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Sony Banks Entire Company On Blu-ray

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I have a bet with my friend on which next-generation high definition video format will win. In five years, I think that Toshiba’s HD-DVD will win over Sony’s Blu-ray. Despite the technological superiority of Blu-ray over HD-DVD, I don’t think it’s what the people want or need (I think holographic technology will be better suited for our storage needs, but that’s about five years down the road).

Sony has invested almost everything it has in Blu-ray, although you would think that the company should bank its future more on the Playstation 3. The video game industry shifted from the once dominant Nintendo to Sony when Sony released its landmark Playstation console. Selling over a hundred million units over its lifetime, the PS helped guide the industry into mainstream society. The Playstation 2 currently has a 60% share in the video game hardware market while Microsoft and Nintendo both lag behind.

Microsoft released its Xbox 360 platform last year and is on track to sell four to five million units by June. Nintendo has yet to release its next generation console or set a firm release date, while Sony has just announced that it would delay its PS3 until November from its previous summer date. In the video game industry, timing is everything. One of the reasons people think that the PS2 won the console war was because it had such an overwhelming head start over the Xbox and Gamecube. But the portability of the original PS games to the PS2 didn’t hurt either.

Sony knows that timing is crucial, and that giving Microsoft too much of a head start might be devastating. But instead of rushing its console to store shelves, Sony decided that further developing the PS3 would be better for its long-term value. The main reason is that the development of its Blu-ray drive has taken longer than expected. The real heart of the PS3 is the inclusion of the next generation optical drive.

The digital encryption has delayed both the Blu-ray and HD-DVD formats. Movie studios are terrified of piracy (not rightfully so, I might add) and the specifications of the AACS (Advanced Access Content System) DRM standards have been tweaked and modified numerous times so that only recently the final hardware units have been cleared to sell. Toshiba HD-DVD players and Warner Brothers HD-DVD launch titles have both been delayed from their original March 28 release to April 18.

Sony has had a rough decade, losing hardware dominance from increased competition in televisions, music players, etc. Its once landmark Walkman players revolutionized music with stylish personal cassette and CD players, but lost the digital music market to Apple’s iPod. Sony’s original DVD format lost to Toshiba’s eventual DVD standard and has been researching Blu-ray ever since. With 100 million DVD players sold in the United States, Sony lost an opportunity at all of the royalties paid for the technology. The one thing that keeps DVD players above the $30 mark is that about $20 is earmarked for royalty payments.

With so much competition in the electronics market, Sony is banking on both the video game and DVD markets. If Blu-ray won the HD video format war, then Sony would get royalties for years. Developing hardware is always costly, and getting the R&D costs back is almost never a possibility. It is rumored that Microsoft loses $200-$300 on every Xbox 360 sold. Sony’s PS3 is supposedly more advanced, and might have the company losing more money on every console sold than the Xbox 360.

But Sony is in a tight spot. It has brand reputation, but its products are no longer the most popular. It might win the console war despite the head start that Microsoft has. There are over a hundred million PS2 consoles in the world and considering that that many original PS consoles were sold, it’s a good bet that that many PS3 will be sold as well. The PS3 will be enormously popular, but Sony wants the PS3 to be a living room media hub. Microsoft tried that route with the 360, but that has stalled. Nintendo decided against that with its “Revolution” console, citing costs to both the company and the consumer. Sony has taken a no-holds barred approach and the company’s entire future rests on the success of the Blu-ray drive.

Microsoft was smart in choosing to release either a HD-DVD or Blu-ray drive as a separate add-on rather than wait to make it standard in the 360. Sony will use Blu-ray as its optical drive, but if Blu-ray doesn’t win the format war then the company will have lost the war and lots of money.

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About Tan The Man

I am a proud dork and loser.
  • http://www.dorksandlosers.com Tan The Man

    That sucks for the backers of holographic storage, I guess.

  • http://w6daily.winn.com/ Phillip Winn

    I think holographic storage is a lot more than five years away. Think about how long it has taken these companies to get HD-DVD and Blu-ray so far, that they started from a stronger place than the holographic folks.

  • Vas

    It’s very annoying that they spend so much time attempting to develop anti-piracy measures, everything will be broken anyway and films will be copied no matter how much money they spend trying to say otherwise.

  • http://www.dorksandlosers.com Tan The Man

    Well, developing the next generation DVD took longer because they made so much money on the standard DVD. But now that DVD growth has stagnated, Sony and Toshiba then started to really push next-generation DVD.

    The anti-piracy is stupid, but at most it prevents the casual pirate who isn’t likely to try very hard.

  • Jet in Columbus

    I spent thousands of dollars in the 80s buying $50-60 video tapes, just to have them become obsolete in the 90s with DVD. Now DVD is becoming obsolete with the new format, just as I’ve spent thousands more on DVDs.

    The same thing happened when my entire album collection went sour with CDs.

    Let’s hope the new blu ray technology is worth it, because the reason everyone was so gung ho over HD was because HD was backwards compatible, where Blu ray uses a different laser, so it means the new players won’t play the stock we already have-forcing us to lay out more money on movies we already have because sooner or later they’ll stop selling DVDs and the players we need to purchase after our’s die.

    Does anyone wonder why movies and music is being stolen off the web instead of purchased in soon-to-be obsolete formats?

  • http://www.dorksandlosers.com Tan The Man

    A lot of people are saying that direct downloading of movies is going explode in the next year or so. But that depends on broadband penetration and the ever expanding fiber optic networks that the telecom companies are putting up.

    In regards to the music thing, it depends on how much the iPod changes the music format. The CD will still exist as long as the concept of the music album still exists. It looks like singles might be making a comeback.

  • Brian

    I’m like jet. I think the physical formats will become less and less relevant as storage (hard drives) become less expensive and broadband becomes more prevalent. Just as no one has large Vinyl/tape/CD collections anymore, the movie library will also be confined to a hard drive as well.

  • http://www.dorksandlosers.com Tan The Man

    The huge problem is DRM. If the people get a good way to backup whatever they buy, then digital downloading might take off. But until then, people would still want the physical copy. And I know a lot of people like me who like the disc art and case art. In regards to CDs, digital files are no where near CD quality — so audiofiles are either going to have to buy more expensive quality files or stick to CDs or vinyls if they’re rich enough.

  • Jet in Columbus

    Tan, your forgeting something. To protest high prices of CDs that came with promises that the prices would soon be coming down, but didn’t, people got CD burners and Library cards. The public library carries thousands of titles—-for free— you simple reserved it, pop into your computer, download it to a .WAV file, and burn it onto your own disc at the same quality of the original. That’s why I hate MP3s, they’re nice, but not nearly the same quality as CDs

    Vwalla!

    As for the disc art, if you don’t have a scanner, you can go on line for not only the artwork, but also the lyrics, no matter how unique they are.

    The same holds true for DVDs, as it’s perfectly legal to make one back up copy.

    The same will happen with blu-ray. Rather than re-purchase your entire collection again because your old player won’t play them, simply get it at the library, then burn it onto your own format… for free-or wait for it to come out on HBO.

    It’s insanely unethical, illegal, but so is competing technology cropping up every few years forcing you to pay hundreds/thousands of dollars for something you already have in an obsolete format.

    You can also bet that blu-ray players will cost an arm and a leg, and the pre-recorded discs will initially be around $30 a piece.

    I’m old enough to remember when black and white TV broadcasts went to color. They were smart enough to force the signals to be backward compatable so a color signal could still be used on a black and white set.

    Now that we’re going to exclusively HDTV in the near future, soon everyone will have to replace their 2-300 dollar sets with ones running near a grand or more, or have to spend the value of their sets to buy converters so their old set will still be compatible.

    …but of course that’s only my opinion

  • http://www.dorksandlosers.com Tan The Man

    With printing, it’s not the same.

  • Jet in Columbus

    That wasn’t exactly the point I was trying to make

  • http://www.dorksandlosers.com Tan The Man

    The digital revolution is happening. Hi-def anything is a must. Cable signals are going hi-def. Eventually, everyone will own a hi-def TV. And prices will drop. And you also have to understand that technology comes and goes. The ones that stick are the ones that people want. If no one buys HD-DVD or Blu-ray, then they’ll probably stick to standard DVD. The people go to the tech, not vice versa.

  • Jet in Columbus

    The fact remains that when it happens millions of us who can’t afford to change technology every 10 years will be left with obsolete and useless entertainment equipment, simply because the old addage of “Make it Backwards Compatable” was thrown out in the name of high profits.

    I just got done spending thousands over the last 20 years to re-complete my music collection into a CD collection, and replace my VHS with DVDs.

    What’s the sense of buying into HDTV recorders when it’s obvious that the Sonys and Philips will wait till we’ve emptied our wallets and maxxed out our credit cards, and then they’ll switch to something else (like holographic) and then we’ll all have to start over again… much to their delight and profit margins.

    …but that’s only my opinion

  • http://alienboysworld.blogspot.com Christopher Rose

    My prediction is that both formats will fail.

    Who needs stupid fragile discs when it’s so much easier to use a usb drive anyway?

  • Michael Davies

    You’d be right to worry about backwards compatibility with next-gen drives, but from what I’ve seen the PS3 is compatible with way more than just Blu-ray discs. It’s even compatible with old PSX discs. So if the PS3 is, surely the new (HDDVD, Bluray) players will be too?

    I’m still a little hazy on the whole subject.

  • MediaGeek

    Chris Rose, you have got to be kidding. That’s the lamest, most ignorant statement that anyone with any tech knowledge can make about this topic. 1) USB drives are also quite fragile and much easier to lose. 2) With HD discs being able to store at least 15GB per layer, the cost of individual units will be a tiny fraction of what flash or miniature hard drives cost. Discs cost pennies to manufacture, while the average wallet doesn’t even contain enough cash for one such drive with half the capacity of a single-layer HD disc. 3) Writable HD discs will in a few years become as cheap as blank DVD and CD media are today. As a result, they will be embraced by the public for cheap, disposable, portable storage in the same way that CD-R/RWs replaced floppies and DVD+/-R/RWs are now replacing CDs. 4) HD discs are for content distribution, not just personal storage. There’s no reason for home entertainment/software manufacturers to spend lots of time and money making complex flash chips or micro-drives when they can just press millions of polymer discs. Optical media and flash media are entirely different animals with entirely different uses. One will not replace the other.

    Also, to clarify an earlier statement, HD-DVD is not inherently backward-compatible with DVD, and it uses a different laser than DVD drives do. HD-DVD drives will merely be easily and cheaply made backward-compatible because HD-DVD is simply DVD with more data packed in the same space, a new laser to allow that, new media decoders, and upgraded copyright protection. Therefore, one chip can be used to read both HD-DVD and DVD; only an additional laser is required. Blu-ray, on the other hand, is entirely different. HD-DVD/Blu-ray combo drives are possible, but they would be very costly, at least at first, as manufacturers need to use two separate chips and lasers in their devices to be able to read both.

  • http://alienboysworld.blogspot.com Christopher Rose

    Actually, MediaGeek, it’s an opinion but don’t let facts get in the way of your hi-tech purity.

    Personally, I don’t like discs cos they’re an inconvenienbt shape and they get scratched easily so I’ll stick with my pen drive and other non-disc formats.

    I’m sticking by my opinion, if Sony really are going to risk everything on this technology, the beating they got in the Betamax-VHS war is going to seem trivial.

  • Phil

    I think a few are forgetting the issue of backwards compatibility. Reluctance to invest in blu ray playing technology, from the consumer standpoint, is generated from the fact that many consumers have already made substantial investment in DVD collections- potential that this format may not be compatible with blu-ray technology, therefore, may inhibit uptake of the new format. You all may be saying, “yeah, but this is what was presumed would be the case during the DVD era”, but in my stance I believe that consumers have reached a level of saturation where the majority stand opposed to new formats being introduced to the market; a public that is ever conscious of greedy corporations trying to squeeze their wallets. The degree to which consumers will be aware of the discrepabncy in quality between the two formats (DVD and Blu Ray)will hinge on whether Sony are a success. To iterate, the general consumer would have to quetion whether blu ray technology would be a worthwhile purchase.

  • Jasper

    Actually, contrary to what the author of the blog wrote, Sony IS putting all their efforts on their new video game console, the PS3, because it’ll be what will allow the blue ray to gain exposure.

  • Big T Mack Daddy

    The PS3 will be backwards compatible, the ps2 uses dvd so the ps3 will have to read dvd. I think Blue Ray will succeed because of the PS3. UMD’s sell solely because of the PSP. When 10 million people have a PS3 with a built in Blue Ray player by Christmas blue ray disc sales will follow. Word. If you can get a next gen dvd player and a video game system for $425, sign me up. 360 blows donkey balls. Seacrest out.

  • Indie

    whata re you talking about 5 years

    hologrphic will be presented to the market by the end of the year, and will most likely be on store shelves by the end of next year.

    blu-ray=screwed

  • your dumb

    “360 blows donkey balls.”

    wow big t mac daddy, how intelligent….you do know that the 360 is more powerful then the ps3 right? if you dont believe me, go read the cell processor specs. And its Blu-Ray…not Blue-Ray.

    and UMD’s dont sell soley because of the PSP, maybe in the states, but have you been to japan recently, where they actually have UMD players?

    and there wont be 10 million PS3 sold by christmas, so i wouldn’t be going around saying that, otherwise come christmas time, a lot of people are going to be telling you you were stupid for thinking so

    and where did you get the figure of $425 for the ps3, sony has made no announcment on price yet, so are you pulling that figure out of your ass, again, may want to stop going around saying that, to save yourself from being called stupid later on. If Blu-Ray players are going to be selling for $1000, what makes you think the PS3 will be $425, that makes absolutly no sense on sony’s part, they couldn’t take that much of a hit, and no one would buy the blu-ray players if the ps3 is less.

    typical sony fanboy, maybe you should do what the real gaming enthusiast do and go pre-order your PS3 like i have, instead of spreading false rumors about the system, its going to be great, but dont make it sound like its going to be more then it is, just so it sounds better than another great system, they both are/will be great….end of story.

  • Malcolm R

    It is said that technology doubles every 18 months. Not just in CPU processor speed, but in the medical field, audio electronics, and basically everything that plugs in. They improve, and finally evolve. However, it has the ability to evolve much quicker, but one thing slows it down – economy. Consumers simply cannot afford to buy rapidly changing electronics, some will just refuse.

    This article has a few errors though. Microsoft does not lose money on each XBox sold, they make money on each one. They have stated this publicly. Listen to ISupply.com, or the actual company? Hmmm…

    Just remember that formats do fail, ever heard of super audio? Many have, and it sounds very good, didn’t take off though. I doubt that Tier 1 providers and manufacturers of consumer electronics would spend this much time and effort into a technology they had any doubts about at all. The average consumer has changed drastically over the years, and these manufacturers, and the RETAILERS know this.

    I highly doubt either format will fail.

    I remember seeing an advertisement in a Popular Science magazine about 5-6 years ago from TDK advertising “Blu-Ray” discs, with super accurate lasers, and over 100 gb capacity, with data transfers of 70 + mbps. These devices exist right now. I don’t see the big tizzy over Sony’s Blu-Ray and Toshiba’s HD-DVD. TDK products are generally superior anyway. (Audiophiles will concur)

    Go ahead, have your doubts, have your opinions, have your random banters about apocalypses. This stuff is real, and wont go away.

    (Psst, the XBox 360 is a weaker machine than the PS3. It has a triple core processor while the PS3 has 7 processing units, and memory with 2x the bandwidth. I still rather have a 360!)

  • David

    Malcolm,

    The Xbox 360 is indeed being sold at a loss to Microsoft. The number floating around is that it losses about $126 on each system is sells. All companies do this; they sell the console at a loss in hopes of making their revenue off of the games they sell.
    http://www.google.com/search?hl=en&q=xbox+360+sold+at+loss

    It was a technique pioneered by Atari a few decades back.

  • regdog

    I’m still not convinced the PS3 is a more powerful machine. The 360 has 3 full 3.2 GHz processor cores. The PS3 has 1 full 3.2 GHz core and 7 “helper” units (not full cpu cores) and many developers who have worked on both say the 360 is more powerful in real-world applications, and most also acknowledge that the 360 has a superior gpu. I will reserve judgement, however, until I see some actual PS3 games, and not just tech demos.

    Some people here seem to be concerned about backwards compatibility for the HD formats. As far as HD-DVD and Blu-Ray are concerned, both types of players also include red lasers which allow them be backwards compatible with existing dvds. Therefore you won’t be forced to replace your existing collection, unless you just happen to want it in hd.

  • Big T Mack Daddy

    “and where did you get the figure of $425 for the ps3″

    Sony had a press release on March 15 and stated that price will be around 50,000 yen, or $425. You might want to do some research before you call someone dumb. The 360 does indeed blow balls. [Edited]

    Seacrest out.

  • http://www.dorksandlosers.com Tan The Man

    “Therefore you won’t be forced to replace your existing collection, unless you just happen to want it in hd.”

    Exactly. But that sucks for those of us who keep rebuying “Casablanca” on every format. GRRRR.

  • http://en.wikipedia.org/wiki/Holographic_Versatile_Disc Maniaq

    Thank you Indie!

    Can we please get our FACTS right! Sony developed DVD *with* Toshiba – both working together, you know? Just as they developed CD *with* Philips, back in the day…

    Blu-Ray is ALREADY obsolete. As Indie has rightly pointed out, holographic or HVD has already hit the market. Forget 30 or so gigabytes, HVD already does 300 and by the end of the year this is expected to range 3-4 TERRABYTES – on the same ordinary disc that we all know and love (ok maybe not *ALL* of us).

    Sony can push Blu-Ray up a hill all it likes – it never worked for Betamax, it didn’t work for Minidisc, it isn’t working for Memory Stick and it won’t work for Blu-Ray…

    See for yourself:

  • Rafik

    The porn industry will decide which format they will back primarily and that will be the format that’s chosen. This has happened everytime a new format was being developed and promoted. Betamax vs. VHS, DVD, CD-ROMS, history repeats itself.

  • AlexKx

    Where are you all getting the idea that somehow holographic discs are on the market already? Are you all cRaZy?