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Blue-ray technology - why, when?

DVD burners, recorders and media have been forced into the commodity market even
before they have been widely accepted because too many manufacturers are chasing
too few customers.

Commodities = Volume + Low Profits
You know commodities - those products that are manufactured and sold in significant
quantities by a bunch of firms that have forced down the price to the lowest
possible level.

That's one of the reason's IBM sold off it's PC group to China's Lenovo. There
were other reasons of course including a stronger relationship with the Chinese
government and business communities. The move gives them a decided advantage
in competing for high-end systems and solutions in this emerging market. So
the lack of significant bottom line profits certainly made the decision a lot
easier.

IBM simply acknowledged the fact that it is very difficult to make much of a
profit from the manufacture of a commodity product. They came to the same decision
several years ago when they sold their hard drive manufacturing operations to
Hitachi.

Most of the consumer electronics products being sold today - VCRs, DVD players,
analog TV sets, etc - are commodities. That's why firms like Philips, Sony,
Panasonic and JVC have such a tough time maintaining their market position.
Commodities simply don't lend themselves to strong market position or profits.


The challenge also faces DVD burner, DVD recorder and even recording media producers.
These generally complex high-tech products should generate a respectable profit
margin for their producers rather than profitless commodities. Unfortunately,
the technology leaders and wanna-be followers put themselves into the position
because they: A) believe the market forecasts are real and B) know that by acting
rapidly they can get the largest possible market share. They all drink from
the same Kool-Aid pitcher.

Too many producers push out too many products with a limited demand. When demand
doesn't materialize they sell their huge inventories at whatever price they can
get and another commodity product category emerges.

The salvation for many seems to be convincing the consuming public that they
really want and need high definition video. The operative word here is convincing
because while DVD was significantly better than VHS, high definition is just
slightly better. Is it worth the investment of discarding your present TV set
and the associated recording and playback devices?

In the long term, probably not.

Are you going to have a choice? In the long term, probably not.

Hollywood Wants High Def
The movie industry wants high def and the consumer electronics industry wants
high def. Movie people want it because if you want to copy a movie across the
Internet today you "can" do it. Okay it takes 2-3 hours to accomplish but it
is possible. To do the same in high def would require 8-10 yours. In addition,
the new formats - HD DVD and Blu-ray - are being designed at the outset with
stronger digital rights management so making copies will be more difficult.

Of course with high def media initially coming out at $20 - $40 per disc it is
difficult to see why anyone would want to rip a movie.

The fact is that blue-ray technologies and high def won't be meaningful until
2006 and won't be mainstream until 2007. But that timespan isn't deterring the
two camps because there will be huge amounts of money involved in licensing fees
from the people who decide to produce players, drives, recorders, content and
recordable media.

While the movie and content industry states that it wants to deliver a better
consumer experience, they are really more concerned about having a technology
that provides the 100% copy protection the industry demands. Studios are beginning
to feel the bit of piracy. As quickly as possible they want to ensure they avoid
the fate of CD sales and online file swapping.

For all of the parties involved it is all about the money.

Because the Blu-ray disc (BD) and high definition DVD (HD DVD) technologies are
quite different a compromise technology probably won't be reached. One camp
will have to blink so only one technology will be delivered to the marketplace.
Or one of the manufacturers will have to do what Sony did with DVD burners -
produce a solution that allows the consumer to play BD, HD-DVD, DVD and CD.


Such a box will be expensive during the early years so this could move volume
consumer demand out even further. Without a single solution we could be looking
at high def not really taking off until 2008? 2009?

But consumers have come to enjoy the universal solution that DVD provides. Writing
and reading DVD+/-R and to a lesser extent DVD+/-RW gives the consumer to buy
the lowest price, best quality media when he or she goes to the store and know
their unit at home will record and play it.

Blu-ray Out First
To convince the marketplace that BD will win, HP has said publicly that they
will begin selling PCs with Blu-ray burners in them this next year. Sony, which
also owns the rights to over 13% of the content in Hollywood, plans to offer
the PlayStation with the technology. This is well ahead of Toshiba's offering
of systems incorporating HD-DVD technology. The press can hardly wait to get
their hands on units to start receiving units to review.

What about PC maker # 1 - Dell - and #3 - Lenovo/IBM? What about the "other"
PC producers? They'll go where the volume and the money is…DVD. And keep in
mind that HP didn't say they would exclusively offer Blu-ray burners so expect
to see most of the units going out the door with DVD burners.

With the street price for burners sitting at $70, DVD recorders at about $150,
DVD players going for as little as $20 and DVDR media priced about 60 cents (and
less) per disc we're only now seeing the consumer demand coming close to the
volumes of devices/media being produced.

Since consumers vote with their credit cards and checkbooks, what are they going
to do?

Buying Today?
All of the good TV sets today are offered as HD-ready so that's a no-brainer.


But what will you purchase next year - DVD or a flavor of blue-ray technology?
Take a look at the movie titles you want to buy or rent and what's your choice?
DVD. Take a look at the TV content you just have to archive? Not a lot of
high def! How many high def full-length videos do you plan to produce? For
that matter, how many feature length DVDs?

Consumers are only now beginning to convert from VHS in large numbers. In many
parts of the country and the world people are finally stepping up to DVD quality.
High def is better? Is it that much better? Consumers - mainstream consumers
- will probably wait for 2006 to make that call. If the hassling continues they
may wait until 2007 or ????

Right now a Lenovo/IBM Thinkpad with slim DVD burner looks real good!