Blu-ray and HD DVD: The Big Dog gets off the porch

(Howdy to everyone who came here from any links after April 2007. Rather than edit this to reflect how things have gone since then, I created a new blog entry that you can find here. 

Other than this note, I've left the original entry unchanged when I wrote it. Interesting to see what I was right about, and what I was wrong about. One thing we were ALL wrong about, that the war would go on for another couple of years. Please correct me if I'm wrong, but I've not seen one single prediction before January 2008 that Blu-ray, which has looked like the winner for a while, would win as quickly as it did.

With that, take a gander.)

I've heard people say that porn is going to decide who wins the DVD format wars, just like they did with videotape. Maybe it'll be PS3 or Xbox. Okay, worth talking about. But there's somebody out there who has a bigger influence on retail buying behavior than all of them combined, and they've got $100 million that says HD DVD is going to win. Anybody here want to argue merchandising with Wal-Mart? 

Even if you do, Wal-Mart is the world's largest DVD retailer, so they get to win the argument.

The story being widely reported is that Wal-Mart is ordering up TWO MILLION HD DVD players from Taiwanese manufacturer Fuh Yuan for $50 apiece.

The source of all of these stories appears to be a post in the AV Science forum. And as we at The COW believe, forums are often the very, very best source for the straight dope. You'll find both the link to the original Chinese story, and a persuasive translation of it. (My Chinese isn't quite strong enough to evaluate it conclusively.) There's also a very lively discussion of what price Wal-Mart will sell them for. As the speculation rages, the price has gone from $299 down to $99. Whatever. We'll know when we know.

I'm thinking lower rather than higher. Wal-Mart has been using the weekly cycle of DVD releases as loss leaders to drive customers into their stores. They're especially fond of this strategy, because DVD buyers spend more per visit than non-DVD buyers. 

If you start poking around, you'll find a heap o' articles (or, as our UK readers would say, "AN heap o' articles") about all this, but I say this is by far the best of them. (Trust me, I'm right.) (This time.) Here's the money quote:

Wal-Mart sees the new high definition formats as a way to bring in store traffic again but they realized that won't happen unless the players are affordable and there is only one standard. They recognized their own power in being king maker previously and are now using that power to drive the format that works best for them. They could care less about the technology as this is all about making money and they (like every other retailer in this space) know that two formats won't allow the market to move outside of the fringes and the dual-mode players are simply way too expensive.

So they need one standard and a lot of players in market before their DVD customers wander off to download land and stops coming to Wal-Mart for movies.

He's got a lot of other interesting arguments, but, more important, a whole lot of what appears to be actual facts. Imagine that!

Oh, and one interesting bit of speculation: that the real source of the whole $100 million story is...wait for it....Wal-Mart.

Quick closing notes for now: 

• I don't think porn had a darn thing to do with the success of VHS. Apparently didn't hurt it any, though..but porn's a non-factor this time for sure.
• As much as the data folks like us think Blu-ray is a no-brainer, many in the home theater world hate it. Folks as old as me hold Joe Kane in the highest esteem. A former chair of SMPTE and a pioneer in video calibration, man oh man, he has nothing good to say about Blu-ray. Admittedly, some of this is ancient history (having been written in the practically medieval Summer of '06), but Joe's disdain endures the sands of time.
• Using a conversation with Joe a few months later as a jumping off point, Ultimate AV concurs.
• While not as virulent, Projector Central was unequivocal in declaring HD DVD the winner in an article called, "Blu-ray: Can it Survive?" Again, some of the information is dated , but still an example of how differently the world of HD disks looks from upstream (creation) and downstream (consumption).
• More recently, Joe's putting his money where his mouth is. One of the reasons we geezers love him so is because of his Video Essentials. I used it daily as a systems installer (including home theater), and it's the cheapest way to make your home theater look beyond its best. It's out on a hybrid disk alright: HD DVD and standard DVD. No Blu-ray.
• Even if you think he's nuts on Blu-ray, you really need to check out his disk.
• I think both DVD formats are irrelevant. It's already all about the HD movie downloads. But that's for another blog entry.

Discuss. 

I just got around to looking this up: Wal-Mart accounts for 40% of US DVD sales. That's a big dog. 

But both Fuh Yuan and Wal-Mart issued denials about the deal today. FY says that Wal-Mart is still shopping, but hasn't placed an order. Frankly, I'm not buying it yet. At the very least, I'll observe that HD DVD fits better with Wal-Mart's postion re: lower-cost goods.

Now for Blu-ray vs. HD DVD, yes, no question that Blu-ray is selling better so far, and probably will for a while. But the numbers aren't statistically significant yet, look to me like they fall almost within the margin of error. Ars Technica observes, "Since their respective launches, there have been 1.2 million Blu-ray discs sold and 937,500 HD DVDs."

What? There's been an awful lot of hubbing and bubbing over barely 2 million disks sold in nearly a year!

For perspective, I just looked up the bestselling DVD last week, in a trade magazine devoted to this kind of thing. It was Smokin' Aces. Are you kidding? I'm a charter subscriber to Entertainment Weekly, and I've honestly never heard of this thing. In its first week? 1.5 miilion! 

In one week, it outsold all Blu-ray sales of every title ever!! Smokin' Aces!! For the record, it stars Ryan Reynolds. You heard of him? Me neither. And this minor title still moved something like 25% more units in a single week than all Blu-ray titles combined.

BTW, a middling title like Borat moved 4.4 million units in its first week.

On top of that, the high-def split last week was 60% Blu-ray and 40% HD DVD. We're a long, long way from declaring a winner here. In fact, HD DVD sales are significantly up this week.

So the big dog's not off the porch yet, but neither format is in the doghouse yet.

This is all highly amusing, and makes for great conversation. But wait until iTunes is selling hi-def movies alongside Xbox. Even Wal-Mart already has its download movie store underway. Just a few of the reasons I think downloads are going to blow either format away.

Indeed, Walmart has an incredible amount of influence over merchandising in the consuming world. Any gamer out there remember back in the day when PC games used to be in HUGE boxes? Then all of the sudden one day the boxes got smaller. What happened?

What happened is that Walmart threatened to pull all PC games from their shelves because they took up way too much space and they needed to make room for other products. Walmart was also the biggest seller of video games in the country. And, just like that, PC game boxes suddenly got smaller.

Whether or not Walmart will single-handedly decide which new format it likes, who knows. According to Amazon.com's statistics Blu-ray has consistantly outsold HD.

http://www.eproductwars.com/dvd/
http://www.hdgamedb.com/amazon/versus.aspx

But regardless, Walmart's decision is definately a big factor.