Winner may lose next generation DVD battle

There can be only one. In the past, VHS won out over Beta, despite the fact that Beta was higher quality.

Now, a war is brewing over the next generation of DVDs. In one corner, we have Blu-Ray, created by Sony and backed by companies like Apple computer and Hitachi. In the other corner we have HD-DVD, created by Toshiba and backed by Microsoft and Intel.

Both formats are based upon blue-laser technology which has enabled a shorter wavelength laser to be used. Essentially this means that far more information can be stored on one disk than in the current generation of DVDs. In practice, this may mean having all three extended Lord of the Rings films, plus all the extras, on one disc instead of 12.

First, the good news. As the battle between these two formats begins, we can be pretty much assured that the actual new players themselves will not only be backward compatible enough to play CDs and current DVDs, but will also be able to play both new formats. In other words, when you buy your 2nd generation DVD player, you'll still be able to play your old CDs, your current DVDs, as well as the competing DVD-HD and Blu-Ray disks.

So what are the differences between the two?

HD-DVD is ready to be released into the market. It can fit 15gb on one layer and 30gb on two layers. This compares quite well to the 4.7gb currently available on standard DVDs.

Blu-Ray is even bigger. 23.3 to 27gb can fit on a single layer, and 46.6 to 54gb on two layers. Apparently Blu-Ray is capable of four layers, which means more than 100gb is feasable in the future.

The problem for Blu-Ray is twofold, though. The first problem is that it is behind HD-DVD in development and in market releases. The second problem is that Microsoft is backing HD-DVD.

I suppose I'm a Blu-ray fan. I'd rather wait for more room than accept a smaller capacity disk now - but I'm hardly representative of the marketplace. It is fairly likely that HD-DVD will win this war simply because it hit the market sooner.

And if HD-DVD wins the battle, what of the money poured into Blu-ray? Will this be a loss?

Remember that both formats are patented. Just like VHS and compact cassettes, these new DVDs will be a cash cow for their designers. Philips, for example, made a stack of money from its compact cassette technology (1963), even though it manufactured only a small amount themselves. Philips made money each time a manufacturer created and sold one of its designs. In the same way, Sony and Hitachi will make money from DVD manufacturers who will be licensed to make their product.

But since the next generation of DVD players will be compatible with both formats, there is much greater scope for competition between the two - and the format which offers the best deal for manufacturers will most likely be chosen.

So let's imagine that HD-DVD wins the war. It's three years from now, and HD-DVD rules the roost. Even though Blu-Ray is technologically superior and has far more capacity, HD-DVD is the chosen format.

So why am I saying that the winner may lose? After all, it's the title of this article.

The loser of this war has what can be called "the kamikaze option". Faced with a hostile market and billions of dollars poured down the drain in wasted development over many years, the loser can choose to commit seppuku or to destroy both themselves and their competitor in a kamikaze attack.

So, HD-DVD is dominating the market and Blu-Ray is going under. If Blu-Ray's backer's then admit defeat and stop marketing their product, then they are going for seppuku. But what is this Kamikaze attack that I am referring to?

It is simple - it is opening the patent up to public domain ownership.

It sounds strange, doesn't it? It's a simple move, and it may even sound counter-intuitive, but I can guarantee that having an open patent will destroy the competition.

It will also destroy the company opening the patent - but that's the downside of a Kamikaze attack.

Why will this work? With an open patent, DVD manufacturers - the actual factories that churn out the products that end up at on the shelves at Blockbuster or Kmart - will pay no royalty fees at all. Moreover, if the open patent is similar to the GNU General Public License - a software license that covers Linux and the Firefox Web Browser (amongst others) - then any further development of the technology will remain open for anyone to work on.

So let's assume that Blu-Ray does a Kamikaze attack on the HD DVD battleship. What will happen? Well, first of all, nothing much. The HD DVD battleship will continue to sail but there will be worrying signs being reported from down below of flooding. After a while, however, the ship will begin to slow down - manufacturers will begin to adopt the Blu-Ray standard and HD DVD cannot compete with something that is free. HD DVD will respond with a marketing campaign about how wonderful they are, but the leaks below deck will continue to slow the ship down. After a while, some of the DVD manufactuers themselves begin to develop Blu-Ray themselves, making slow but important progress in the technology.

At some point, the DVD-HD battleship will sink in this scenario - it is obvious. Blu-Ray, released from its financial backers, will then "rule the roost".

This sort of corporate Kamikaze attack has no precedent in history as far as I know, with the possible example of the Browser Wars in which Microsoft's Internet Explorer defeated Netscape, only for Netscape to open its source code and eventually morph into the Firefox browser. The only reason why I say that this is a possible example is that the war is far from over, (Firefox, while still in a minority, is making steady headway)

It may seem strange, but this sort of Kamikaze attack may be seen as a "lose-lose" situation. In actual fact, it will not be, because the financial losses suffered by both developers will be more than compensated by the financial gains enjoyed by DVD manufacturers, film studios and end users.

There is, however, one further possibility. Instead of Seppuku, instead of Kamikaze, the developer of the losing format may be financially compensated by the winner. In the face of a potential Kamikaze attack, the winning format may decide to buy the patent of the losing format, figuring that the cost of doing so (which would be considerable) would be far less than the potential cost of fighting against a free product later on. In this scenario, the losing patent would not be opened up to the public domain and its developers will be handsomely compensated for their efforts.

Whatever happens, the next few years will be interesting. I, for one, will watch in interest to see whether HD-DVD does gain the edge over Blu-Ray, and wonder whether a Kamikaze attack is imminent.


© 2006 Neil McKenzie Cameron, http://one-salient-oversight.blogspot.com/

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