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Paramount Drops Blu-Ray Support, Goes HD-DVD exclusive

Dreamworks, who hasn’t released movies in either format, will also begin releasing movies on HD-DVD exclusively. Films directed by Steven Spielberg are not included in the deal and will not be exclusive to either format.

According to Microsoft rep on, Paramount’s forthcoming Blu-Ray titles that have already been announced are being cancelled. Existing Paramount Blu-Ray titles that are already being sold are being phased out; once existing inventories are exhausted, they will move to HD-DVD only.

Paramount’s titles have sold better on Blu-Ray than they have on HD-DVD. Overall, Blu-Ray has held roughly 70% of the Blu-Ray/HD-DVD disc sales. Why would Paramount move against sales and consumer demand like this?

DreamWorks Animation CEO, Jeffrey Katzenberg said:

“We believe the combination of this year’s low-priced HD DVD players and the commitment to release a significant number of hit titles in the fall makes HD DVD the best way to view movies at home.”

Sounds like bogus PR. The New York Times cites a much more likely explanation:

“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 two studios may have left themselves wiggle room, however. Paramount’s agreement to use only HD DVD is limited to only 18 months.”

$150 million is a lot of money. It’s hard to blame anyone for selling at that kind of price.

Why are companies, such as Microsoft, so invested in the Blu-Ray/HD-DVD issue? Two reasons:

1. The obvious: PS3 vs. 360

Blu-Ray is tied with the PS3. Obviously, Microsoft wants to displace Sony and the PS3 with their own gaming technologies and standards.

2. Java vs. Microsoft

Microsoft has been a long competitor with the Java development platform. Microsoft would obviously prefer to remove any footholds that rival technologies might gain, such as BD-J within Blu-Ray, and replace them with Microsoft developed standards such as the interactivity features in HD-DVD.

As noted:

Interestingly, Microsoft’s Xavier Bringué implied that it was only when the Blu-ray camp decided it was going with Java that it decided to stop being format agnostic and go with HD DVD – a tacit admission that the move was purely political, based on Microsoft’s poor relationship with Sun.

An EE Times report also makes a similar conclusion:

…the classic battle between Microsoft and CE companies always comes down to the stickiest issue: to Java or not to Java.

For Microsoft, hoping to establish control over the software platform in the living room, support for HD-DVD is critical in this regard.

“For MHP [Java-based technology], the industry already has development tools, experience and an installed base that will grow, regardless of any DVD decision,” said Stu Lipoff, partner at IP Action Partners.

The Java-averse Microsoft “is trying to displace MHP so that they have a big dog in the fight,” he said.