Well, it looks like Paramount and DreamWorks are catching a bit of heat from the industry over yesterday’s announcement of their move to HD DVD exclusivity.

I’ll start off with an interview Blu-ray.com did today with Steven Spielberg’s spokesperson and member of the Board of Governors of the Academy of Motion Picture Arts and Sciences, Marvin Levy.

Mr. Levy did confirm for us that Mr. Spielberg is “certainly a supporter of Blu-ray” and communicated the Spielberg camp’s excitement over the upcoming release of ‘Close Encounters of the Third Kind’, exclusively on Blu-ray.

High-Def Digest also has an article on the apparent friction between Spielberg and HD DVD, and his apparent support for Blu-ray. It also has a quote from Marvin Levy:

“It was important to Steven that if any of his films were to be released [first] on high-definition, that it would be a classic,” said Levy. “Steven is big supporter of Blu-ray, and chose ‘Close Encounters’ to be the first of his films on either format.”

And:

Levy further clarified the Paramount/DreamWorks press release, saying that “…his movies, like ‘Saving Private Ryan’ and ‘War of the Worlds,’ are not included in that deal. They are not exclusive to HD DVD, nor [are they] planned for that format at this time.’”

To say that Steven Spielberg has some clout in Hollywood is a bit of an understatement. Paramount’s decision is unlikely to help reduce the tensions between Spielberg and the studio.

Moving on from Spielberg, another hot director is Michael Bay – the man behind hits such as Bad Boys, Pearl Harbor, and, oh yeah, Transformers. He’s been a huge money-maker for Paramount – but apparently that may not continue. He made a post in his personal web forum entitled “Paramount pisses me off!” in which he said:

“I want people to see my movies in the best formats possible. For them to deny people who have Blu-ray sucks! They were progressive by having two formats. No Transformers 2 for me!”

I sure hope that $50 million pay-off to Paramount and the $100 million pay-off to DreamWorks was worth it guys!

That brings me to the next bit of news – The New York Times confirmed the pay-off.

But money talks: Paramount and DreamWorks Animation together will receive about $150 million in financial incentives for their commitment to HD DVD, according to two Viacom executives with knowledge of the deal but who asked not to be identified.

The incentives will come in a combination of cash and promotional guarantees. Toshiba, for instance, will use the release of “Shrek the Third” as part of an HD DVD marketing campaign.

The deal is apparently for 18 months of exclusivity – which would mean no Blu-ray from Paramount or DreamWorks until early 2009 – except perhaps for Spielberg films, of course. Though I’m sure that if Blu-ray really stomps HD DVD over the holiday season, they’ll find a way to break the agreement to release BD in 2008.

For now I guess I’ll just have to do without their movies – that leaves only Sony, MGM, Fox, Disney, Warner, New Line, Bandai, Funimation, etc… However will I cope.

The BD / HD DVD ‘war’ has been something of a cold war for a while, with both sides probing the other and not much actual shooting going on. Mainly just trading marketing jabs and quotes in the press. Last week things started to heat up a bit with Disney kicking off their “Magical Blu-ray Tour”, then announcing titles out into late 2008, and starting promotions for Cars. And Sony announcing $100 million HD marketing effort. A little sniping across the DMZ.

Well, today all hell broke loose. Paramount opened up with the big guns. Back during the ‘game of chicken’ before launch, Paramount was in the HD DVD camp. When it became clear a format war was inevitable, Paramount went neutral – promising to release titles on both formats. Recently they’d even been considered to be favoring BD, using BD’s higher capacity to include content or features not on the HD DVD. And, as with the market in general, their BD versions outsold HD DVD roughly 2:1. So there was some talk of them going BD exclusive, but no one really expected them to make a move.

Today they surprised everyone – not just by going exclusive, but by going exclusive with HD DVD! That’s right, going forward all Paramount HD releases will be exclusive to HD DVD. And, on top of that, all DreamWorks Pictures, DreamWorks Animation, Paramount Vantage, Nickelodeon Movies, and MTV Films releases will also be exclusive to HD DVD – as Paramount handles their home video distribution. That means films such as Transformers, Blades of Glory, and Shrek the Third will be exclusively on HD DVD – even though they’d been up for pre-order on BD until now.

There is one major exception – movies directed by Steven Spielberg will NOT be exclusive to HD DVD. To date the only Spielberg film slated for high-def is Close Encounters of the Third Kind, from Sony on BD. (And that looks like it will be one hell of a release!) Indications are that he favors Blu-ray and that, if Paramount releases any of his films on high-def, they’ll either be BD or at least dual-format. I’ll include the full press release below.

So, why did they do this? Well, this is what they had to say in their press release:

The companies each said that the decision to distribute exclusively in the HD DVD format resulted from an extensive evaluation of current market offerings, which confirmed the clear benefits of HD DVD, particularly its market-ready technology and lower manufacturing costs.

Seems odd considering their own releases were selling on BD 2:1 over HD DVD. But wait, that doesn’t seem to be the full story. There is a report that Paramount and DreamWorks were effectively paid-off to make this move – $50 million to Paramount and $100 million to DreamWorks to go exclusive on HD DVD. Of course, paying a studio directly to exclusively support a format could lead to legal troubles, so these funds are for ‘promotional considerations’. It looks like the HD DVD camp knew that they were on the ropes and decided to go all out for this holiday season. Universal alone wasn’t going to carry the format, but this shift gives HD DVD a boost. It isn’t enough to save HD DVD by itself, but it gives HD DVD some more life, and more time to carve out a niche in the market while they look for a more permanent solution. It still comes down to the holiday shopping trends, only now it isn’t quite the sure thing it was for BD to knock out HD DVD. HD DVD could come through battered but still standing, leading to another round – and a longer war.

The BDA made a very circumspect comment on the move:

“The decision seems oddly timed given Blu-ray’s tremendous momentum both with consumers and with retail. Blu-ray title sales continue to outpace HD-DVD sales by nearly a 2 to 1 margin, and major retailers have expressed a strong preference for Blu-ray. Moreover, the price delta between HD DVD and Blu-ray players has been greatly reduced in the past few months, a trend that is on its way to eliminating any perceived cost advantage the HD DVD format has claimed to have. Under these circumstances, we can only imagine what could have enticed them to walk away from a format that is clearly selling significantly more software than the ailing HD-DVD format.” – Andy Parsons, Chairman, Blu-ray Disc Association US Promotions Committee

It didn’t take long for the BD camp to respond – Fox and MGM re-affirmed their exclusive support for Blu-ray, and backed that up by announcing 29 titles and also stating that they will be using BD-Java and BD-Live for features on some of the titles. 19 catalog titles and 10 new releases ‘day and date’ with the DVD. Since the news was rushed out in response to Paramount’s announcement, not all of the details are out yet – but the rest of the dates and more details on the content of each release should be out soon. Fox and MGM were early supporters of BD, but neither have released any BD titles in months. They stopped around the time AACS was cracked, and it was widely believed that they were waiting for BD+, as an added layer of anti-piracy, was available. As BD+ recently became available, and Fox licensed it immediately, this announcement is not unexpected – but it is still impressive for the number of titles coming just this year. And it sounds like there will be more titles as of yet unannounced. The releases are:

October 2nd
The Day After Tomorrow
Master and Commander

October 9th
28 Days Later
Amittyville Horror
Edward Scissorhands
The Fly
From Hell
Robocop

November 6th
A Bridge Too Far
Battle of Britain

November 13th
I, Robot

November
Die Hard
Die Hard 2: Die Harder
Die Hard With a Vengeance
Red Dawn

December 4th
Cast Away
Independence Day
Mr. and Mrs. Smith
Ronin

New ‘day and date’ releases:
Fantastic Four: Rise of the Silver Surfer
Live Free or Die Hard
Prison Break

+ 7 more not yet named

I’ll also put their full press release below.

For me this doesn’t change much. I will not be buying HD DVD this year, and I plan to wait well into next year before deciding if I’ll buy it at all. If HD DVD survives this holiday season and shows signs of being healthy and sustainable next year, I’ll consider it. Until then I won’t waste any money on it. I still expect HD DVD to die in 2008. It isn’t a slam dunk as it was before this mornings move, but even with Paramount and DreamWorks in their camp, HD DVD has a lot of challenges to beat to remain viable. Studio support is still slanted in favor of BD, as is consumer electronics and computer industry support. And BD is simply a better format, technologically. If HD DVD needs to buy friends, it isn’t viable. I still recommend that people do not buy HD DVD at all. Either buy Blu-ray or nothing. I’d prefer people buy Blu-ray, as every purchase helps tip the balance toward BD and thereby helps end this format war faster. Buy Paramount’s existing BD releases, but don’t touch their HD DVD releases. Let them have weak sales this holiday season, and realize their mistake.

I expect this kind of aggressive move to really stir the hornets nest. The Fox and MGM response is likely just the first salvo. There are literally billions of dollars in future revenue at stake. Sony alone is spending $100 million to market HD, including Blu-ray, through this holiday season. Expect the rest of the BD camp to spend similarly large amounts. I would not be surprised to see Sony make some aggressive moves with pricing on their standalone BD players, and perhaps the PS3, to eliminate Toshiba’s price advantage on players. Sony already dropped the BDP-S300 from $599 to $499 between announcing the unit and the retail launch, primarily in response to Toshiba’s pricing. You’ll probably see some very low prices on BD players, along with free movie offers, rebates, etc, this holiday season. It should be great for consumers looking to pick up a player.

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