Blu-ray: Dogged by delays, will it still have its day?
Brian Dipert, Senior Technical Editor - July 29, 2010
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.
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.
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.
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 email@example.com, and www.bdipert.com.
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