, if the other format goes away.”

Erik van Stiphout, area sales manager, Axxicon Moulds Eindhoven BV

Since it’s difficult to predict the future of high-definition formats, Axxicon covered its bases with moulds for both Blu-ray and HD DVD. Various content owners have their preferences for high definition formats. Regarding pre-recordable and recordable, Blu-ray seems to be preferred but the PC industry, represented by Microsoft, opts for HD DVD. Other pillars of the industry such as gaming are still divided in both directions and also the adult entertainment industry has not commited, so all options are still open.

“Our DVD mould is already prepared for HD DVD and we have a proven Blu-ray mould as well,” said Erik van Stiphout. “Both technologies are qualified in this high tech industry.”

Axxicon Moulds announced that the new BD rewritable production line installed at Philips Optical Media & Technology (OM&T) in Eindhoven (since taken over by Moser Baer), was equipped with an Axxicon STX-Blu-ray mould.

Frank Simonis, chairman of the Blu-ray Disc Association in Europe and senior director of Communications for Philips Intellectual Property and Standards.

Frank Simonis sees this latest development as helping to resolve the discussion between the two formats in the press and at retail. “In the next year it will become more and more clear what the values of Blu-ray are. And which companies can benefit more strongly. It’s not related to the format, it’s really related to the sales performance.”

Right now Simonis still sees confusion. Paramount and Dreamworks Universal are still staying exclusively on HD DVD and he hopes they will change their minds. Plans are to build on the level of confidence the early adopters have given Blu-ray by expanding the Blu-ray disc title catalogue they invested in. The second means of support is an introduction of a bigger array of
hardware devices.

In terms of how this announcement affects his own business strategy for the short term, for Philips there is no change. “We always have been a strong believer in the Blu-ray format,” says Simonis. “As one of the founding members of the association we stick to our commitment on this.”

James Steynor, CEO, DaTARIUS

It’s difficult to be absolutely sure about the end of the format war because the industry has had false dawns on this issue before; however: “I have to say this is the strongest sign that it should be over now,” says James Steynor. “It appears that Blu-ray will win the format war.”

In the short term, there are some concerns about the manufacturing base of Blu-ray discs. “Oerlikon and Singulus were to some extent struggling to get their processes for BD 50 out in use. In the very short term, there is a shortage of technology for manufacturers to readily buy into in order to make BD 50. In order for the technology to develop, it’s important to increase the confidence in the next generation formats.”

In the short term, the fact that HD DVD may be perceived as not the winner will to some extent mean a reduction in possible sales for companies such as DaTARIUS since people who were pursuing both formats now will sit on the fence. “We are relatively indifferent to which format wins, other than the fact that we want there to be one format, and not two or three.”

Michael Dobler, general manager, Dr Schenk GmbH

If HD DVD turned out to be the high-def format of choice, that would require an upgrade to current disc production equipment in order to facilitate the increased capacity. With Blu-ray pulling ahead for high-def preference, it means all new equipment is necessary to produce the new generation of discs.

“For the equipment supplier, this is the preferred solution for our inspection systems,” says Michael Dobler. “With Blu-ray we are able to sell new equipment. It is a good direction since now we should see results for all the effort we put in to development.”
The Warner announcement will not have great effect on Dr Schenk’s strategy. “We put a lot of effort in developing our systems for these new formats. We will continue with that regardless of what kind of decision would have been made.”

As it’s still in the early stages, there is still a good amount of production development to come. “We are going to follow a similar path as the first two or three years of DVD.”

Dr Leonhard Schwab, CTO, dr.schwab Inspection Technology

During the last few years rival formats caused uncertainties among manufacturers and consumers as well, says Leonhard Schwab. It hindered a balanced growth of third generation media, and new ways of content distribution like Internet downloading and the discussions about additional developments like Total-HD contributed to that awkward situation.

“The decision for Blu-ray will help to rebuild and strengthen the customer’s confidence and boost sales figures to numbers that will make this technology more affordable. The decision for Blu-ray will enable the industry to regain a balanced and profitable growth.”

Schwab sees consumers, replicators and equipment manufacturers as relieved that the format war will finally come to an end very soon. “This decision for Blu-ray confirms our strategy and our R&D investments will come to fruition,” he says.

Bruce Nazarian, president of the DVD Association (International) and CEO of Digital Media Consulting Group, Inc.

The Digital Media Consulting Group will continue to remind people that there are perfectly good technological solutions on both sides. “The most important thing is to not panic from the perception of this announcement or what people think the spin-off from this announcement may be,” says Nazarian. “It is important to carefully evaluate a company’s needs at the time and in the future—and carefully select a solution based on that.”

Nazarian contends that the Warner announcement is certainly significant. But it doesn’t necessarily indicate what may be possible with the HD DVD format in terms of its uses for other independent publishers, corporate or industrial outlets. “Sometimes it’s a hard to kill a format like that once it’s already got some life.”

He sees it affecting publishers in terms of what format they’re going to consider publishing on. The potential affecton retailers would manifest in choosing to stock one format or another.

Holger Volpert,COO,KBA-Metronic

No matter whether it’s Blu-ray or HD DVD, the new high-definition discs will require high-quality decoration. Holger Volpert is relieved to see a preference for one of the formats that will hopefully lead to an end to the confusion about the high-definition formats.

The favorable decision for Blu-ray affects KBA in that the companies investing in new replication lines will need new printing machines. “For us it doesn’t matter if it was Blu-ray or HD. In the past, there was no decision at all. That’s why there were only a small number of printing machines sold. If a company is investing in new replication lines, they are open for printing machines afterwards as well.”

Volpert sees the next year as the turning point. “Now the information is very new that Warner is going with BD. I expect during the next four to six months that it will be clear that BD has won.”

Volpert also sees it as a relief for the consumer. “The consumer is tired of the discussion around BD and HD and hardly understands the issues. The uncertainty was with consumers as well as with producers. The latest news regarding Warner has been published worldwide, not only in industry magazines, but also in regular newspapers. The people understand this as a clarification and will go for investments into BD.”

Mahesh Jayanarayan, CEO, NME (New Medium Enterprises Inc)

As the third HD format in this market, NME released a statement in response to the current Blu-ray versus HD DVD format war.

“On the surface, the issues surrounding HD DVD could be seen as a good thing for us. But I don’t think the format war is over yet, as the studios have changed their minds before. In the end, we believe that the studios will support any format that will increase their revenue base. With our lower cost, competitive price, and 1080p standard, HD VMD certainly points to a bigger revenue base for content owners and mass adoption for consumers.”

NME’s vision is to make HD accessible for the masses. “The fact that we currently cater to the world’s largest independent video distributors allows the studios to take a piece of the HD video revenue pie,” Jayanarayan says.

Oerlikon Optical Disc

For Oerlikon Optical Disc, the current market development confirms its strategy since their focus has always been on Blu-ray technology as the next generation format.

“Through our cover layer spin coating technology and machine concept we have already achieved the widest installed base of Blu-ray replication lines covering ROM, R as well as RE applications,” according to a statement from the company.

“Also the co-operation with Sony in regard to the BD50 wet embossing process allowed Oerlikon to ship the first BD50 lines to key customers in December of last year.”

Bernhard Krause, Singulus spokesman

The recent decisions from the film industry have particularly paid off for Singulus and Blu-ray. “For 2008 we now expect a pick-up in demand for Blu-ray machines, especially for the BLULINE II, our new Blu-ray Dual layer production line,” says Bernhard Krause. “Capacities can gradually build up for this year’s Christmas business.”

“Following Warner’s decision, Blu-ray has definitely gained momentum to become the winning format. In addition, there were announcements in mid-January that Universal and Paramount will terminate their HD DVD exclusivity agreements.”

The storage capacity of a dual layer Blu-ray disc with 50 GB is certainly not the end. “There will be more developments to increase the capacity to fit movies with extra-long playing time and the respective high audio quality as well as other features on a disc.”

Guido Dalessi, CEO, Singulus Mastering BV

Guido Dalessi is not sure if HD DVD will disappear completely, but he believes that Blu-ray will win overall. For his own business as CEO of Singulus Mastering BV, the clarity in the market for one high definition format means customers on the fence can finally find a resolution. Those who had planned to invest later in Blu-ray can now do it sooner.

“We had quite a group of customers interested in our equipment, who didn’t invest because of the market situation. They were waiting to see which format would be preferred,” says Dalessi. “I don’t think there will be more or many new customers all of a sudden. But the schedules that people had so far for investing maybe in the second half of this year will be changed to the first half of this year.”

Ron Goodwin, vice president Marketing, Tapematic SpA

A ‘format supplier’ will keep trying to push their product until the costs make it prohibitive to continue. While Blu-ray and HD DVD are both out there on the shelves, there are others still trying to get a foot in the door, like NME. “As we still live in a free world they are free to do so, but in the meantime it has slowed down the adoption of any single format,” says Ron Goodwin.

Another concept to consider is the fact that the entertainment industry is not the only market for these high-resolution discs. “Which format will become the major seller during 2008 will depend on who backs it,” said Goodwin. “We have seen the film makers are backing BD, but HD will not just die off overnight. For some time HD will have to fulfill their commitments. I am sure we will see HD around for some time to come.” Goodwin does agree that BD in 2008 will come close to 100% of the market share in movies.

“With BD becoming the number one, this will make buyers, manufacturers and the market in general more stable. This is positive for our industry. In the long term the move to BD with HD DVD no longer being an option will reduce the total number of replicators.”

Cameron Serles, president, Xiris

The end of the format war is unfortunately not so cut and dry. Cameron Serles, President of Xiris, doesn’t think Toshiba and Microsoft have given up yet. “It seems that Blu-ray has definitely taken the lead with regard to the studios,” he said. “Also Sony is finally getting PS3 consoles out on the marketplace. But I still think there are some very good reasons for HD DVD in software. With XBox and other gaming formats, HD DVD has some pull.”

The trend toward Blu-ray is not happening extremely fast. “Confusion equals equipment delays and everyone wants a new generation format,” said Serles. “Consumers want to use it. Replicators want to be able to make it for their customers. But without a clear-cut winner, everyone is nervous about making a decision. So consumers are playing the wait and see game. As a result the replicators are doing the same.”

Xiris touts some new and interesting equipment available for Blu-ray. The question is: When will one format dominate the high-definition realm? “Until that question is answered, our business is hurting because we’re waiting for people to make a move.”

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