HD-DVD makes a comeback

[pheggie]

Just when Blu-ray thought it had clear sailing, a tempest has risen in the East: China Blue Hi-definition Disk (CBHD). Toshiba has licensed its HD DVD to them and it will be the unit world leader in HD optical technology in just 12 months.

Why? The Times Online reports that the CBHD players are outselling Blu-ray in China by 3-1 and the CBHD disks cost a quarter of Blu-ray.

Blu-ray, we hardly knew ye
What happened to Blu-ray’s dominance? Blu-ray’s dominance.

Conceived by Sony at a time when few thought upscaling would succeed, the idea was that HDTVs would require HD content on optical media. Reliving the glory days of DVD adoption they forecast tens of billions in revenue from players and disks, enormous licensing fees and consumer-proof DRM.

Watching the CD business crater, studio thought that HD would drive their business to new heights while eliminating piracy. It was an optical gold rush - that has turned into a mirage.

The fundamental problem is that the slightly sharper HD picture isn’t worth the extra dollars. 10%-15% max.

Enter the dragon
China has good reasons to support a home-grown HD format. First, the exorbitant Blu-ray royalties hurts Chinese manufacturers ability to compete on price.

An equally important, but unspoken, issue is the econoclypse. The Chinese government has made a deal with the Chinese people: leave us in control and we’ll deliver rising living standards. The current slow down has hit China hard: millions have been laid off and economic growth is anemic.

CBHD is a double win for the Chinese government: billions saved in royalties; and a much cheaper, locally manufactured, luxury item for the restless masses. Blu-ray is simply collateral damage.

Studio knuckle-draggers no doubt are salivating at a tough new form of Region encoding: incompatible formats for the West and Asia. But will that really work?

English is the #2 language in Asia, so English-language CBHDs will be popular. Shanghai vendors will happily sell CBHD players and disks on Ebay. The economics are irresistible and, other than the studios, who will turn down HD content at DVD prices?

The Storage Bits take
Toshiba’s gambit is brilliant. Instead of taking a total loss on their billion-dollar HD DVD investment, they’ll get incremental revenue and, no doubt, valuable future consideration from the Chinese government.

It is a nice win for the Chinese government and manufacturers. Blu-ray’s high cost has slowed its acceptance to a crawl, so Chinese CBHD players will rapidly climb down the cost curve to prices lower than DVD-only players since they aren’t paying DVD royalties either.

The studios get a couple of years to make some money on Chinese CBHD releases, but will piracy disappear? Not anytime soon.

The big loser is the Blu-ray camp. Boo-hoo. They’ve consistently misjudged the market and Blu-ray’s appeal. Guys, I’m sorry you made a bad business decision, but it’s time to man up and take your write-offs.

CBHD vendors should not ignore the writable CBHD market. Many consumers would like something larger than DVDs for backup and much cheaper - and more compatible - than Blu-ray.

Here’s hoping the CBHD storage market is running wild by this time next year. CBHD will be the world’s #1 format in unit volume by next year.

Comments welcome, of course. Who vetted that name? China Blue was Kathleen Turner’s alter-ego in Ken Russell’s outrageous Crimes of Passion. A prostitute by night, hard-charging professional woman by day and a constant temptation to Tony Perkins’ street preacher, she is certainly not a character the prudish Chinese government would endorse.

[eaglem]

It's a good thing I kept my 2 Toshiba HD Players then!!