12-01-2003, 12:40 PM
New format war looms as DVD Forum chooses standard
Reuters, 12.01.03, 10:28 AM ET
By Lucas van Grinsven, European Technology Correspondent
AMSTERDAM, Dec 1 (Reuters) - Toshiba and NEC have won a round in the fight for standardising the format for DVDs as their technology has been embraced by an industry forum, but the real battle is won by convincing consumers and Hollywood.
Japan's Toshiba and NEC received the support from the DVD Forum last month, but it was only over the weekend that the news spread into the public domain.
Last year, the two companies pitched their version of a blue-laser DVD player against that of a consortium of the world's biggest electronics makers, including Japan's Sony Corp and Matsushita and Dutch firm Philips.
Sony and Philips are also members of the DVD Forum.
Blue-laser DVD players will replace the current generation of red-laser DVD players in a few years time. A blue-laser disc can store around five times more information than red-laser discs -- which is up to three hours of high definition video.
The electronics industry expects that over the next few years high definition TV will at last reach a critical mass, which in its turn will push the need for higher quality DVDs.
The DVD Forum, an industry association of some 220 electronics and media companies, said it will endorse only one technology. By backing the so-called HD DVD standard from Toshiba and NEC, a new format war is looming.
The electronics industry has plenty of experience with format wars. In fact, the last format war, over recordable DVD discs, is still being fought out in the market.
The DVD Forum did not approve the so-called DVD+RW recordable technology developed by Sony and Philips -- yet, this technology has a significant chunk of the market. Its inventors even claim that it is the dominant standard.
ROYALTIES
Financial analysts said the DVD Forum's choice does not mean Sony and its consortium partners will miss out on the next stream of technology licensing income, which is what the struggle is really all about.
Licensing fees have become a substantial income source for the notoriously low-margin electronics industry. Philips, for instance, has an official target to double its two to 2.5 percent profit margins with royalty income -- it has a strong patent pool as it has helped invent the CD and the DVD.
Low-cost Chinese electronics makers have often complained about the high DVD royalty payments, which can run to $10 per machine. China has therefore invented yet another DVD technology, EVD, which might become a local Chinese standard.
For a standard to be succesful, the support of Japanese giants Sony and Matshushita, which operates the Panasonic and JVC brands, is crucial, said investment bank J.P. Morgan in a research note. Only with their support will there be sufficient products in the shops.
These companies can still push their own so-called Blu-Ray technology -- both blue-laser formats will play old DVDs.
There is, however, one major difference with the current recordable disc format war, as the first blue laser products are aimed at DVD players and pre-recorded discs, not recorders. The electronics makers need the full support of the movie industry to supply films on pre-recorded DVD discs.
The DVD Forum appears to have the ear of the media industry, and industry analysts have said it is unlikely Hollywood will back two different blue-laser formats. (Additional reporting by Daisuke Wakabayashi in Tokyo)
Copyright 2003, Reuters News Service
Reuters, 12.01.03, 10:28 AM ET
By Lucas van Grinsven, European Technology Correspondent
AMSTERDAM, Dec 1 (Reuters) - Toshiba and NEC have won a round in the fight for standardising the format for DVDs as their technology has been embraced by an industry forum, but the real battle is won by convincing consumers and Hollywood.
Japan's Toshiba and NEC received the support from the DVD Forum last month, but it was only over the weekend that the news spread into the public domain.
Last year, the two companies pitched their version of a blue-laser DVD player against that of a consortium of the world's biggest electronics makers, including Japan's Sony Corp and Matsushita and Dutch firm Philips.
Sony and Philips are also members of the DVD Forum.
Blue-laser DVD players will replace the current generation of red-laser DVD players in a few years time. A blue-laser disc can store around five times more information than red-laser discs -- which is up to three hours of high definition video.
The electronics industry expects that over the next few years high definition TV will at last reach a critical mass, which in its turn will push the need for higher quality DVDs.
The DVD Forum, an industry association of some 220 electronics and media companies, said it will endorse only one technology. By backing the so-called HD DVD standard from Toshiba and NEC, a new format war is looming.
The electronics industry has plenty of experience with format wars. In fact, the last format war, over recordable DVD discs, is still being fought out in the market.
The DVD Forum did not approve the so-called DVD+RW recordable technology developed by Sony and Philips -- yet, this technology has a significant chunk of the market. Its inventors even claim that it is the dominant standard.
ROYALTIES
Financial analysts said the DVD Forum's choice does not mean Sony and its consortium partners will miss out on the next stream of technology licensing income, which is what the struggle is really all about.
Licensing fees have become a substantial income source for the notoriously low-margin electronics industry. Philips, for instance, has an official target to double its two to 2.5 percent profit margins with royalty income -- it has a strong patent pool as it has helped invent the CD and the DVD.
Low-cost Chinese electronics makers have often complained about the high DVD royalty payments, which can run to $10 per machine. China has therefore invented yet another DVD technology, EVD, which might become a local Chinese standard.
For a standard to be succesful, the support of Japanese giants Sony and Matshushita, which operates the Panasonic and JVC brands, is crucial, said investment bank J.P. Morgan in a research note. Only with their support will there be sufficient products in the shops.
These companies can still push their own so-called Blu-Ray technology -- both blue-laser formats will play old DVDs.
There is, however, one major difference with the current recordable disc format war, as the first blue laser products are aimed at DVD players and pre-recorded discs, not recorders. The electronics makers need the full support of the movie industry to supply films on pre-recorded DVD discs.
The DVD Forum appears to have the ear of the media industry, and industry analysts have said it is unlikely Hollywood will back two different blue-laser formats. (Additional reporting by Daisuke Wakabayashi in Tokyo)
Copyright 2003, Reuters News Service
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