Blu-ray: Dogged by delays, will it still have its day?
The Sony-championed Blu-ray optical disc has to date significantly undershot its backers' initial forecasts. Format wars and economic recessions haven't helped matters, but is there substantial market pull for such substantial storage?
Brian Dipert, Senior Technical Editor -- EDN, July 29, 2010
At A Glance
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Kazuo Hirai, then president and chief executive
officer of Sony Computer Entertainment
America, and Ken Kutaragi,
at the time the president of Sony Computer
Entertainment, likely felt on top of
the world when the two corporate executives
took to the stage at mid-May 2005’s
E3 (Electronic Entertainment Expo) in
Los Angeles to unveil the PS (PlayStation)
3 game console (Figure 1). After all, the PlayStation
2, for which both men held prominent and visible project
roles, had handily won that console-generation war, beating
back both historical competitor Nintendo’s Gamecube
and upstart Microsoft’s first-generation Xbox (Reference 1).
In the process, the PS2 had become a key factor in the success
of optical-DVD (digital-video-disc) media, by virtue of
its DVD-playback capabilities and content-subsidized price
tag. Sony hoped that the PS3 would play the same role for
next-generation Blu-ray media, not only generating profitable
revenue for the Sony Studios movie subsidiary but also
regaining the lucrative patent-royalty crown that it and partner
Philips had held with the optical CD and subsequently
lost to fellow competitor Toshiba in the DVD era (Figure 2).
Fast-forward five years, and you’ll
find that those rosy predictions
haven’t come to fruition (references
2 through 4). DVD-content rentals
and sales still eclipse by a substantial
margin their Blu-ray counterparts,
even though Blu-ray movies and
stand-alone players first became available
four years ago. “If you get a number
of titles hitting 30% of sales in
Blu-ray, then that is successful,” says
Craig Kornblau, president of Universal
Studio’s home-entertainment sector.
When he made that statement
last December, the Blu-ray format had
garnered only about 14% of the revenue
of DVDs, despite having substantially
higher per-disc manufacturing
and distribution costs (Reference 5).
This failure comes despite the fact
that several movie studios have offered
inexpensive DVD-to-Blu-ray trade-in
programs that strive to encourage the
format migration of both SD (standard-definition)
and HD (high-definition)
DVDs to Blu-ray, along with dual-format
DVD-plus-Blu-ray “flipper” discs.
It comes despite hardware suppliers’,
content providers’, and retail partners’
heavy Blu-ray-format promotion and
despite the fact that, thanks to cable,
IPTV (Internet Protocol television),
and satellite-subscription providers’
service upgrades, consumers can now
discern the improvements of HD images
over their SD predecessors. Last
summer’s transition in the United
States from NTSC (National Television
System Committee) to ATSC
(Advanced Television Systems Committee)
over-the-air broadcasts also
provided encouragement for consumers’
broader migration to HD material
versus the SD predecessor (see sidebar
“A fuzzy future”). And it comes despite
faster-than-anticipated content and
hardware price decreases, which have
led to dubious profitability for vendors in the supply chain, including building-block-
semiconductor companies.How has the Blu-ray industry arrived at this messy point, and what path—if any—exists for it to achieve eventual success, both fiscally and in other ways? Given this situation, should you consider adding Blu-ray support to your future designs and, if so, when? Both the underlying reasons for and the fading potential exits from this debacle are complex. The Blu-ray quagmire provides a compelling case study of the pitfalls of a short and narrow vision that adapts to neither history’s lessons nor today’s deviations. This flawed vision assumes that suppliers’ push will still ultimately triumph even without a substantial amount of customers’ pull.
Console controversy
The Sony PS3 remains an ideal hardware platform for Blu-ray playback, thanks to its substantial processing muscle for both current needs and future feature updates; HDMI (high-definition-multimedia-interface) output; hard-disk-drive- based upgradability; and upgrade-friendly, built-in, wired- and wireless-Internet connectivity. The reasons for its less-than-stellar market performance to date, however, begin with its late-2006 introduction date. Microsoft and Nintendo had launched their Xbox 360 and Wii, respectively, a year earlier, and both their initial consoles and subsequent accessories and content proved tempting to shoppers (Reference 6).
Even this setback, under ordinary circumstances, might not have been a deal breaker. Despite its traditional razors- and-blades-subsidized sales mode, however, the entry-level PS3 sold for $100 more than the premium Xbox 360 variant, $200 more than the entry-level Xbox 360, and $250 more than the Nintendo Wii (Reference 7). The entry-level PS3 also eliminated key features as a cost-reduction move. For example, it offered neither an HDMI output nor embedded Wi-Fi, had no distinctive cosmetics, and lacked an integrated memory-card adapter. To obtain these capabilities, along with a 20- to 60-Gbyte hard-disk upgrade, would cost $100 more, pushing the price to more than the all-important $500 threshold.
Sony has slowly but demonstrably addressed the PS3 pricing problem, along with slimming the console and reducing its ambient noise, albeit with requisite feature retractions. The company first restricted and then eliminated game-content compatibility with the PS2 and, more recently, dispensed with the ability to run other operating systems, such as Linux, on the hardware. It could do little, however, beyond the control over its own game studio’s offerings regarding the comparative lack of compelling content—especially, exclusive titles—for the PS3. This dearth was due in large part to the difficult-to-program distributed-processing model employing the unproven Cell CPU architecture, along with third-party developers’ skepticism that their development investments would incur an adequate fiscal return.
Sony also had no control over the still-lingering economic crisis that in 2008 gripped the United States—a big problem for a foreign company such as Sony due to currency exchange-rate factors—and rapidly expanded from there to blanket the global economy. Unemployment for many, uncertain futures for those remaining employed, and a credit crunch for everyone prompted many whose PS3 downward-pricing moves might normally tempt to instead keep their wallets in their pockets. Ironically, it conversely was at least a moderate win for Microsoft and Nintendo because their customers had already made the pricey initial hardware investments. These consumers weren’t traveling and otherwise going out for entertainment; they instead stayed home with Microsoft’s and Nintendo’s comparatively inexpensive new games and accessories.
Optical competition
Whereas Sony had burdened every PS3 with an expensive Blu-ray drive, Microsoft instead sold its now-discontinued HD-DVD player, which partner and key HD-DVD promoter Toshiba supplied, as an optional USB (Universal Serial Bus) 2-tethered add-on. Besides reducing the base console’s cost and consequent price, this accessory move gave customers something else to purchase for a subsequent birthday or holiday, and it created the as-yet-unrealized perception that, if HD DVD lost the format war, Microsoft could switch gears and instead support Bluray with a different external drive and associated software. In other words, Microsoft’s omission of an integrated HD optical drive preserved consumers’ investments in their base consoles, regardless of the outcome of the format war. Sony’s integrated drive, on the other hand, would effectively obsolete a notable portion of the PS3’s appeal should Blu-ray end up the loser. Given this discrepancy in consumer perception, it’s easy to see how the battle, which largely ended in early 2008, almost a year and a half after the PS3’s release, further dimmed consumers’ enthusiasm for the PS3. HD DVD’s foundation technology lives on in the form of the CBHD (China Blue High- Definition Disc), which to date shows strong indication of usurping Blu-ray in that all-important market.
Sony had followed a similar integration strategy with the DVD-inclusive PS2 and for even fewer obvious reasons: Sony Studios would benefit from DVD sales, but Sony’s patent presence in DVD was more limited than its presence in Blu-ray. Nevertheless, the DVD-on-PS2 outcome had turned out more positively for the company. The difference this time was that DVD had received a far more unified industry embrace. The format war was less intense and relatively quickly over with DVD.
Another critical factor was that consumers correctly perceived DVD as a greater advancement over the VHS (video-home-system) predecessor than Blu-ray was an advancement over DVD. When DVD emerged, consumers were comfortable with the optical-disc format from years’ worth of audio-CD experience. They were also familiar with the audio CD’s advantages over cassette tapes: short and long-term sonic quality, media durability, and fast random access to any segment of the stored content . As a result, they quickly embraced the DVD format.
Blu-ray’s primary sales pitch—high-resolution images—was of significance only to consumers whose displays and viewing setups enabled them to discern the quality improvement. Initial Blu-ray offerings, such as the low-quality first-generation The First Element, employed the archaic MPEG (Motion Pictures Experts Group)-2 video codec instead of the more modern H.264, also known as MPEG-4 AVC (advanced video coding), MPEG-4 JVT (joint video team), or MPEG-4 Part 10, or VC (video coding)-1, also known as Windows Media Video 9 Advanced. That choice didn’t much help matters for Blu-ray’s fortunes. And inexpensive DVD players, which used sophisticated upscaling techniques to fill in the pixels absent from the standard-definition 4-by-3 or wide-screen image source, further muddied the high-definition picture.
Analogies to DVD-Audio and SACD (super audio compact disc) versus the CD predecessor are apt (Reference 8). In this case, a format war also existed, and the industry was attempting to move consumers from a conventional to a supposedly higher bit- and sampling-rate presentation. The dueling sound formats even offered native surround-sound enhancements versus their two-channel red-laser audio-CD predecessor. Customers ultimately gave both formats a lukewarm embrace, however, perceiving their predecessor as good enough. The video industry didn’t learn from its audio counterpart’s problems but instead followed a similar technology-treadmill strategy in the absence of strong customer demand and, thus far, with a largely similar outcome.
Standards in flux
Look beyond prerecorded movies to consumer-generated content, and you’ll encounter yet another format fracas. In the post-DV (digital-video) SD era, high-resolution consumer camcorders subdivided into three camps: tapebased HDV (high-definition video) employing high-definition MPEG-2, solid-state-storage-based AVCHD (advanced video codec high definition) leveraging H.264, and largely proprietary hard-disk-drive-based approaches. AVCHD has now garnered the lion’s share of the business, partially thanks to flash memory’s ruggedness, low power consumption, compactness, and fast-random-access media. Yet it’s taken several years for this situation to even begin to sort out. Throughout this time, consumers, content with SD DV cameras and DVD optical-archive and playback media, have delayed upgrading their HD equipment.
Ironically, market-analysis reports consistently conclude that most camcorder owners do no video editing whatsoever, much less burn the results to an optical-disc archive. Instead, they often simply toss tapes or memory cards into a desk drawer or shoe box. Alternatively, they use YouTube and related online services as their content repositories, uploading clips directly from their cameras using USB-tethered computers as intermediary transfer devices. The convenience seems to have trumped the disadvantages: lossy compression and low-resolution images. Analogies to the embrace of MP3 audio are apt. This trend explains the booming popularity of Cisco’s Flip flash-memory-based camera line and its competitors from Creative Labs, Eastman Kodak, and other companies. It also explains why many camcorder users were oblivious to the blue-laser-optical-disc-format wars.
Speaking of standards, Blu-ray has undergone several significant evolutionary steps through its short life. Consumers’ reluctance to purchase hardware that will inevitably become out of date partway through the evolutionary path is therefore understandable. Initial player generations followed the BD (Blu-ray disc)-Video 1.0, the so-called initial standard or grace-period profile. This profile left optional, therefore largely unimplemented, key features, such as local-storage capability, secondary audio and video decoders— enabling picture-in-picture support, for example—and virtual-file-system support. Profile 1.1 players, which currently still constitute most of the equipment on the market, made improvements in each of these areas, requiring, for example, 256 Mbytes of local storage, thereby enabling the Bonus View limited enhanced-feature mode.
However, Profile 1.1 players extended Profile 1.0’s stance of not requiring network-access support. In contrast, HD-DVD players include this capability from first-generation hardware. As such, the Blu-ray players couldn’t access Internet-housed added features, for example, and end users could not easily update players’ firmware to fix incompatibility bugs they discovered with the release of subsequently published titles. Profile 2.0, the so-called final standard, is the latest published Blu-ray specification iteration. It requires built-in network connectivity and boosts local storage to a minimum of 1 Gbyte. As such, the feature suite that Bonus View formerly branded is now BD-Live.
Managed Copy is another as-yet-unrealized Blu-ray feature that was available in HD DVD from its earliest days. When (or perhaps more accurately if) cognizant hardware implements it, it enables consumers to make legal and bit-accurate digital copies of discs they’ve purchased. The mention of “copies” inevitably leads to the broader topics of digital-rights management and content encryption, which have also undergone development during Blu-ray’s lifetime. Initial discs relied solely on the AACS (Advanced Access Content System), an expansion of DVD’s CSS (content-scrambling system), which, like its CSS predecessor, hackers quickly cracked. The Blu-ray Association’s response, BD+, leveraged a virtual-machine-architecture approach. Hackers have cracked it, as well, as software products such as SlySoft’s Any-DVD HD suggest. Offshore manufacturers often develop these products; as such, they are beyond the reach of US copyright-court jurisdiction.
Hollywood is even concerned with real-time degraded copies that individuals might create through intermediary digital-to-analog and digital-to-analog transformations using a player’s component-video outputs. As such, a revision of the Adopter Agreement that the AACS Licensing Authority released last year requires manufacturers to phase out by 2013 all unencrypted—that is, analog—video outputs in players. For the near term, such a move may stimulate Blu-ray-hardware sales to consumers whose displays lack or have too few digital inputs (Reference 9). For the long term, however, such potential customers, also including those whose displays support now-obsolete HDMI generations, will be loath to embrace Blu-ray by virtue of the substantial incremental expense they’ll need to shoulder in the form of new TVs.
Streaming successor?
Concerning the price decreases that
are occurring more rapidly than manufacturers
intended for Blu-ray players
and media, consider that the first
Blu-ray player in the United States,
Samsung’s BD-P1000, which the company
released in June 2006, initially
cost $999 (Figure 3). Toshiba’s rival
HD-A1, which it released roughly two
months earlier, originally sold for $799.
Last year, during a “Black Friday” promotion,
Walmart sold the Magnavox
NB500 Blu-ray player for $78, a roughly
13-fold price reduction from that
$999 starting point. Nowadays, more
than four years after the BD-P1000 first
went on sale, Blu-ray players selling
for less than $100
are commonplace.
Even if you assume
that consumer-electronics
manufacturers are
still clinging to
at least a modicum
of profitability
despite this rapid
price decrease,
you can imagine
the cost pressure
that they’re passing
along to their
building-block-IC suppliers.
Ken Lowe, vice president of marketing
at Sigma Designs, indicated early
this year that, as a result of the cost
pressures, the company had withdrawn
its interest in entry-level Blu-ray-only
designs, preferring instead to focus on
more lucrative value-added platforms.
He refers to the new generation of set-top-boxes, devices that begin with a
Blu-ray base and augment it with network-connection-enabled playback of
Internet-based content from sites such
as Amazon Videos On Demand, Hulu,
Netflix, Pandora, and Yahoo, along
with access to LAN NAS (network-attached-
storage)-stored audio, video, and
still-image material (Figure 4).Ironically, much of this content is SD in native resolution. The local playback device then dynamically upscales it to match the pixel count of the destination display. Manufacturers are doing whatever it takes to sell gadgets in the near term. The sales of these gadgets, however, are, for the long term, negatively affecting Blu-ray’s fundamental sales premise: high-quality “true,” high-resolution content. Netflix even last year brought streaming support to the PS3. Netflix streams HD content to consumers if their broadband connections support the necessary bit rates, but such material is high-resolution only in the strictest pixel-count definition of the term. Its aggressive compression renders it generally inferior to 720p and 1080i ATSC broadcasts, for example.
Reed Hastings, chief executive officer of Netflix, has repeatedly mentioned his company’s long-term aspirations to get out of the disc-shipping business and move to a streaming-delivery model. This move would substantially reduce the company’s operating costs by eliminating warehousing, processing, shipping, postage, and lost-and- damaged-goods expenses. Netflix’s job site recently posted a presentation in which the company forecasts that the disc-by-mail business will peak in 2013, after which content streaming will drive business growth. The presentation estimates that 100 million households in the United States currently have pay-TV subscriptions and contrasts that figure with Netflix’s 14 million subscribers at the end of March, which the company expects to rise to 17 million by year-end.
Apple is another strong advocate of Internet-based content delivery, as its online iTunes store demonstrates. You might expect that a portion of the company’s desktop and laptop computers would by now have incorporated built-in Blu-ray burners, given Apple’s longstanding embrace of multimedia and the dominance of the Mac in multimedia- content creation. At press time, however, Apple was still relying exclusively on third-party hardware and software partners to bring Blu-ray support to the Mac ecosystem. Blu-ray’s capacity isn’t even necessary for hard-drive backups; the Mac 10.5 and 10.6 operating systems contain Time Machine, a feature that automatically and periodically mirrors content to a USB- or network-tethered hard drive.
The company’s mercurial chief executive officer, Steve Jobs, referred to the Blu-ray situation as a “bag of hurt” during a 2008 press conference. Many in the industry, however, believe that the company’s rejection of Blu-ray is a strategic move to accelerate adoption of the presumed online-delivery heir apparent. Microsoft made public its similar aspirations in response to Toshiba’s decision to shutter its HD-DVD efforts in February 2008, indicating that it had no intention of offering a Blu-ray accessory for the Xbox 360 but would instead focus its development and promotion efforts on consumer purchases and rentals from its Video Marketplace, now known as the Zune Marketplace. Blu-ray founder Sony has even entered the act, offering rentals and purchases of movies and other video material from an online store accessible through the PS3.
You can reach Senior Technical Editor Brian Dipert at brian.dipert@cancom.com, and www.bdipert.com.
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Talkback
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No, Blu-Ray isn't too threatened today.
Yeah, there was some delay in getting the standards finished, but that wasn't a problem in the long run, other than to aid Toshiba in their format war. In fact, Blu-Ray faced exactly the DVD-Audio/SACD problem at its onset. But keep in mind, there were two problems in that. One was the never-resolved format war. The other was realization of the new format's advantage. In short, so few consumers had an audio system capable of even delivering CD's full fidelity, DVD-Audio and SACD were inherently stuck in a niche.
Some of the delay helped here. When Blu-Ray first hit Japan in the early 2000s, as a proprietary HD recording medium (and somewhat later, on the XDCAM professional camcorder format), there were not enough HDTVs in consumer hands to push the format. And they still had issues, like video and audio formats, to work on for the final consumer offering. By the time Blu-Ray won the format war, HDTV was getting cheap and pretty much taking over. The timing, ultimately, wasn't all that bad.
And don't forget... DVD took a long time to take off, even given that most US households had a television capable of delivering a good result. The first DVD players cost $1,000... just like the first Blu-Ray players (except the PS3) and the first CD players, back in the very early 80s. The time to low cost was largely driven by the fact that the technology for Blu-Ray was already mature enough to get cheap. The first players had to do more in software, to deal with a spec still being finialized, but there was a clear shot to commodity. And while the CE companies may not be happy about that, that's necessary to ensure the success of the format, in the long run. Entry level Blu-Ray has replaced "Upscaling DVD player" at that semi-premium pricepoint of around $100.
As for gaming, yeah, Sony paid a price to get Blu-Ray in the box. But that's ultimately part of what won the market for Blu-Ray over HD-DVD (the other being Toshiba's treating HD-DVD like a gaming console and selling all their systems at or below cost).
Price was something of an issue, but it was also availability of blue-violet lasers that limited initial production. But thanks to the BD-ROM, they now have the one gaming console that can play truly modern games, with the same HD content you'll find on today's multi-DVD PC games. These things have to be dumbed down for the X-Box 360, and they don't both with the Wii most of the time... that's a different class of gaming.
As for streaming video... it's not a replacement for Blu-Ray. It's a replacement for rental and pay-per-view, for the most part. If you care about quality, you buy the Blu-Ray... if you want to see something once, right now, you stream it. Or see it via PPV, or on-demand, or maybe even trek down to that one remaining Blockbuster in the area and rent it. On Blu-Ray.
Streaming may eventually replace Blu-Ray. While it's possible today to buy via download, the quality of the super-compressed 720p video you get from outlets like iTunes is close to DVD than to Blu-Ray. If we did start downloading Blu-Ray quality video, we'd notice that at today's storage prices, you're still paying a non-trivial amount to house your purchases. And your ISP would be slapping monthly download caps faster than you can say "network neutrality".
But in the long run, streaming may well prevail. As storage gets cheaper and networks faster, the difference in quality may shrink... as long as the per-GB prices keep falling on the bandwidth to get the video to your player. Blu-Ray is handling 3D, but there's going to be a demand for 4K home video, probably within 10 years or less. That's going to need more layers on a Blu-Ray, or "something else"... which could be improved compression, or in a world of gigabit-to-the-home, it could be downloads.
Either way, interesting times we live in. Sometimes that's curse...
Dave Haynie - 2010-25-8 08:46:58 PDT -
If your idea of in the long run is about 10 years, you can probably pat yourself on the back, assuming congratulating yourself on stating the obvious is what you like to do. In the here-and-now all the signs are that Blu-Ray is set for a fairly rosy future, certainly rosier than that of streaming near term. I offer this for your delight and delictation, from the Digital Entertainment Group, the official industry body which (amongst other tasks) holds the job of monitoring sales and rentals of all media formats in the US. DVD, Blu-Ray, and yes, even satellite/cable VOD and internet streaming:- "Blu-ray Disc continued its strong performance, with sell-through and rental reaching a combined total of $982 million for the first half of the year. Blu-ray Disc sell-through was up 84 percent to $733 million at the mid-year point, compared to the same period last year. Blu-ray Disc sell-through also grew a remarkable 112 percent in the second quarter, to $363 million, compared to second quarter 2009." ..... "Digital distribution maintained its steady rise with electronic sell-through (EST) up 36.9 percent to $285 million and video-on-demand (VOD) up 19.1 percent to $865 million in the first half of the year, a combined growth of 23.1 percent to $1.1 billion. This is the first time that digital distribution surpassed the $1 billion mark in the first six months of the year" .... “The growth of Blu-ray, both hardware and software, continued to dominate the home entertainment landscape in the first half,” said Ron Sanders, President, DEG and President, Warner Home Video. “Clearly, we are still grappling with a challenging marketplace and a tough economy, but overall the trends that we are seeing are encouraging.” ( www.degonline.org/pressreleases/2009/f_2Q10release.pdf ). All the growth and (correspondingly) all the good news, is in Blu-Ray, not streaming or digital. In case anyone missed it, growth of 84% to $733 million > 36.9% to $285 million. Especially when that $285 million encompasses both standard def and high def streaming. And, oh dear! What's that? Blu-Ray's growth actually went up AGAIN in the second quarter to 112%. Tsk tsk. Maybe turn that backslap into a dandruff brush-off for now? Enjoy! Milt R. Smith
Milt R. Smith - 2010-20-8 08:09:11 PDT -
At the heght of the HD-DVD vs Blu-Ray wars I had predicted neither would be the winner in the long run. Network video such as streaming rentals from Netflix and Youtube are where mass consumer sentiment is headed. I think it can be shown that consumers are more interested in convenience than they are high quality A/V. With that said a streaming set top box they can order movies from and store ALL of their personal collection on will be what "wins" in the end. Blu-Ray will have a small life extended by the videophiles just as CDs and SACDs do for audiophiles.
Carl R - 2010-19-8 13:26:33 PDT -
I don't know about any of that buddy, my Walmart has been selling Blu ray players at $99 for about a year, sometimes as low as $80. Lite-on has reported major sales growth from a surge in Blu ray PC drives and Microsoft puts Blu ray at the top of its list of things Macs can't do in its latest anti-Apple campaign.
Tom J - 2010-12-8 02:00:10 PDT -
Blu-Ray is a victim of its own patents, and the "monetization" of that IP.
Everybody has always known that mass consumer acceptance would not occur until the $99 price point. Just within the last six months have low-end Blu-Ray players become available. Support for BD-Live will cause you to bust the price point.
The PC Market is on life support. Having a Blu-Ray burner was once everybodys dream for backup, but now a 1TB USB external disk retailing for $80 makes it unnecessary. And don't get me started on the outrageously priced "Ultimate" version of Windows not having Blu-Ray codec support.
LB - 2010-11-8 13:51:53 PDT
