Now that the announcement of the death of HD DVD turned out to be exaggerated, as both formats are making market inroads, the battlefront has shifted in a more constructive direction. Both groups are now rallying in a common fight to educate consumers about the high definition value proposition as well as train retailers to communicate clearly that proposition. Indeed, education and training were the new battle cries heard loud and clear at Barcelona.

Jim Bottoms, co-director of media analysts (and conference organiser) Understanding & Solutions, says that conveying the high definition message to the consumer is critical. “No hi-def disc market will build unless the industry removes consumer confusion.”

He fears that, if the fully-fledged high definition concept is not grasped, consumers will migrate to the half-baked, but considerably cheaper, DVD up-scaling alternative. “This is really a battle between HD and SD (standard definition) DVD. If the price of true HD does not come down sharply and quickly, there is the danger consumer may pass on hi-def,” Bottoms argues.

The first port of call is to address the inflation of logos adorning “high definition” products. Dietrich Westerkamp, Director of Standards Coordination Technology Strategy at Thomson and EICTA HDTV Issue Manager, counted no less than 26 logos on a device!

To add insult to injury, this writer has seen on the shelves of major UK retailers £59.99 DVD players with up-converting function from top brands you trust, affixed with ‘1080i,’ ‘756p,’ even ‘1080p’ logos!

“HD Ready” and “Full HD 1080” is a breeding ground for consumer confusion. “A logo must help consumer make the right choice; it ought to guarantee a certain minimum set of features to enable interoperability throughout the chain of devices consumers will likely purchase from different suppliers,” says Westerkamp.

The ‘Golden Full HD’ logo introduced at CES this year just says there are 1080 lines on the screen, nothing more. Also, the 60/24p US standard is not acceptable to Europeans where 3-2 pulldown produces juggered motion. Therefore, CE devices must handle 60 as well as 50Hz.

There is light at the end of the tunnel, though. The CE industry is currently unveiling a streamlined ‘HD Read 1080p’ logo that guarantees the following requirements: 1920 x 1080 display; digital input 24, 60 and 50p (future-proof); and selectable overscan mode on remote.

“The new logo must be used across the entire HD pipeline, from CE manufacturers, content producers and broadcasters if high definition material is to go through the entire delivery chain with a guaranteed level of quality; only educating the consumer is not enough,” warns Westerkamp.

Same philosophy at Sony Europe. For Tim Page, Technology Marketing Manager, “high definition doesn’t just refer to a display device, but is part of an ecosystem, from content through to devices. We use a common logo across a family of products.” The company liaises with Sky for HD content for screens in stores. The emphasis is on HD rather than just Blu-ray.

Page makes the point that standard definition broadcast television must look good on an HD display as well, as it accounts for most of the viewing experience. Ensuring a good in-store SD broadcast feed is important.

“The last six feet (away from the display) are crucial, that’s when purchasing decisions are made,” says Page. “It’s also when you see the difference in quality between an upscaled SD picture and a true HD picture.”

Page is hopeful that, with the increasing offer of HD broadcast TV channels, the overall high-definition presence in retail stores will grow and it will be easier to communicate the hi-def value proposition of next-generation packaged media to the consumer.

Olivier van Wynendaele, Toshiba’s European Assistant General Manager, sings from the same hymn sheet. The key communication strategy is to promote high definition per se, rather than a particular standard.

Amongst its marketing paraphernalia, Toshiba produces a combo disc – SD on one side, HD on the other – as a way of introducing HD into the home in a user-friendly fashion. The company is aggressively bundling HD movies titles with its HD DVD players to enable consumers to get an immediate taste of what high definition is all about.

Store staff training is a key priority, but it is a never-ending exercise. “We may need to visit the same retailer one, two, three times because of a big turnover of sales staff. It’s not unusual to see different people in the same year,” laments van Wynendaele.

While POS kiosks are welcome in some outlets, they are not in others when they run against the retailer’ policy of not giving an advantage to a particular brand.

Reflecting the view widely shared by all speakers, the Toshiba executive identifies pricing of hi-def hardware as the main obstacle to rapid adoption. A next-generation player is still 10 times the price of an SD DVD player, even of an upscaling DVD player. Shop retailers have thus more incentives to push a £60 player with a £1000 TV than a £300 player with that same screen.

With HD DVD players hitting rock-bottom price at Wal-Mart earlier this month, van Wynendale is understandably less concerned with the competition from DVD up-scaling devices. “Why buy a $60 upscale player when a full HD player costs only $98.”

Seeing is believing. Working with selected digital cinemas, the company organises HD screenings from discs.

An innovative cross-format marketing initiative is based on consumer blogs. Four families have been equipped with the complete set of HD products. A couple of families got a HD DVD player and full HDTV from Toshiba. Another couple got a BD player and a full HD display from Panasonic. The families will maintain blogs and tell their HD experience. The testimonials will be used for further communication.

As content is king, it was the turn of studio executives to hold court.

For Philippe Cardon, Warner Home Video’s President, International, a positive sign at this early stage in the life of next-generation formats is that consumers who have bought hardware, TV screens and discs are all very happy – 85% are satisfied/very satisfied with the HD experience, according to a study he quoted. “It’s important as it is the basis for word-of-mouth, telling your friends, spreading the words in informal circles.”

Less positive is the lack of hardware and the low level of penetration. “Tackling format confusion and communicating the high definition difference boils down to the need for education.”

With the transition from VHS to DVD, sales people just told consumers to buy a DVD player to get a better picture. It’s no quantum leap this time around. The message is more complex as it requires a new screen as well. “Stores see the sales of HD screens shot up, but not HD players. So, they do not feature the latter prominently,” Cardon observes.

Simon McDowell, Senior VP Europe at Sony Pictures Home Entertainment, points out that manufacturers and content providers have a much greater vested interest in educating the consumer than do retailers. “The onus is on us. Maybe we have let this responsibility softens a bit.”

Ken Graffeo, Executive VP of High Definition Strategic Marketing at Universal Studios Home Entertainment, notes that it is the retailers as well who are asking why the format is not doing better. They are facing shelf space limitation in store, especially with two formats. And they have now to compete with the likes of Amazon that are not confronted with this issue.

The problem is: consumers are very satisfied with the way DVD pictures appear on an HD screen, reckons Graffeo. “This is where the competition lays: convincing people that a HD player is better than a SD player. They come to the store with a fixed amount to spend. The big ticket item is the screen, only to realise that to optimise the hi-def experience they have to buy a hi-def player and hi-def discs as well. Then, they notice very affordable upconverting DVD players and they believe these will give them true high definition. Some 40% who buy a HDTV set believe what they see is in HD.”

Cardon reminds that the strategy behind Warner’s support for both formats is to try to drive competition amongst hardware manufacturers to bring the price down as quickly as possible.

Olivier Robert-Murphy, VP Strategic Marketing at Universal Music Group, releases titles in both HD DVD and Blu-ray formats. “Do I have a choice?” he sighed. “Publishing in a single format would lose us customers. Surely, it doubles the costs to publish in both formats, but we want to make a statement. We want to give high definition a chance. It is still too early to seek to recoup costs.” Robert-Murphy says consumers find the HD DVD and Blu-ray packs cheap-looking. “We need sexier packaging to match the content and premium price.”

The studio executives believe their respective title line-ups are particularly rich this Christmas, with their biggest blockbusters ever. Sales so far are strong, which bodes well for a high-definition push.

“What we don’t know,” says Cardon, “is whether people will spend more because there are more attractive titles or will they spend the same as last year and be more selective.” For Graffeo, the attach rate is very good because the new titles span the variety of genres, not just action-type films, but also comedy, romance, horror, something for everyone.

What about releasing catalogues titles on HD? Today, the offer is skewed toward new releases, day & date SD/HD titles. Surely, the studios would like consumers to rebuild their existing SD library into HD. It boils down to the extra value that will be added. “At Warner, we look at interactivity and Internet connectivity, with titles like Mad Max and Indiana Jones. Only looking at additional content may not be enough and it’s expensive to produce. Catalogue titles on HD must push the technological envelope,” says Cardon.

“HD catalogue is not affordable and does not represent a hi-def experience. The HD value proposition must be overwhelming,” says Graffeo. “The price diffential between SD and HD versions is much wider in the US than in Europe, reaching a 2-to-1 ratio. SD catalogue titles are much cheaper in the US. So, adding extras on an HD version is a costly proposition that does not make commercial sense.”

The USP of the next-generation formats is undoubtedly interactivity, and even more critical, Internet connectivity. Alan Bell, Executive VP and CTO of Paramount, emphasises that these technological features were the underlying reason why the studio decided to go exclusively HD DVD.

“Implementing the creative vision seems to be quite a bit less complex to get to the same level of interactive experience in HD DVD than in BD with Java,” says Bell. “It’s a simple, powerful language. Not that the BD format is incapable to achieving the same result, but BD Java is a broad language. Using HD DVD minimises the risks of potential compatibility problems.”

Connectivity on physical media is seen as a stepping stone into the future when consumers will be even more used to downloading material off the Internet. “It offers more of a community-based experience than does individual viewing. These things may sound a little bit far-fetched, but you have to think in terms of a generation of web-savvy people who expect interactivity, who are living on the web,” Bell adds.

Graffeo concurs: “The MySpace generation wants personalisation. The high-definition format offers a new way to interact in a web-like experience. We need to look beyond the movie on the disc, it’s all about an experience. That’s the difference with past formats.”

It will take some time for the consumer to get used to interactivity and connectivity, it’s a question of educating the consumer. “Based on the number of web registrations, there is certainly a demand for these functionalities,” says Cardon. “The 15-to-25 age group who are born with internet and social networking will come into the market in a big way. It will be much more natural for them to connect their players.”

Interactivity has been talked about for a long time, starting with the laser disc, then DVD. What is different this time around?

“We live in a different, digital world. Videodisc was an analogue video. We have Internet,” Bell points out. “Before, there was no concept of what interactivity meant. Web connectivity, persistent memory and the full set of codecs were mandatory in HD DVD players from day one.”

Rating the usage and popularity of various features was a perilous exercise. Now, actual usage statistics can be obtained through web connections. It has important implications for designing new features, experiences and marketing strategies. “Internet connectivity seems to be an attractive option, indeed,” Bell says. “Of the 250,000 HD DVD units of Transformer sold, 75,000 users registered on the web. That’s quite remarkable.”

The existence of two competing hi-def formats certainly is an impediment. “Either the industry rally behind one or the other, or there is a great opportunity for CE manufacturers to make dual-format players, something they can produce at a small incremental price now that very inexpensive HD DVD/Blu-ray system-on-a-chip come onto the market,” Bell continues. “It may be an insurance policy. I don’t think it’s likely to happen. At the end, it’s going to be one of the formats pulling away from the other.”

Unsurprisingly, Bell thinks it is going to be HD DVD. “Paramount has gone behind the technology produced at the lowest cost, with the lowest barrier to entry. Packaged media is a full ecosystem, with replicators, authoring and systems suppliers. HD DVD being an evolutionary technology makes it a lot easier for replicators and authoring companies, in Europe, to get on board,” Bell argues.

As for competition from online downloading, the studio executives are not losing sleep over it. So far, online revenues are incremental, they are not cannibalising physical media revenues. There is a shared view that physical media will feed TV screens for quite a while. Download may be the primarily delivery channel for the PC. And both will deliver sideways to portable devices.

Downloading a high-definition movie is equivalent to 10,000 music tracks. It’s going to take a while before consumers have bandwidth to make the experience user-friendly. Alison Casey, Business Director, Content and Services at Understanding & Solutions, notes that, with the exception of Apple’s iTune service, the consumer experience of downloading content from the existing Internet services is “not great.” But, why does it have to be one or the other?

“Studios have done a good job is managing the distribution chain to produce incremental revenue at each stage – cinema, DVD, VOD, pay-TV, free TV,” Graffeo argues. “We are good at taking a title and making it available to everybody on the range of technologies. Internet is the latest distribution channel. You just cannot rely on one delivery platform. None of these platforms have ever replaced any of the others.”

“The challenge is for us to adapt our offer in the packaged media to the consumer who is also used to the online world,” Cardon adds. “People used to say that the rental business would die. Well, the rental business is still there. Technology transformation is a slow process. Physical goods are still going to be the dominant force for many years.”

In the interim period before an all-web world, the consensus was that playing a hi-def disc on a HD screen enables the consumer to enjoy the high-definition experience – immediately.

Story filed 21.11.07