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The Coming DVD Format War
By MICHEL MARRIOTT The New York Times January 20, 2005

JORDAN GREENHALL sat before a flat-panel television that glowed with remarkably crisp, bright images, offering it as evidence that he could put a full-length movie in high-definition quality on a standard DVD, with room to spare. Neat trick.

So neat, in fact, that it would seem to upstage the efforts of the biggest consumer electronics companies and Hollywood studios, which are choosing sides in a battle between two high-definition DVD formats, Blu-ray and HD DVD. Those formats, expected to reach North America late this year, will require ultra-high-capacity DVD's and a new class of expensive players.

The advent of Blu-ray and HD DVD may give rise to a format war reminiscent of the Betamax-VHS contest in the early days of videocassette recorders. At stake are potentially billions of dollars in hardware and discs as the demand for high-definition content grows.

In the midst of the battle, for which the two sides mounted elaborate floor displays this month at the Consumer Electronics Show in Las Vegas, Mr. Greenhall is asking, Why wait for the giants to sort it all out? There's a little guy, he said, with a high-definition solution right now: his own company's DivX 6 software.

"We're just going straight to market," said Mr. Greenhall, the 33-year-old co-founder and chief executive of DivXNetworks. "It's cheap. It's great, and it's going to be in the DVD players."

The first DivX-capable DVD player is the $250 Avel LinkPlayer 2 by I-O Data. Mr. Greenhall and his DivX team, based in San Diego, said the company hopes to see DivX high-definition players for as little as $100 by late fall. ( Toshiba, in contrast, recently announced an HD DVD player to be brought market late this year for about $1,000.)

In short, Mr. Greenhall said, he wants high-definition DivX to be to video what the MP3 audio format was to music: a "grass-roots movement that breaks above ground." But if you're thinking about joining the movement, there is a major vulnerability: no major studio is marching along. That means those buying DivX players, for now at least, will lack prerecorded high-definition discs - like major Hollywood movies - to play in them.

All the talk of high-definition DVD's, no matter which approach ultimately prevails, may seem premature in a marketplace saturated with standard-definition DVD's. According to industry analysts, most consumers indicate that they are satisfied with the picture and audio quality of standard DVD's, and they are growing accustomed to finding the players an inexpensive commodity, priced as low as $40.

Nonetheless, as television picture quality evolves with high definition, many consumer electronics makers expect substantial demand for DVD's and players that can use that quality to advantage.

Consider, for example, the consumer who just spent thousands of dollars for the latest big-screen high-definition television, only to find that a Bon Jovi concert on a high-definition cable television service looks vastly better than a standard DVD of Zhang Yimou's color-drenched "Hero."

Besides, said Andy Parsons, senior vice president for advanced technology at Pioneer Electronics, a major backer of Blu-ray technology, consumers are already outgrowing traditional DVD's, which were first introduced in 1996.

"If you look at most of the 'A' titles coming out now - 'Spider-Man 2,' these sorts of things - they're two discs," Mr. Parsons said. "There's one for the movie and there is usually one for the bonus features."

Mr. Parsons said next-generation DVD's must offer much more storage than today's five to nine gigabytes. HD DVD, backed primarily by Toshiba, NEC and a number of studios - including Paramount Home Entertainment, Universal Pictures, Warner Brothers and New Line Cinema - is capable of storing 15 gigabytes of data on a single-layer disc. A Blu-ray DVD can store up to 25 gigabytes on a single layer and 50 gigabytes on a dual-layer disc. Both formats use blue lasers rather than the regular red one.

"It would be, I think, foolish to limit ourselves in terms of capacity unnecessarily," Mr. Parsons said. "Why not do the very best we can do as far as today's technology?"

Backers of HD DVD say making discs in their format will be much less difficult and expensive than Blu-ray DVD's, which are supported by Sony, Samsung, Hewlett-Packard, Panasonic, LG Electronics, Sharp, Mitsubishi, Dell, Walt Disney Pictures and Television, 20th Century Fox and others.

For Mr. Greenhall of DivXNetworks, much of the debate between Blu-ray and HD DVD misses the immediate point.

"The essence is that DivX makes you realize that high definition and blue laser are not linked at the hip," he said. "Blue laser means lots of storage; high definition means good quality. With DivX you don't need lots of storage to get quality."

Blu-ray and HD DVD partisans would disagree. In all these approaches, a significant factor is the way the video file is compressed to make it fit on a disc. While DivX can compress video to a greater degree - hence its use of conventional DVD's - it makes compromises in picture quality, its rivals say. Mr. Greenhall said his company was pursuing an aggressive DivX certification program to help more DivX-capable players get to market this year. It has also received an investment from Samsung.

But, he added, he has no illusions. While DivXNetworks says that more than 160 million people worldwide have downloaded and used its video-compression software since the company was founded in 2000, the lack of studio support is a major handicap. "Very frankly," he conceded, "the studios are tough to crack on the high-definition front. They're kind of standing away."

Meanwhile, he said, DivX is "concentrating on all the other content in the universe," notably independent movies. He also noted that consumers with high-performance personal computers could record high-definition television broadcasts in DivX 6, then burn the broadcasts onto blank DVD's. High-definition home movies can also be burned onto DVD's using DivX, available as a free download at www.divx.com.

"They have begun to build a significant presence among PC users," P. J. McNealy, an analyst for American Technology Research, said of DivX. "They have become a nice alternative to HD DVD and Blu-ray, and more readily available. But the question is, can they get significant content from the major studios and television networks?"

The reputation of DivX (which is unrelated to a defunct video-rental format of the same name) has also suffered because of its early use for pirating. And after having their content on commercial DVD's illegally copied and distributed, studios have said they are less willing to take additional risks with next-generation DVD's.

So far, the studios have entrusted DivXNetworks with a few high-definition movie trailers, available from the DivX site; they can be played on a PC if a free DivX software player is downloaded and installed. Mr. Greenhall said he was aware of whispers of the use of DivX as a piracy tool, but said it would take time to distance DivX from that image. "Dastardly deeds were done," he said, adding that such incidents happened long ago. "We've been getting away from that image for almost five years now."

He said DivX 6 provides strong digital-rights-management safeguards. He attributes the studios' caution to DivX's late entry into standards talks that gave way to the adoption of the Blu-ray and HD DVD technologies. Blu-ray players are being sold in Asia.

"We were very late to the game," Mr. Greenhall said of DivXNetworks. "A lot was going on before we matured enough to know what was going on in this world. They were in the endgame by the time we were ready."

Nonetheless, he said, as DivX high definition becomes more available in players there will be more content, and more content will help usher in more DivX-capable players. "Ten million people later," he said, pausing, the studios will have little choice but to take DivX seriously.

But Ross Rubin, director of industry analysis at the NPD Group, a research firm, said there was probably no rush to adopt any of the formats. For consumers to play high-definition DVD's, they need high-definition-capable televisions.

"The installed base right now is quite small, certainly under 10 percent of the population," Mr. Rubin said. "Consumer electronics makers probably don't want to confuse the marketplace, which is already confused enough."
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http://www.nytimes.com/2005/01/20/te...rint&position=
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