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Monday, September 02, 2002
DVD maker says Hollywood will decide format war...


A format fight over a future generation of DVDs will be decided by the entertainment industry which will back only one horse, a European consumer electronics executive said Friday. The DVD industry, already divided into three camps backing different recordable DVD formats, had been expected to close ranks when it moved to the more powerful blue laser successor to the current red laser DVD technology. However, this week Toshiba and NEC said they would launch their own blue laser DVD format.

Jean Charles Hourcade, Chief Technology Officer at France's Thomson Multimedia, said it would be wrong to "repeat the mistake the industry has made with recordable DVDs."

"In any case, in the pre-recorded market there is a powerful third party we all have to work with and that's the content industry. Whatever the media owners say is decisive," he said.

He is the first senior executive in the consumer electronics industry to speak openly about the surprise move by Japan's . Toshiba and NEC. Hourcade said dual formats once again threaten to confuse consumers and slow down adoption rates.

The media industry, mainly film studios, has not yet decided which format it will back. But analysts agreed with Hourcade it is unlikely that major media companies such as Disney and AOL Time Warner will sell their films on competing blue laser DVD formats alongside the existing DVD format, which will remain on sale for a while.

"It is unlikely that the film industry will support different formats," said Ben Keen at British market research group ScreenDigest.

Disney and Time Warner were not immediately available to comment.

Blue laser DVDs could be on sale by around 2005, some eight years after the debut of the first red laser DVDs. They have much higher capacity, which allows for play-back and recording of films in high-definition format.

CHEAPER?

Toshiba and NEC, which go it alone against a powerful group of consumer electronics rivals including Sony Corp, Panasonic brand maker Matsushita, Philips, Pioneer and Hitachi Ltd, claim their format will save manufacturing costs and allows for smaller players.

Hourcade believes that the two, whose market share in the DVD equipment market is just a fraction of their rivals', are overestimating the manufacturing advantages.

"It's only significant if it allows equipment to be re-used or if the production equipment is significantly cheaper. But the market for DVDs is growing 100 percent a year. For any additional capacity companies will have to invest. And we don't know how in real terms Toshiba's replication systems and ours are going to compare in investment terms."

Netherlands-based Philips Electronics said that Toshiba's claim that its new format would play back old DVDs was irrelevant, because both competing blue-laser formats will allow for DVD players and recorders that will play back current discs. Asked if Toshiba's move could be explained as a strategic move aimed at renegotiating the lucrative royalty revenues on its DVD patents in return for joining the Sony alliance, Hourcade said: "It's not unrealistic. It's a reasonable guess."

Toshiba in Japan was not available to comment and NEC in Japan declined to comment.

Many consumer electronics companies make hundreds of millions of euros (dollars) in royalty revenues they receive for every DVD disc, player or recorder sold. Sony, Philips, Thomson and Toshiba all hold significant DVD patents.

"A lot of companies make significant revenues from their patents. There are deep commercial forces at work here," said ScreenDigest's Keen.

Toshiba and Sony have been here before. In 1995 the two were heading two different consortia and ready to go their separate ways with DVD formats, when Hollywood's movie industry forced them to agree on a single standard. It is widely believed that Sony and Philips, which had jointly invented DVD's forerunner, the CD, were forced to give up a large chunk of their royalty streams.


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