Euro Commission Launches Inquiry Relating to Hollywood’s Blu-Ray/HD-DVD Decision

[Tik-Tok]

This was just posted over at thedailyjump (http://thedailyjump.com/site/tech-news/based-on-pure-suspicion-euro-commission-demands-all-files-relating-to-blu-rayhd-dvd-decision.php).

The European Commission is ready to begin a probe into why most of the Hollywood movie studios chose to side with Blu-Ray instead of HD-DVD.
Apparently there is some speculation as to whether or not anti-competitive tactics were used to seal the deals.

If something substantial IS found this could be a huge boost for HD-DVD and a huge blow to Blu-Ray

[Sl1pstream]

I have HD-DVD, Europe loves me!

[Trazzlo the Magnificant]

Firstly, I thought this was already older news, unless the news is that the inquiry is going further then the first portion which asked for information from the companies involved.

But, I really think something needs to be done to make sure it's a fair competition for each format. The studios had the opportunity to make a single format. They couldn't agree, so now we have two formats. The customer has to pick a side, hoping they are right, the cost is having to repurchase everything again.

If the customer is to make the choice, and pay the price, then it had better be a fair representation. I think all studios should be forced to support both formats equally, and permanently. Then the customer no longer has to care; it comes down to which unit fit their needs best the day they bought it.

It also solves the "war" as far as customers go. We didn't create the war, why should we pay the price of it?

[Demo_Boy]

Nothing will be found.

[Trazzlo the Magnificant]

Nothing will be found.
Wow, so you are an expert at European anti-competition law?

[Matthias]

Firstly, I thought this was already older news, unless the news is that the inquiry is going further then the first portion which asked for information from the companies involved.

But, I really think something needs to be done to make sure it's a fair competition for each format. The studios had the opportunity to make a single format. They couldn't agree, so now we have two formats. The customer has to pick a side, hoping they are right, the cost is having to repurchase everything again.

If the customer is to make the choice, and pay the price, then it had better be a fair representation. I think all studios should be forced to support both formats equally, and permanently. Then the customer no longer has to care; it comes down to which unit fit their needs best the day they bought it.

It also solves the "war" as far as customers go. We didn't create the war, why should we pay the price of it?

No offense, but that viewpoint is rather naive. If every studio is forced to support both formats equally, that also means they will have to support both until the next generation comes out, which splits their manufacturing budget straight up the middle(and actually forces them to raise it, making them lose money, which no studio wants to do)- now instead of having plenty of one format that everyone with current-gen hardware can watch (as in the DVD this past gen), you have a schism that causes problems when the Blu-Ray version of the movie sells out but the HD-DVD version doesn't. And it is much more likely that at least one version will sell out when they're only producing half as many for a given format as they could with DVD. Now the consumer is upset because he has to either wait and come back for the movie or leave and go to another store (which then makes the retailer rather upset).

Furthermore, this causes major problems with the movie rental industry, which now has to take a limited amount of shelf space, which can barely hold all the single-format movies they need to, and split it in half. Now you have a bunch of rubes coming up to rent the latest award-winning flick, only to find out that they grabbed the HD-DVD version by mistake, and that the store is out of Blu-Rays (you think people are smarter than this, but you'd be surprised how many grab the boxes that have a huge "DISPLAY BOX ONLY" sticker on them). Now the consumer is upset again, and has to either pick a less wanted movie or leave, and the rental places are upset because the original movie was guaranteed in stock, so they have to issue a rain check AND potentially lose a customer.

Then you have the home front- both Blu-Ray and HD-DVD players are still rather expensive, and the one that can view both formats is even more so. It will pretty much remain that way until studios come to an agreement to use only one format, because manufacturer's are not only not making the sales they need to offset their initial retooling costs, but they've also either split the manufacturing line to make both formats, or are making one format in relatively limited numbers because the market is too split for them to risk having all these extra players for the dead format on hand. And there will be a losing format one way or another- it's how the free market works. Right now the competition is being fought over which movies can be bought in which format, but if every movie were made in both formats, the battle would simply shift to a different field- which manufacturers are willing to lose enough money to lower prices on players for a particular format (most manufacturers only produce one format) and therefore attract more consumers, for instance.

So in all actuality, I would say studios need to be forced NOT to support both formats. Rather, they need a way to agree on a single format. Unfortunately, in a free market system, the only way to get them to agree is for consumers to buy a significantly higher number of players and movies in one format. Coincidentally, that's exactly what's going on now. So to be honest, I don't feel sorry for the early adapters willing to put their money on the line for one or the other- it's the necessary embodiment of capitalism. But as for myself, I think I'll wait to purchase a hi-def player until one has pretty much taken over the market (right now it looks like I'll eventually be buying a Blu-Ray, but who knows). Of course maybe I'm not feeling so urgent about it because I don't have an HDTV yet. But that'll come soon enough anyway.

[WastelandDan]

if they actually find something then it'd be more hilarious then anything. Sony's really been cultivating the Evil Corporation image, much in the way that Microsoft used to, and this would just be the icing on the top of that blackened corrupt cake.

[DeadlyDonkey]

So in all actuality, I would say studios need to be forced NOT to support both formats.

This. If they did make any action against it would be supremely retarded.

[Sloth]

nothing substantial will be found. even if there was some shady business tactics, they aren't serious enough that the policiticans won't be bought off

[Trazzlo the Magnificant]

No offense, but that viewpoint is rather naive. If every studio is forced to support both formats equally, that also means they will have to support both until the next generation comes out, which splits their manufacturing budget straight up the middle(and actually forces them to raise it, making them lose money, which no studio wants to do)- now instead of having plenty of one format that everyone with current-gen hardware can watch (as in the DVD this past gen), you have a schism that causes problems when the Blu-Ray version of the movie sells out but the HD-DVD version doesn't. And it is much more likely that at least one version will sell out when they're only producing half as many for a given format as they could with DVD. Now the consumer is upset because he has to either wait and come back for the movie or leave and go to another store (which then makes the retailer rather upset).

Furthermore, this causes major problems with the movie rental industry, which now has to take a limited amount of shelf space, which can barely hold all the single-format movies they need to, and split it in half. Now you have a bunch of rubes coming up to rent the latest award-winning flick, only to find out that they grabbed the HD-DVD version by mistake, and that the store is out of Blu-Rays (you think people are smarter than this, but you'd be surprised how many grab the boxes that have a huge "DISPLAY BOX ONLY" sticker on them). Now the consumer is upset again, and has to either pick a less wanted movie or leave, and the rental places are upset because the original movie was guaranteed in stock, so they have to issue a rain check AND potentially lose a customer.

Then you have the home front- both Blu-Ray and HD-DVD players are still rather expensive, and the one that can view both formats is even more so. It will pretty much remain that way until studios come to an agreement to use only one format, because manufacturer's are not only not making the sales they need to offset their initial retooling costs, but they've also either split the manufacturing line to make both formats, or are making one format in relatively limited numbers because the market is too split for them to risk having all these extra players for the dead format on hand. And there will be a losing format one way or another- it's how the free market works. Right now the competition is being fought over which movies can be bought in which format, but if every movie were made in both formats, the battle would simply shift to a different field- which manufacturers are willing to lose enough money to lower prices on players for a particular format (most manufacturers only produce one format) and therefore attract more consumers, for instance.

So in all actuality, I would say studios need to be forced NOT to support both formats. Rather, they need a way to agree on a single format. Unfortunately, in a free market system, the only way to get them to agree is for consumers to buy a significantly higher number of players and movies in one format. Coincidentally, that's exactly what's going on now. So to be honest, I don't feel sorry for the early adapters willing to put their money on the line for one or the other- it's the necessary embodiment of capitalism. But as for myself, I think I'll wait to purchase a hi-def player until one has pretty much taken over the market (right now it looks like I'll eventually be buying a Blu-Ray, but who knows). Of course maybe I'm not feeling so urgent about it because I don't have an HDTV yet. But that'll come soon enough anyway.
No offense, but your premise that no competition is better than equal competition is naive.

They had the chance to have one format; they failed to do that. It is naive to assume that consumers will pick up the burdens of both R&D budgets, and also the cost of one failing.

The studios brought two formats into the market, they can support them as well.

Furthermore, if you truly believe that the studios are not able to make up for their manufacturing costs for both formats, I simply point at the studios that do, currently, support both formats. And, I will also point out the obvious flaw in your reasoning that they would suddenly have access to the entire portion of the market instead of one slice.

The current situation is that consumers are expected to make a decision now, without any knowledge of the royalty schemes and negotiations that have taken place that may have a massive impact on their purchasing once one format "wins". If you don't see that, then perhaps you should not point fingers at other people "naive" viewpoints.

You have no idea if Sony has the right to ask massive royalties from Universal if they decide to publish Bluray movies after Sony owns the entire market, do you?

Until then, I will simply stay with my naive opinions that free and honest competition protects us more than hurts us.

[Heretic Machine]

Stop playing with your Laser Disc 2.0 bullshit and wait for a proper digital distribution solution.

[JCtheMC]

By the time this investigation is done, one of the formats will be the winner.

[Vandenh]

By the time this investigation is done, one of the formats will be the winner.

And will probably have to pay a couple of billion euro to the European courts.

[DangerousDaze]

This doesn't help the consumer. The consumer needs one format, and it can be either one, but stirring everything up to make it "competitive" so half the movies are one one format and half on the other is just a fucking dumb idea.

Everyone, it's not about the studios, they can fend for themselves, it's about us as the consumer. Do you want to have to buy two sets of kit, because I don't.

[Sparky]

You guys are right. The government needs to step in and make some decisions for us, rather than letting the marketplace dictate the winner.

Also, I hope Europe gets around to figuring out why the DVD format beat DIVX.

[Sl1pstream]

You guys are right. The government needs to step in and make some decisions for us, rather than letting the marketplace dictate the winner.

Also, I hope Europe gets around to figuring out why the DVD format beat DIVX.

The marketplace doesn't get a chance to decide when studios tell the marketplace to go screw themselves by taking money from someone else. If they would've picked one format to begin with, I would agree.

This isn't exactly comparable to Divx.
Soon after DVD’s were commercially introduced, a Los Angeles law firm teamed up with Circuit City to release a competing home video format called Divx (not the same thing as the more recent online video format, DivX). The idea of Divx was that you would buy low-cost discs that you could take home and use for a few days, after which time they would “expire” and become unusable, unless you paid an additional usage fee. Unlike DVD’s, which consumers can buy and use for as long as they like, Divx discs kept control of the media directly in the hands of the media distributors. A child only a lawyer could love.

Divx failed. Consumers hated the idea. The competing DVD format, with less privacy restrictions, less centralized control, and a concrete feeling of ownership for the person buying the disc, won out and put Divx out of business.

HD-DVD and Blu-Ray were launched at pretty much the same time. HD-DVD also has more than a few reasons why it would seem like the better choice for consumers, price being the most important one.

[Morangie]

You guys are right. The government needs to step in and make some decisions for us, rather than letting the marketplace dictate the winner.

Also, I hope Europe gets around to figuring out why the DVD format beat DIVX.
Damn Europeans, investigating suspected corporate crime. Its un-American!

[Loganrapp]

Stop playing with your Laser Disc 2.0 bullshit and wait for a proper digital distribution solution.

Don't know about anybody else, but I like having a physical copy of my movies. I like having the box, the cover art, the disc.

I am wary of having my movies attached and "stuck" on one machine, and "just burning to a DVD" would have to be pretty much impossible or else digital distribution models are essentially pirating factories.

I don't like this Blu-Ray/HD-DVD bullshit, but having a physical, tangible copy of my movies is important to me.

[Sparky]

The marketplace doesn't get a chance to decide when studios tell the marketplace to go screw themselves by taking money from someone else. If they would've picked one format to begin with, I would agree.

This isn't exactly comparable to Divx.


HD-DVD and Blu-Ray were launched at pretty much the same time. HD-DVD also has more than a few reasons why it would seem like the better choice for consumers, price being the most important one.

Huh, I see your point. Oh wait, you mean how like Microsoft (and to a lesser extent Sony and Nintendo) has paid ass-loads of money to get exclusive titles and content locking it out from other consoles? Maybe after Scooby Doo and crew get done investigating the BluRay/HD-DVD mystery they can get on that one next.

[Sl1pstream]

Huh, I see your point. Oh wait, you mean how like Microsoft (and to a lesser extent Sony and Nintendo) has paid ass-loads of money to get exclusive titles and content locking it out from other consoles? Maybe after Scooby Doo and crew get done investigating the BluRay/HD-DVD mystery they can get on that one next.

You're not seriously suggesting that's the same thing?

[digitalErich]

Unless the Blu-Ray/HD-DVD generation lasts more than 10 years (or even if it does), I can't see digital distribution being the only next generation delivery system. Sure, it will continue to grow and might be in the majority, but I predict there'll be a market for physical media a lot longer than a lot of the techno-pundits will have you think.

[OperatorC]

Ugh. I don't know about anyone else, but I refuse to buy either products until there is a clear cut industry supported format like DVD. Since I don't see the point in purchasing a PS3 at this point, that includes that system as well but only indirectly - I wouldn't have bought for any BluRay purposes anyway.

It's nice to watch movies in HD which is something I'm able to do only when there's a decent movie worth watching on the HD channels that my cable provider doesn't support enough of. So, I the idea of a format that's like DVD but allows me to own movies in HD is nice (though I won't re-purchase very many movies if any at all that I already own on DVD). The thought of buying into either format when it has the potential of failure is scary and I'm sure I'm not alone.

[Babbster]

I think some of you - unsurprisingly - are misunderstanding the concern being addressed by this inquiry. The worry isn't that studios choose one format over another. They obviously have the right to do so, and could choose based on any number of "good" reasons like hardware price, hardware availability, manufacturing capacity, manufacturing cost, technical differences, etc. For example, if I'm running an independent studio and want to release an HD version of a movie, I might go with Blu-ray because I want to include a lot of extra stuff and don't mind paying the higher manufacturing cost.

The thing is, there are "bad" reasons to choose one format over another as well: Bribes, kickbacks, getting manufacturing below actual cost, etc., all in exchange for going exclusive. Let's say, for example, that it costs a Blu-ray manufacturer $1.00 per disc while it costs an HD DVD manufacturer $0.80 per disc (numbers entirely fictional). Now, Sony wants Disney to be exclusive to Blu-ray but Disney is concerned about the extra cost of making Blu-ray discs and that's the only stumbling block. Sony (and the BD consortium as a whole) could offer to subsidize Disney's Blu-ray manufacturing costs to make them equal to those of HD DVD by cutting them a deal on BD licensing. That might be considered anticompetitive, depending on applicable laws.

If, on the other hand, Disney looked at both BD and HD DVD and chose BD on the merits, there'd be no worries.

Note: I'm not saying that Sony and the BD folks have accomplished what they have in an anticompetitive, monopolostic manner (I'm particularly ill-equipped to evaluate this in the strictly legal sense). Nor am I saying that Toshiba and the HD DVD peoples are bright, shining angels making our free-market economy better every day in every way. All I'm saying is that being "competitive" doesn't mean that companies have to support both formats.

[Incidence]

Unless the Blu-Ray/HD-DVD generation lasts more than 10 years (or even if it does), I can't see digital distribution being the only next generation delivery system. Sure, it will continue to grow and might be in the majority, but I predict there'll be a market for physical media a lot longer than a lot of the techno-pundits will have you think.
Pure digital distribution is a long way off, way more then 10 years, for two simple reason, broadband speeds and market penetration. The fastest consumer level broadband is great but it is still way too slow to download HD movie files with any regularity, streaming helps but no where near enough to offset the core problem. The other major issue is broadband's market penetration, a very large chunk of the movie market doesn't have broadband at all (or even a net connection) and a large percentage of the broadband users is still composed of comparatively slow sub-1 megabyte connections. I have a fiber connection and even for me trying to pull down a file the size of the bluray disc would take hours or even days depending on other factors.

Digital distribution will have a place, but with optical and holographic storage media growing in size (gigs per disc) at a faster rate then broadband speeds and market penetration the higher quality/more convenient option will be the physical media for a long time.

[Matthias]

No offense, but your premise that no competition is better than equal competition is naive.

They had the chance to have one format; they failed to do that. It is naive to assume that consumers will pick up the burdens of both R&D budgets, and also the cost of one failing.

The studios brought two formats into the market, they can support them as well.

Furthermore, if you truly believe that the studios are not able to make up for their manufacturing costs for both formats, I simply point at the studios that do, currently, support both formats. And, I will also point out the obvious flaw in your reasoning that they would suddenly have access to the entire portion of the market instead of one slice.

The current situation is that consumers are expected to make a decision now, without any knowledge of the royalty schemes and negotiations that have taken place that may have a massive impact on their purchasing once one format "wins". If you don't see that, then perhaps you should not point fingers at other people "naive" viewpoints.

You have no idea if Sony has the right to ask massive royalties from Universal if they decide to publish Bluray movies after Sony owns the entire market, do you?

Until then, I will simply stay with my naive opinions that free and honest competition protects us more than hurts us.

You treat the studios as if they are one conscious entity, and the formats as if they are the one doing the competing. "The studios" did not bring in two formats- some studios bought into the idea format, and others among their competition bought into another. Neither format was "created" by any studio, but rather Sony in Blu-Ray's case and Toshiba/NEC in HDDVD's case.

Competition works best only when the consumer has equal access to the entire strata of products, and can therefore consistently make the most enjoyable decision. Right now, consumers have to spend twice as much on players so they can access the entire market. Sure, one solution to this would be to have all the studios put out every movie in both formats. That's all well and good, except it costs them more money. And sure, they can afford to spend that money, but that doesn't mean they will want to (and we all know they won't want to if they have any say in the matter). That's why only a few studios are supporting both, and not all; the few that do are simply hedging their bets.

And as for royalties, why do you think studios sign with either Blu-Ray or HDDVD? It's because either format's creators gave them the better deal when it comes to royalties. Royalties are a fact of life, and Sony realizes that it can't afford to charge outrageous royalties or the studios will simply move on to HDDVD. In your model where every studio has to support both formats, you actually remove competition from the equation when deciding royalty costs, because the studios are forced to support Blu-Ray, no matter how much Sony wants for rights to their disc. And do you really think that customers would look at any information concerning "royalty schemes and negotiations that have taken place that may have a massive impact on their purchasing" if it were made available to them? No, of course not, just like the vast majority of consumers aren't researching to discover which format is technically superior. They buy based on marketing, price, and movie selection, not on economic or techinical repercussions.

And I know for a fact that Sony WOULD have the right to charge massive royalties. I also know that Universal has the right to push another format to the public if it decides it doesn't want to pay up to Sony. Ironically, that's similar to what Universal is doing with iTunes (which virtually owns the music downloads market) at this very second- they want more money per song than Apple's willing to charge, so they pulled exclusivity and are looking for another store that they can make exclusive deals with on their terms. In the case of movies, Sony would likely be trying to pull the same thing on other studios, and several would follow Universal's examples and find another format. Therefore, Sony can't afford to charge too much. The same thing is happening right now with DVD- the tech companies (again, not the studios) who developed the format charge the studios royalties for its use. And DVD completely ruled the market, with no competitor. Yet somehow all parties were able to squeak out an agreement that made everyone happy, and sent no one looking for an alternative that would probably have been quite easy to come up with. Amazing, isn't it?

To address your first point, about it being "naive to assume that consumers will pick up the burdens of both R&D budgets, and also the cost of one failing," I'll simply say that of course it is- that's what you're asking them to do when you ask them to tolerate two seperate video markets. Because in all reality, HDDVD and Blu-Ray wouldn't be competing products in your model- they would be two entirely seperate markets that would hurt each other for no reason. They would split shelf space and inventory, marketing time, and consumer attention. Furthermore, its inevitable that one will become more popular than the other (unless you can figure out a way to somehow coordinate a worldwide 50-50 split), with ratios that will be in constant flux until eventual equilibrium. These ratios will have to be tracked by manufacturers, studios, and retailers simply in order to keep the right amount of product in each format on the shelves at any given moment, and will also have a large say in which format eventually dominates at equilibrium, as people will see more cases bearing the dominant format's logo. In fact, you will most likely end up with one format becoming overwhelmingly dominant over the other, banishing the losing format to a single shelf in the corner. Sounds a lot like the eventual goal of the competitive model that's currently in place, right? Actually, it's even worse than that, because in the meantime you've been artificially encouraging people to support the eventual loser by providing them many of the same movies. This will leave a larger percent of the initial buyers with a losing player and several movies that they will need to replace with the winning format. At least in the current model, studios are free to exclusively back the format of their choosing, and change that decision when their initial decision begins to sink. Because people choose a format based on title availability, one format will dominate more quickly as studios freely move from one format to the other, leaving fewer obsolete players and unhappy consumers. The losing format cuts its losses relatively early on, with only R&D and a few factories' worth of funds being wasted, and instead retool to support the new format in the hopes of making up for their lost money. In your model, they would have to make the same change years on down the line after they had committed much more money to production.

So at the end, the losing consumers and manufacturers fall harder on their faces after an artificially prolonged lifespan, the winning manufacturers don't win as much because they weren't making as much as they could early on, and the studios and retailers are hurting due to split shelf space all those years and a backlog of unsold product in the losing format.

[Matthias]

I think some of you - unsurprisingly - are misunderstanding the concern being addressed by this inquiry. The worry isn't that studios choose one format over another. They obviously have the right to do so, and could choose based on any number of "good" reasons like hardware price, hardware availability, manufacturing capacity, manufacturing cost, technical differences, etc. For example, if I'm running an independent studio and want to release an HD version of a movie, I might go with Blu-ray because I want to include a lot of extra stuff and don't mind paying the higher manufacturing cost.

The thing is, there are "bad" reasons to choose one format over another as well: Bribes, kickbacks, getting manufacturing below actual cost, etc., all in exchange for going exclusive. Let's say, for example, that it costs a Blu-ray manufacturer $1.00 per disc while it costs an HD DVD manufacturer $0.80 per disc (numbers entirely fictional). Now, Sony wants Disney to be exclusive to Blu-ray but Disney is concerned about the extra cost of making Blu-ray discs and that's the only stumbling block. Sony (and the BD consortium as a whole) could offer to subsidize Disney's Blu-ray manufacturing costs to make them equal to those of HD DVD by cutting them a deal on BD licensing. That might be considered anticompetitive, depending on applicable laws.

If, on the other hand, Disney looked at both BD and HD DVD and chose BD on the merits, there'd be no worries.

Note: I'm not saying that Sony and the BD folks have accomplished what they have in an anticompetitive, monopolostic manner (I'm particularly ill-equipped to evaluate this in the strictly legal sense). Nor am I saying that Toshiba and the HD DVD peoples are bright, shining angels making our free-market economy better every day in every way. All I'm saying is that being "competitive" doesn't mean that companies have to support both formats.

Oh I know that the inquiry is about antitrust issues, but it's still fun to get into a debate over the economics of the situation anyway.

[Matthias]

Ugh. I don't know about anyone else, but I refuse to buy either products until there is a clear cut industry supported format like DVD. Since I don't see the point in purchasing a PS3 at this point, that includes that system as well but only indirectly - I wouldn't have bought for any BluRay purposes anyway.

It's nice to watch movies in HD which is something I'm able to do only when there's a decent movie worth watching on the HD channels that my cable provider doesn't support enough of. So, I the idea of a format that's like DVD but allows me to own movies in HD is nice (though I won't re-purchase very many movies if any at all that I already own on DVD). The thought of buying into either format when it has the potential of failure is scary and I'm sure I'm not alone.

Yeah, I'm waiting on a winner too- there will be one eventually, but I think the battle was immature to begin with- there simply aren't enough people who own HDTVs and are that gung ho about upgrading their libraries yet. I'll give it another year or two and see what the market looks like then.