Next-Gen DVDs' Blurry Picture

The battle between Blu-ray and HD-DVD was already tricky for consumers. But new content protection may mean buyers get even less than they might have hoped

After years of waiting, the new era of high-definition home theater has finally arrived. In April, Toshiba (TOSBF) plans to introduce HD-DVD, its high-definition successor to the DVD player, two months ahead of rival consumer-electronics companies who plan to sell a competing format called Blu-ray Disc.

Electronics makers hope the new gear will keep sales in the $120 billion industry humming, while Hollywood hopes the lure of interactive features and crystal-clear pictures five times the resolution of current DVDs will jump-start slumping home-video sales.


  Here's the problem: Both camps are shooting themselves in the foot before they get to the starting line. Consumers already were faced with the prospect of mass confusion, thanks to two next-generation DVD formats, whose disks do not work in each other's machines but look essentially the same. Remember Betamax versus VHS? At least then you could tell one tape from the other.

But that's just the tip of the iceberg. Turns out, most of the 20 million high-definition TVs sold over the past three years aren't capable of displaying the disks in their full resolution. Worse, at least one major studio intends to downgrade the picture even more unless consumers hook their players up through a special, pricey cable aimed at preventing piracy.

"It's crazy," says chief analyst Richard Doherty of consumer-research firm Envisioneering. "The sticker on your new player promises the equivalent of a high-performance car, but the fine print says you may be buying an Edsel instead."


  The new content-protection scheme would be the first time any consumer electronics purchaser -- not just those who try to break copyright laws -- could be penalized. In this case, even if you have a perfectly equipped TV, content providers retain the right to automatically downgrade the picture quality because of piracy concerns. Current DVD releases like Batman Begins and Walk The Line include software to prevent unauthorized duplication, but still play normally.

New software included on both Blu-ray and HD-DVD releases, however, will automatically slash the image, making it only marginally better than current DVDs, unless consumers have a relatively new connector and cable called HDMI to hook up players to their televisions. Only one in 20 HD sets sold to early adopters over the past few years has the right version of the connector. Only 15% of new sets sold this year will include it, and deliver the full 1080 resolution capable of showing such detail.

Sony execs say a majority of Blu-ray content, at least initially, will play at the highest resolution possible on a consumer’s HDTV, regardless of how the player is hooked up. Four major studios -- Sony Pictures (SNE), 20th Century Fox (NWS), Disney (DIS), and Paramount (VIA) say they initially will not use the new copy protection on their releases. Universal execs told BusinessWeek on Mar. 21 that they, too, will forego the protection. Execs at Warner Brothers declined to comment, but sources with knowledge of the studio's plans say "at least some" of the 20 HD-DVD releases planned through April will use the software. "What do you have then? A very expensive DVD player," says Sony Senior Vice-President Tim Baxter.

To make matters more confusing, Sony and other consumer-electronics companies are adding features to the next-generation players that then may "upconvert" -- boost the image quality -- so the same disk may look vastly different, depending on which machine you purchase and the size of the TV (see BW Online, 3/27/06, "Sony's Renaissance Geek"). Experts say both of the new formats shine on sets 50 inches or larger.

The confusion may be just enough for consumers to say good night, and good luck. Already, a growing number of so-called technology influencers and Web sites are recommending sitting out the first round of the new DVD wars.

Many believe the best bet for either format to gain acceptance now lies with next-generation game consoles. Sony plans a November worldwide release of its new PlayStation 3, which will include a Blu-ray player. Execs at Sony hope by then that enough new HD sets will be sold, with the right connectors, to make the player worthwhile. And Microsoft (MSFT) has said it may add an HD-DVD player to its Xbox 360 in coming months. Until then, the crystal ball for crystal-clear movies remains fuzzy.

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