CES 2008

Buffalo's new drive doesn't make you pick a winner in the high-def disc format war, and it doesn't make you open up your PC's case to install it. The Buffalo MediaStation Blu-ray HD DVD (BRHC-6316U2) drive is an external USB combo drive that reads and writes Blu-ray discs and reads HD DVD discs. Unfortunately, Buffalo made no mention of eSATA or FireWire, so you're stuck with USB 2.0. It'll cost $649 when it starts shipping later this quarter.

LAS VEGAS--The winner in the Blu-ray and HD DVD war is the hard drive, according to Bill Watkins, CEO of Seagate Technology.

"People are saying Blu-ray won the war but who cares? The war is over physical distribution versus electrical distribution, and Blu-ray and HD lost that," he said during a breakfast meeting at the Consumer Electronics Show here this week. "In this, flash memory and hard drives are on the same side. The war is over and the physical guys lost."

Bill Watkins

(Credit: Seagate)

Watkins, naturally, speaks from personal interest, but he's got a point. (A former Army grunt and a decades-long Deadhead, Watkins is also one of the more entertaining CEOs in the technology industry to interview.) Consumers haven't been buying Blu-ray or HD DVD players and by the time they do, technology companies will likely be hawking sophisticated on-demand services and Internet Protocol TV. IPTV, in fact, is the dominant theme of the show. Sharp, Samsung, and Panasonic all unfurled content alliances that will let consumers look at headlines or videos from the Net on their TVs.

That's good news for Seagate, because electronic distribution means more hard drive sales. "If (data) is in the cloud I get more storage sales because you have to back up everything," he said.

"Surveillance is a big deal," he added. "You're being filmed right now (we were in a casino) and they've got to store it somewhere."

Hard drive makers are right now living through good times. In the 1990s, excess manufacturing capacity and price cuts led to stagnant revenues and losses for many companies. Since then, many players have dropped out. New markets such as digital video recorders opened up for drive makers. As a result, both Seagate and rival Western Digital are seeing double-digit growth. Seagate has already upped its revenue guidance twice for the quarter that just ended.

And the future continues to look good. Hollywood, Watkins said, will have no choice but to get into home delivery of content in a big way. People are leaving home less and less. And if the movie studios don't deliver their content to their home, people will watch whatever they can find on the Internet. At CES, XStreamHD is showing off a box that gets on-demand movies from a satellite. Actor Michael Douglas is an investor.

"They will watch lousy content if it is easy to do," he said.

Other notes from Watkins:

•  Seagate doesn't have its solid state drive out yet, but it's coming.

•  Flash memory, he added, will never completely take over the hard drive market. The demand for storage is too big. If a flash maker wanted to provide just 15 percent of the world's market for storage in 2012, it would have to invest $50 billion this year alone.

"And right now, no one has made that investment," he said.

He further argued that flash memory gets too much attention from Wall Street. "I'm making 75 cents a quarter, and I get half the valuation of SanDisk or Micron," he added.

•  Consumers still seem buoyant in Europe and Asia, so a lengthy, full-blown global recession may not occur. Admittedly, he adds, that's his own spin.

•  America has got to reform its immigration laws by letting in more immigrants. Nearly 60 percent of the companies in Silicon Valley were founded by people born outside the U.S. Last year, close to 70 percent of the students getting Ph.D.s in engineering were from other countries.

"And none of them got a green card," he said. "Because of this, U.S. companies will have to put R&D overseas."

•  Speaking of foreign lands, the government-to-university-to-private sector triumvirate (the government provides grants, universities invent stuff, and the private sector sells it) that helped build the tech industry in the U.S. no longer works as well as it once did. However, they have copied it pretty well overseas.

"They are following the made us successful and here it's broken," he said. "We used to say that what is good for GM is good for America. Now, what is good for the stockholders is not necessarily good for America. That drives me crazy."

Toshiba's Qosmio G45-AV690

With Intel's new Penryn series of laptop CPUs, PC makers, including Toshiba, are revamping their lines to offer the new parts. You'll be able to find the new chips in the Toshiba Qosmio line, the Satellite X205, and select Satellite U305 laptops.

One of the more impressive new Toshibas is the Qosmio G45-AV690, which the company calls the "world's first notebook to feature an HD DVD-R/RW optical drive." Although we admit, that might have been more impressive news before last week's Warner/Blu-ray smackdown.

Toshiba's Qosmio systems are still among our favorite multimedia desktop replacements, featuring 1080p-compatible screen resolution, an HDMI output for sending those HD DVD movies to your big-screen plasma or LCD TV, and most exciting, an external OCCUR TV tuner -- also known as CableCard. Setting up CableCard, for recording hi-def TV signals with your computer, is still a major pain, but it's a vast improvement over old-fashioned TV tuners. You also get Intel's new Penryn T9300 Core 2 Duo processor, and a decent Nvidia GeForce 8300 video card.

The tricked-out Qosmio G45-AV690 is available now for $3,199.

Sony has shored up the problems in its electronics, and will concentrate in 2008 on bringing more video content to its devices and improving its software, said CEO Sir Howard Stringer.

"We will see if we can enter the battle against the software companies. This is probably the year we need to demonstrate that," Stringer said during a meeting with reporters at the Consumer Electronics Show in Las Vegas Monday morning.

One of the first examples of this strategy will be an expansion of the PlayStation Network. The network now is mostly used by gamers. Sony wants to turn it into a platform to deliver video, too. Sony will hold a press conference in two months to discuss changes to the PlayStation 3.

The world, of course, will wait and see. Consumers and analysts for the past several years have complained about the functionality of the software in Sony devices. The company, along with nearly everyone in the electronics industry, has also been trying to bridge the gap between the PC and the TV for years. But progress seems to be occurring across the industry. Microsoft says it has put nearly a million intelligent set-top boxes into homes, and Sharp and Samsung announced new TVs that serve up headlines and weather from Web sites.

Overall, Stringer seemed to be in an upbeat mood. A year ago at the same press conference, he had recently launched into a reorganization of the company and was in the midst of a notebook battery recall. Stringer and others noted that the software divisions didn't talk with the hardware divisions, and neither had much contact with the movie unit.

Now, all of Sony's divisions work more cohesively together, he said. Sales in many key areas are also up. Blu-ray players outsold HD DVD players during the holiday season, Sony asserted. Blu-ray accounted for 70 percent of the standalone high-def video players during the holidays, according to the company.

"Three years ago, we were not profitable in electronics. Now we are seriously profitable," he said. Observers will "also probably be pleasantly surprised" with results for Sony's third fiscal quarter, which come soon. Recent economic trends could put a damper on sales "but it's too early to be pessimistic," he said.

The reorganization has also allowed Sony to start coming out with more innovative products, such as the robotic Rolly device.

"We are now getting into the rhythm of innovation," Stringer said.

Stringer and other executives touted Sony's OLED TVs. The company, however, admitted that making large OLED TVs (the version on the market measures only 11 inches in diameter) is difficult.

Other notes:

--Stringer wouldn't directly comment on whether the Blu-ray consortium paid money to Warner to put its movies exclusively on Blu-ray. Stringer said Warner saw the value of the format but dodged discussing financial terms. "I think you are going to have to take that announcement at face value," he said.

The HD DVD group paid Paramount to commit to publishing its movies on the HD DVD format for a specified period of time in 2007. It was seen as a victory by the HD DVD group, but Blu-ray backers called the deal a form of a bribe.

--Sony Ericsson is going to concentrate more heavily in gaining market share in North America. Worldwide, Sony Ericsson has seen its market share rise to around 10 percent, but the weak place is the U.S., admitted Dick Komiyama, who heads up the group.

--Sony is also looking at incorporating its Cell processor, which currently sits inside of the PlayStation3, in other products. Cell is particularly good at manipulating video streams. The company even held a contest among engineers to design new applications. However, Sony didn't put a firm date on when some of these devices might come out or what they might be.

--The PlayStation 2 will become the device that Sony will use to take on the Nintendo Wii. Titles like Guitar Hero have sold well with PlayStation 2 and consumers can expect to see more casual games and non-core gamer games coming out, said Kaz Hirai, chief executive of Sony Computer Entertainment, which oversees video consoles.

Is Samsung's new combo player still relevant?

(Credit: Samsung)

Just a month ago, home theater enthusiasts were clamoring Samsung's soon-to-be released BD-UP5000 HD DVD/Blu-ray combo player, which promised high-end features like HQV processing and the ability to decode DTS-HD Master Audio (after a future firmware update). But the BD-UP5000 was delayed, and now it's likely to face less demand considering Warner's decision to go Blu.

Watch the Samsung BD-UP5500 Duo HD Player video on CNET TV.

The same goes for Samsung's newly announced combo unit, the BD-UP5500. It appears that the main step-down from the BD-UP5000 is that it lacks HQV video processing, which will disappoint videophiles, but should make it available at a lower price point. Soundtrack support is solid, with onboard decoding for Dolby TrueHD and DTS-HD Master Audio, plus the ability output high resolution audio in bitstream format. Samsung specifically mentions full support for HDi and BD Profile 1.1, so it should have no problem with special "picture-in-picture commentary" features available on some HD DVD and (future) Blu-ray discs. Rounding out the feature set is an Ethernet connection for firmware upgrades and some HD DVD interactive features.

Just a few weeks ago, a step-down combo player might have been attractive to those looking to into high-def discs without worrying about the format war. But with HD DVD canceling its press conference at CES presumably due to Warner's announcement, the general feeling in the industry is that HD DVD days are numbered--which makes a combo player seem like a waste of money. The BD-UP5500 will be available in May 2008--and we'll certainly know more about the format by then--but don't be surprised if it already feels like an anachronism by then.

LAS VEGAS--"Disappointed" probably isn't a strong enough word to describe when a major focus of your business plan and the highlight of your Consumer Electronics Show pitch is derailed two days before by one of your former partners.

As the most prominent backer of the HD DVD high-definition video format, Toshiba's press conference at CES this morning drew a lot of interest among the tech press, mostly out of morbid curiosity. What could it say after Warner Bros. announced Friday it would exclusively back rival Blu-ray, after the studio had played it neutral up until now?

Toshiba didn't waste any time addressing the 800-pound gorilla in the room. President and chief executive of Toshiba America's consumer division, Akio Ozaka, took the stage to lament the studio's announcement despite strong sales of HD DVD players in the last quarter of 2007.

"Unit sales of HD DVD in Q4 were the strongest yet. Therefore we were surprised by Warner Bros. announcement that it plans to abandon HD DVD later this year," said Ozaka. "We were particularly disappointed this decision was made in spite of the momentum HD DVD has gained in this market."

Toshiba vice president of marketing for digital audio and video products Jodi Salley was even more somber.

"As you can imagine, this is a tough day for me," she said as she took the stage. "I fully expected to come here this morning to share with you the successes of the last year of HD DVD, (but) the events of the last few days have shifted the focus of my comments."

Instead of announcing a fourth-generation HD DVD player as expected prior to Warner Bros. announcement on Friday, Toshiba took the opportunity to simply reaffirm its faith in the format, and point out features like Web connectivity and the presence of Ethernet ports on every player, which Blu-ray does not have.

"It is difficult to read pundits declaring HD DVD dead...but we've been declared dead before," Sally said.

Despite that sense of optimism, she didn't offer any details on what Toshiba's next move will be.

War is hell, particularly when you want to schedule cocktail parties.

The HD DVD Promotional Group had scheduled a cocktail party and a press conference this Sunday evening in Las Vegas to tout the "progress" it has made in high definition video and the ongoing format war with the Blu-ray consortium.

On Friday, however, the group sent out a note terminating the event because Warner Home Video earlier in the day said it would switch exclusively to the Blu-ray format.

"Based on the timing of the Warner Home Video announcement today, we have decided to postpone our CES 2008 press conference. We apologize for any inconvenience this may cause," the cancellation read. "We are currently discussing the potential impact of this announcement with the other HD DVD partner companies and evaluating next steps. We believe the consumer continues to benefit from HD DVD's commitment to quality and affordability--a bar that is critical for the mainstream success of any format."

The original invite was a lot more upbeat:

"Please join us as we present exciting news and a sneak peak at what's to come for 2008," it read, "featuring executives from the HD DVD Promotional Group: Intel, Microsoft, Paramount Home Entertainment, Toshiba, Universal Studios Home Entertainment, and Warner Home Video."

Warner leaving the group probably wasn't the exciting sneak peek they had in mind. But you have to wonder, why cancel? Was Warner bringing the food? Springing for the drinks? If they had any guts, the remaining members could have bought a keg and held a party in the parking lot.

We've all faced rejection, and the way to deal with it is to get shamelessly drunk and loud in public, after all. Where did these people learn their manners? The upside is that you will probably see a lot of derelicts walking around the strip with "HD DVD 2008" shoulder bags that they found in a dumpster.

The cancellation also marks two bad CESes in a row for Toshiba. Last year, the company abruptly canceled plans to show off its SED TVs at the show. Subsequently, it tossed responsibility for SED to Canon.

Ironically, HD DVD players have outsold standalone Blu-ray players. At Ceatec last October, Blu-ray execs said that their group would become more aggressive in late 2007 in promoting the format and try to gain an advantage by the first quarter of 2008.

Warner to HD DVD: That's all, folks.

(Credit: www.referenceforbusiness.com)

The big buzz today around CNET offices in New York is the news that Warner Bros. Entertainment has decided to stop making HD DVD discs and will become a Blu-ray-only studio at the end of May. Needless to say, this is a major blow to the HD DVD camp, which earlier this year struck a deal with Paramount to go HD DVD exclusive. You could say this is a tit-for-tat move by Sony and the Blu-ray camp, but it's actually more of a clubbing because Warner has a much bigger library of movies than Paramount.

While rumors of Warner potentially dumping HD DVD have been circulating for the past few months, the timing of the announcement right before the start of the Consumer Electronics Show seems designed to inflict maximum damage to Toshiba's planned HD DVD push at the show. With lower prices on its standalone players and the Paramount deal, Toshiba and HD DVD backers such as Microsoft appeared to be gaining some momentum in the format war. But now the company is faced with a PR nightmare. (An HD DVD event is scheduled for Sunday in Las Vegas; it should be interesting). No one knows at this point what it took for Warner to say sayonara to HD DVD, but you can bet it involved a truckload of something.

Does this spell the end for HD DVD? If I had to give a yes or no answer, I'd have to say yeah, it's probably curtains. The fact is, with the lack of studio support, it's very hard to recommend to readers to buy an HD DVD player, even if it is half the price of a Blu-ray machine. All that said, things have looked bleak for Toshiba and HD DVD before and they've managed to scrap their way back into contention, so you never know. Feel free to weigh in after you read the full press release from Warner, which I've posted below via The Digital Bits:

WARNER BROS. ENTERTAINMENT TO RELEASE ITS HIGH-DEFINITION DVD TITLES EXCLUSIVELY IN THE BLU-RAY DISC FORMAT BEGINNING LATER THIS YEAR

Decision made in response to strong consumer preference for format

(January 4, 2008 - Burbank, CA) - In response to consumer demand, Warner Bros. Entertainment will release its high-definition DVD titles exclusively in the Blu-ray disc format beginning later this year, it was announced today by Barry Meyer, Chairman & CEO, Warner Bros. and Kevin Tsujihara, President, Warner Bros. Home Entertainment Group.

"Warner Bros.' move to exclusively release in the Blu-ray disc format is a strategic decision focused on the long term and the most direct way to give consumers what they want," said Meyer. "The window of opportunity for high-definition DVD could be missed if format confusion continues to linger. We believe that exclusively distributing in Blu-ray will further the potential for mass market success and ultimately benefit retailers, producers, and most importantly, consumers."

Warner Home Video will continue to release its titles in standard DVD format and Blu-ray. After a short window following their standard DVD and Blu-ray releases, all new titles will continue to be released in HD DVD until the end of May 2008.

"Warner Bros. has produced in both high-definition formats in an effort to provide consumer choice, foster mainstream adoption and drive down hardware prices," said Jeff Bewkes, President and Chief Executive Officer, Time Warner Inc., the parent company of Warner Bros. Entertainment. "Today's decision by Warner Bros. to distribute in a single format comes at the right time and is the best decision both for consumers and Time Warner."

"A two-format landscape has led to consumer confusion and indifference toward high definition, which has kept the technology from reaching mass adoption and becoming the important revenue stream that it can be for the industry," said Tsujihara. "Consumers have clearly chosen Blu-ray, and we believe that recognizing this preference is the right step in making this great home entertainment experience accessible to the widest possible audience. Warner Bros. has worked very closely with the Toshiba Corporation in promoting high definition media and we have enormous respect for their efforts. We look forward to working with them on other projects in the future."

What do you think? Is there any hope for HD DVD? Should Toshiba and Microsoft continue fighting or make a deal?