Tuesday, March 20, 2007
Both high def DVD formats use blue laser technology to encode enough data to contain a full length movie, plus its bonus features, in High Definition Television on a normal sized optical disc. The format war comes from the fact that even though both formats are based on similar technologies, they aren't compatible because the player for one type of disc can't play discs in the other format. It's generally agreed that there can be only one winner in the format war and some experts argue that it's possible that neither format will survive the conflict. Because of the possibility that one or both of the formats could go the way of the Betamax video cassette format, many consumers have been hesitant to invest in either technology. This in turn has led to a protracted conflict over which format will be the winner. Since consumers have been slow to embrace either format, it's not really clear which format they prefer, and as long as there's no clear preference, there's not clear winner.
Another permutation to this story came about a few days ago when an anonymous hacker announced that he had found a way to decrypt HD-DVD discs. Toshiba's HD-DVD disks use the Advanced Access Content System encryption protocols to prevent the discs from being copied and then illegally sold on the Internet. This encryption system supposedly is hacker proof, if this hacker's claims are true, then it could put the profits of major movie studios in jeopardy.
At this point there's only the indication that the hacker has cracked the code for discs in the HD-DVD format, but may experts agree that if HD-DVD can be pirated, it's only a matter of time before Blu-ray discs can be hacked as well. Besides the possibility that pirated copies of these discs would cut into the profits of the studios, they could also mean that Toshiba and Sony wouldn't receive the same kinds of royalties from the sales of these discs that they otherwise would.
All of this figures into the format war because if the total profits to be made from royalties and licensing fees are eroded by illegal copies of these discs offering extra competition, a lot of the potential benefits of winning the format war are also eroded. Toshiba and Sony, as well as their backers, have put a sizeable amount of money, time and other resources into making their respective formats come out on top. That's because literally billions of dollars are at stake in the form of licensing fees and royalties in the years and possibly decades to come. Now, with the possibility that pirated copies of movies could cut into those profits, there's less at stake. In general, the winners won't win as big and the losers will have less to lose.
The interesting thing about this development is that with less at stake, it's more likely that both the Blu-ray and HD-DVD formats will survive the format war, which is an option that hasn't been seriously considered before.