Parks Associates Blog

Monday, September 17, 2007

High Definition Format Alternatives

With 15 weeks left in 2007 (look for Christmas decorations on sale at a retailer soon), it is likely we will not be anywhere close to having a winner in the HD DVD vs. Blu-ray format war this year. In the report, Next Generation DVD Players: Will History Repeat? I stated that, while there was not a clear-cut winner in the high definition player format war, Blu-ray was inching ahead. Well, many things have happened since the release of that report. The most notable development was Paramount deciding to exclusively support the HD DVD format. While some have cited this now gives the HD DVD format the advantage, more than likely, it just extends the format war indefinitely. This depressing notion got me thinking. What if neither format wins? The longer this battle wages on, I think there is a better chance this will be the outcome. So if the HD DVD or Blu-ray formats do not win, who does? It is unclear at this point, but there are some viable options:

Forward Versatile Disc
The Forward Versatile Disc Format (FVD) was developed in Taiwan by the Advanced Optical Storage Research Alliance (AOSRA) and the Industrial Technology Research Institute (ITRI) as an inexpensive alternative to new HD formats. The FVD is similar to the traditional DVD in terms of pit length. The format also utilizes a red laser to read content. Because this format utilizes most of the manufacturing methods of traditional DVDs, the production and licensing costs are much lower than those of other new HD formats. However, the FVD is different in that the track width on the disc is smaller. This feature allows the disc to store more data per layer. The format was launched in Taiwan in 2005. Plans are in development to expand this format in other parts of the world. Because it uses existing DVD technology, the FVD format could be a significant threat to the HD DVD and Blu-ray formats as a low-cost high-definition alternative.

Versatile Multilayer Disc (HD VMD)
Versatile Multilayer Disc (HD VMD) is a red-laser, high-capacity optical disc technology developed by New Medium Enterprises. Different from traditional DVDs which hold two layers per side, HD VMD contains four layers with total storage of 20GB. HD VMD has been initially marketed in India and China. The HD VMD format is scheduled to be released in Western Europe and North America in the latter half of 2007. Similar to the FVD format, HD VMD looks to compete with the HD DVD and Blu-ray formats as a lower-priced HD alternative.

Total High Definition Disc (THD)
In January 2007, Warner Brothers announced the development of the Total High Definition Disc. This new format is a two-sided disc that will have HD DVD content on one side of the disc and Blu-ray content on the other. While this announcement received positive feedback from manufacturers and retailers, there are questions about the format’s technological and financial feasibility. Because the disc contains both formats, manufacturers would have to pay double the royalty fees for not only the two formats, but also any other licensing fees associated with the manufacturing and development of the discs. To date, a writeable version of the Total High Definition format has not been developed. These issues and the recent success of the Blu-ray format have resulted in the delay of the Total High Definition disc. Originally schedule to launch in the second half of 2007, the new format has now been slated to launch in the first half of 2008.

China High Definition DVD (CH-DVD)
Announced this month by the Optical Memory National Engineering Research Center, this new high definition technology is based on the HD DVD format with additional Chinese-owned technology added. While this technology will, initially, only be available in China, it provides a low-cost option that could lower prices of other high definition players around the world. The first of these players is scheduled to launch in 2008.

These are a few of the more popular high definition alternatives related to the HD DVD or Blu-ray format. Broadband video is a topic for a whole other blog.

Thursday, September 06, 2007

iPhone price cut

Welcome to the mobile phone business, Apple! A mere ten weeks after introducing the iPhone, Apple has made some big adjustments. The company is slashing the price of its 8 GB iPhone from $599 to $399 in time for the holiday shopping season. The company is also phasing out the 4 GB version, which had sold for $499.

Handset price decreases are nothing new to the mobile space, but such drastic price reductions at such an early stage are a rude wake-up to Apple as it enters a market where it faces stiff competition. There's no question that the iconic iPhone is as slick as a device as the mobile phone industry has seen in sometime, and Apple is already transferring features such as the touchscreen to its new iPod devices.

However, after such a hyped introduction, it would appear that Apple hasn't overcome the resistance that we predicted in our June white paper - The iPhone: A Consumer Perspective. Granted, we know that Steve Jobs is definitely not referring to the iPhone as a "hobby" (as he did with the underperforming AppleTV). However, even with Apple's great history of developing intuitive and in-demand products, pricing is a big hurdle to overcome as consumers consider the purchase of an advanced mobile phone handset.

In our white paper we noted that only 3% of consumers surveyed in a recent study (Mobile Entertainment Platforms and Services: Second Edition) expressed a strong willigness to pay $499 or more for an iPhone. We're still not convinced that a $399 price point is going to spur significant dividends, either. At this price point, the needle only bumps to 4% of consumers.

Apple has enjoyed some great gains in the last few years, but it's got major challenges ahead of it if growth is going to continue. Recent defections from content providers away from the iTunes service and the company's need to convince millions of users to replace their existing iPods are among two key issues. Perhaps this is only a moment where Apple simply catches its breath before charging ahead, or it's a sign that even the great Apple has its limits. We're watching closely.