Costs key in high-def DVD war

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Costs key in high-def DVD war

Licensing costs from 'winning' format could hold back hybrid systems.

The creation of DVD players that handle both high-definition formats will aid consumers, claims an industry analyst, but hybrid format players could be held to ransom by the winning technology.

Carl Gressum, head of Ovum's ConnectedHome advisory service, said that the HD-DVD Forum and the Blu-ray Association will have a big say in how the hybrid market develops because of product licensing. 

The 'winning' format could keep the price of a hybrid licence high to discourage users switching to such players.

"The more likely scenario is that licences are sold for single-format players, and for hybrid solutions," said Gressum.

"In such a market the consortium that is leading the market has fewer incentives to embrace the hybrid product. We can therefore expect that hybrid licensing from a 'winning' format could be higher than for a single format player only."

Gressum explained that the consortium seen to be 'losing' would have incentives to drop its price to provide reassurances to content providers that its format is viable and in high demand, and that content providers should continue their support for that disc format.

However, the analyst believes that dual-format systems will be a good way for consumers to gain a foothold in the market without worrying about which technology will be victorious.

"There will be less need to understand the different technical specifications behind HD-DVD and Blu-ray, " he said.

"In general, consumers want products and technologies that work out of the box, with no need to worry about device interoperability."

Gressum admitted that, despite the promise of backing the right technology no matter what, hybrid systems are unlikely to catch on in the short term because of price concerns.

"It is not the increased manufacturing cost that concerns me. I believe that cost will be incremental as Blu-ray and HD-DVD players share a lot of components," he said. "My main concern is around licensing structures."

Gressum maintained that, if the assumed tipping point price for next-generation DVD players is around US$200, LG's price of US$1,199 for its hybrid player shows that they have a long way to go.
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