Paramount embraces Blu-ray

"Warner expected to make similar move this week

"In a stunning announcement Sunday morning, Paramount Home Entertainment has decided to support Sony's Blu-ray Disc format for the next-generation of high-definition DVDs.

Although Paramount will continue to support Sony's rival, the HD DVD platform from Toshiba, the studio is the first to end its singular commitment to one format, which both sides had hoped would give the industry its best chance of avoiding a Betamax/VHS-like format war.

With Warner and Universal expected to follow suit very shortly, Paramount's decision potentially throws the decision once again into the hands of consumers and retailers next year. Both formats are expected to be introduced next spring.

Thomas Lesinski, Paramount Pictures president of worldwide home entertainment, one of the staunchest supporters of HD DVD, said in a statement Sunday that the studio will release movies on Blu-ray in North America, Japan and Europe as soon as Blu-ray hardware launches in those markets.

"We have been intrigued by the broad support of Blu-Ray, especially the key advantage of including Blu-Ray in PlayStation 3," Lesinski said in a statement. "After more detailed assessment and new data on cost, manufacturability and copy protection solutions, we have now made the decision to move ahead with the Blu-ray format. We believe the unique portfolio of Viacom content coupled with this format will provide great benefit for consumers and our shareholders alike."

A format war is precisely what studios, hardware manufacturers, retailers and consumers desperately want to avoid. The introduction of two incompatible formats has the potential to cause a much slower adoption of a new format for their movies, games, music and other programming, as consumers hesitate to pick one for fear of selecting the next Betamax that quickly will be obsolete. Studios and hardware manufacturers managed to find a compromise solution on DVD, which led to the introduction of the most successful consumer electronics product ever.

With the DVD market rapidly maturing and slowing to single-digit growth rates, media companies, which derive most of their studio revenue and profits from DVD, are pressuring their home video and consumer electronics units to get the next-gen format into the market as quickly as possible, whichever one it is, in order to rejuvenate sales of their vast libraries of TV, movie and music programming on discs.

"All we're doing is guaranteeing a format war," said a top exec at one studio DVD division about the Paramount announcement.

Sony Pictures Home Entertainment president Ben Feingold said that while the Paramount announcement is very important to the Blu-ray camp, "being on both formats will confuse the consumer."

Several execs in each camp believe the Paramount announcement to publish in both formats—which is the direction Warner has been leaning for the past week or two with a similar announcement expected this week—is simply a temporary face-saving strategy and that ultimately all studios will shift completely over to Blu-ray by launch time.

"Launching with a single format is the only way to get back quickly to double-digit compound growth," Feingold said.

Universal would not comment, but if Warner does announce that it also will publish in both formats, Universal is expected to be pressured to reluctantly follow suit.

Toshiba responded to Paramount's announcement with this statement late Sunday questioning the veracity and deliverability of Blu-ray: "Although it is understandable that studios want to serve all potential markets and all possible users, it is now clear that the format dispute will continue well into 2006 and possibly into 2007 until the validity of the Blu-ray format can be established."" [more]