Fate of high-def DVD may lie with Microsoft
After months of intense wrangling between the competing Blu-ray and HD-DVD groups, the battle lines in the war over a next-generation high-definition DVD format have moved to the doorstep of Microsoft Corp.
Several industry sources told EE Times that Microsoft is muscling into the optical-disk fray by leveraging its OS clout to bundle HD-DVD within Vista, the company's next-generation OS. There is also talk that the software giant may be planning to offer cash incentives—in the form of "coupons"—to system vendors or retailers if they agree to support HD-DVD. Such coupons would provide "credits" or "memos" for each PC that is sold with HD-DVD inside.
Microsoft would neither confirm nor deny such reports. Asked about financial incentives, the company might be dangling in front of PC OEMs to lure them into the HD-DVD camp, a spokesman said, "Microsoft doesn't comment on the details of meetings we've had with our partners."
One fact, however, is hard to miss: In the short span, Microsoft has gotten through to Hewlett-Packard Co. HP, which still sits on the board of the Blu-ray Disc Association and previously supported the Blu-ray format exclusively, joined the HD-DVD Forum in December last year. This semi-reversal came in the wake of a series of meetings with Microsoft, said Maureen Weber, general manager of HP's Personal Storage Business.
Many consumer electronics executives involved in negotiations with PC OEMs believe there is more to the story of HP's flip. Some sources expect clarifications and new developments to emerge.
Dell Inc., for its part, has no intention of switching its support from Blu-ray, Brian Zucker, a Dell technology strategist who sits on the Blu-Ray DVD committee, told EE Times. "The only reasons we would make a change would be if we saw significant customer demand not to back the format we have been working on," he added.
Dell chose Blu-ray for two reasons: higher capacity (25GB for an entry-level disk, compared with about 15GB for a basic HD-DVD) and longer list of industry backers. Two years later, Dell now feels it has a vested interest in Blu-ray because it helped make sure the spec represented its customers' interests, Zucker said. In his opinion, slight differences in the copy-protection scheme for Blu-ray will not prevent users from making so-called "managed copies" of content on the disks, a feature that he said was a priority for both camps.
Intel provides no optical-disk technology, so a difference of opinion between Dell and Intel on the subject has little impact on the PC maker. Likewise, Microsoft, which does not make optical drives, has a history of letting third-party software companies supply key optical-disk support rather than write its own optical-disk code into Windows.
Given that history, the question for many industry watchers is: Why is Microsoft siding with HD-DVD, a format that has generated relatively little enthusiasm among Hollywood studios and hardware vendors?
While Dell may have no idea about Microsoft's motives, those in the consumer electronics industry have several theories. Many, who spoke on condition of anonymity, believe Microsoft is committed to prolonging the format war, not necessarily winning the battle for HD-DVD. Rather, they say, HD-DVD is a Trojan horse, rolled into the format war to create advantages in battles yet to be fought—especially against Sony Corp.
Xbox vs. Playstation
Consider, for example, Microsoft's Xbox 360. The game console is already on the market, despite the absence of a high-definition strategy, said one source. The Xbox 360 is based on a current-generation DVD drive. The longer the next-generation HD-DVD format battle persists, the better the opportunity for Microsoft to downplay the HD capability scheduled for integration in Sony's upcoming Blu-ray-based Playstation 3 game machine.
Second, a drawn-out high-definition optical-disk format battle helps Microsoft buy time to promote its connected-home strategy. By undercutting the value of standalone pre-recorded media devices, Microsoft hopes to accelerate a consumer electronics transition into the brave new world of "downloadable" content, some observers say.
As Peter Barrett, CTO of the Microsoft TV Division, explains it, the company believes that "the point of integration, the point of convergence, is the service, not the device."
In Microsoft's view, next-generation consumer devices will no longer be simply connected to one-way broadcast or removable media. Rather, the company envisions HD-DVD players tied to the network via subscription services. In essence, said a longtime Microsoft observer, by leveraging its .Net strategy, Microsoft "wants to become the telephone company of the living room."
Third, the classic battle between Microsoft and CE companies always comes down to the stickiest issue: to Java or not to Java.
For Microsoft, hoping to establish control over the software platform in the living room, support for HD-DVD is critical in this regard. The format uses iHD, an XML-based technology, to add interactivity, rather than Sun Microsystems Inc.'s Java language.
In contrast, consumer electronics companies are committed to deploying the Java-based Multimedia Home Platform in the Blu-ray format. MHP has already established itself in the TV world as the standard platform upon which to offer interactivity.
"For MHP, the industry already has development tools, experience and an installed base that will grow, regardless of any DVD decision," said Stu Lipoff, partner at IP Action Partners.
The Java-averse Microsoft "is trying to displace MHP so that they have a big dog in the fight," he said.
Meanwhile, Microsoft is blaming Blu-ray's use of Java for its potentially much higher royalties. Java-based Blu-ray format royalties include the licensing of the Globally Executable MHP standard, the cost of a Java test kit from Sun Microsystems and the cost of BD-Java, the version on which the Blu-ray Disc format is built, said HP's Weber.
PCs don't need Java because they already offer interactivity. In contrast, consumer electronics companies do need Java to make their end-products interactive. Just as consumer electronics manufacturers regard integrating Microsoft's Windows as overkill, HP feels that Java in a PC platform is too costly.
Until Microsoft stepped into the battle, the Blu-ray Disc format was gaining ground steadily over HD-DVD, with support from a majority of major studios in Hollywood—with the exception of NBC Universal—and a much longer list of hardware companies than HD-DVD can boast. Besides Dell and fellow computer maker Apple, supporters include Hitachi, LG Electronics, Matsushita (Panasonic), Mitsubishi, Philips, Pioneer, Samsung, Sharp, Sony, TDK and Thomson.
But even with that list of heavyweights, nobody is declaring a Blu-ray victory because everyone understands the sheer power Microsoft can—and often does—exercise, all by itself.
Asked whether Microsoft was offering Dell or anyone else financial incentives to join the HD-DVD consortium, Dell's Zucker said, "I have not heard anything about that, nor would I comment on it."
The last few months have seen a tug-of-war between the Blu-ray and HD-DVD camps over HP and Dell. Negotiations that played out at a very high level, according to sources familiar with the situation, resulted in HP's flip and Dell's refusal to budge.
But even as they claim victory by keeping Dell on board, Blu-ray backers are not anxiety-free. No one in the consumer industry can ever safely ignore the Microsoft/Intel support for HD-DVD. There is no assurance that the alliance within the Blu-ray group, now united against Microsoft, will remain tight forever.
- Junko Yoshida
Additional reporting by Rick Merritt