1. High-definition DVD Format Wars
March 14, 2007
MANGAL DAS
HIMANSHU RAMCHANDANI
MUDIT NIGAM
MOHIT KUMAR
Strategic Computing

2.  In recent years, high-definition (HD) television and
HD optical discs entered the market
 Two HD formats have appeared in the DVD
market, both claiming to be the rightful successor
to the DVD throne:
 Blu-ray (developed by Sony/Phillips)
 HD DVD (developed by Toshiba)
 Measured by most performance metrics these two
technologies are the same, except that Blu-ray has
significantly larger capacity (66%).
 However, Blu-ray appears to have greater network
support
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3.  While the format war rages on, entirely
different outcomes are possible:
 LG has introduced a dual-format player and drive
 Internet may replace the DVD as a movie delivery
vehicle
 International view: Japan (96% Blu-ray), Europe
(pushing for open licensing of both formats),
China (proprietary HD format), India (small $
market), South America (unknown); Xbox 360
but still no PS3)
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4.  Before HD, IBM arbitrated a standard DVD format
intended to avoid a format war, but the outcome
favored Toshiba regarding royalties, leaving Sony
unhappy
 In response, Sony began developing the next
generation of high-definition optical media
 Toshiba followed suit with its own HD technology
 While there were many “peace talks”, neither party
reached agreement
 Comparison: VHS vs. Betamax War
 Despite Beta’s superior quality, VHS won the war because
of its strong “content” network
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5.  Certain format wars were never won, but
instead compromised with the introduction of
multi-format technology
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 DVD-R vs. DVD+R
– Multi-format DVD drives accommodate both
 CDMA vs. GSM
– Can make/receive calls regardless of technology
– Both prevalent around the world
 Flash Memory Formats
– Over 50 different kinds of flash memory
– All-in-one readers handle most types

6.  Most performance metrics of these two technologies are the same
 Blu-ray storage capacity is more practical for HD movies
 One high-definition movie (~20GB) fits on just one Blu-ray layer
(25GB); while HD DVD requires two layers (2x 15GB)
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Blu-ray HD DVD
Storage
(single layer)
25GB (5 hrs of HD video) 15GB (2 hrs of HD video)
Storage
(dual layer)
50GB (9 hrs of HD video) 30GB (5 hrs of HD video)
Cost/Disc* ~$1.59 ~$1.45
Cost/GB* ~$0.064 ~$0.097
Disc Player
Price
$500 (PS3) - $1000 $500 - $800
* Sources: ProActionMedia, WesleyTech; single layer.

7.  While both formats have support from various large companies, Blu-ray
has greater support from content providers that are critical to achieving
a network effect
 Consumers will follow the format of the CONTENT providers
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Blu-ray HD DVD
Content Network
20th Century Fox, Apple, Dell,
Disney, LG, Lion’s Gate, Paramount,
Philips, Sony (Columbia and MGM),
Warner
Paramount, Universal, Warner
Player Network LG, Phillips, Samsung, Sony LG, RCA, Toshiba
Gaming Network
Sony PS3 (integrated), Electronic
Arts (EA)
Microsoft Xbox 360 (external)

8.  Digital Rights Management
 Blu-ray promises BD+, which
allows encryption keys to be
modified when they are hacked
 AACS is the copy protection
scheme used by both HD DVD
& Blu-ray. Took years to
develop, but broken in weeks
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 Blu-ray more prone to error due to high
aperture
 Without protective hard-coating, Blu-ray
is easier to scratch (data layer is closer
to surface)
Disc Aperture Settings
DVD 0.6
HD DVD 0.65
Blu-ray 0.85

9.  Sales trends illustrate Blu-ray gaining dominant market share
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10.  Availability of Hardware (players)
 Blu-ray (with PS3) : HD DVD =
5 : 1
 Blu-ray sales up 700% since the
launch of PS3 and other players
 687,000 PS3 sold in US
 Availability of Content
 19 of the “Top 20” DVDs in 2006
were released by studios
supporting Blu-ray
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11. Strategic Computing 11
HD Optical
Disc Format
Competitors Complementors
Customers
Suppliers
Disc Replicators /
Factories
Machinery Providers
Entertainment Industry
HDTV
Media Players
Game Consoles
Consumers
Retailers / Distributors
Licensees
Internet
VHS
TV
On Demand (VOD)
Flash Memory
 There are several players in determining a dominant network
 However “Content is King” and will largely determine the victor

12. Strategic Computing 12
ESTIMATED ANNUAL REVENUE 2006 IN U.S.
$3.6 Billion
$12.5 Billion
$35 Billion
 Key players with influence in the format war between HD DVD and Blu-ray:
the film industry, the adult film industry, and the video game industry
Video Game Industry
Film Industry
Adult Film IndustryXX
X

13. Strategic Computing 13
 “The Look and Sound of Perfect”
$150M advertising campaign
 Xbox 360 supports external HD
DVD player
 Pornography industry
experimenting with HD DVD
 “War is Over” advertising
campaign
 PS3 internal Blu-ray player
 Sony cutting player prices from
$1K to less than $500
 Future Blu-ray car players
HD DVD Blu-ray
 Blu-ray has adopted a “pre-emptive strike” marketing strategy with its “War
is Over” advertising campaign

14.  What are the drivers that will determine the future of this format
war?
Economic Performance Regulatory
 Content – Blu-ray has
greater support
 Price – Similar pricing
 Complementors -
HDTV supports both
formats
 International View –
Japan sided with Blu-
ray
 Storage Capacity –
Blu-ray greater capacity
 Security – Promising
dynamic BD+
encryption
 Durability – Blu-ray
offers proprietary
coating to prevents
scratching
 Associations - Blu-ray,
BDA; HD DVD, DVD
Forum
 Europe –European
Commission (EC)
seeking open
technology
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15.  Resolution (NTSC)
 640 x 480i pixels
 Audio – Stereo,
44kHz
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 Resolutions
– 1920 x 1080p
– 1920 x 1080i
– 1280 x 720p
 Audio - AC-3: 48 kHz
sampling rate, up to 8
channels, up to 18
Mbit/s
Standard High Definition
 TV remains the Limiting Factor for the time being
– High-definition provides far superior resolution; however, without
HD televisions the improvement in quality will go unnoticed.

16. Strategic Computing 16
 HD TVs expected to increase from 4M HHs in 2006 to 52M HHs in 2009

17. Strategic Computing 17
 With the PS3, Blu-ray is quickly approaching the chasm…
…but HD-DVD is lagging behind.

18. Strategic Computing 18
Dual-disc / Dual-player
 LG Super Multi Blue Player and Drive
– Supports playback of both formats
– Available now for $1,199
 Warner Bros. Total HD
– Single disc compatible with both players
– Available 3Q 2007
– Costs marginally more than current discs
Internet / Flash
 Internet/flash memory may replace DVDs as the dominant media
delivery vehicle for movies
 “DVD format will be irrelevant” – Bill Gates … may be replaced by flash
memory or Internet

19.  Blu-ray is positioned to win the format war because
 Stronger sales in the US and Japan
 Larger studio network providing film content (promise of superior
security BD+)
 PS3 integrated Blu-ray players
 Larger capacity of 25GB (vs 15GB)
 Questions & Answers
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