Warner Starts HD Format War on a New Front: China

With the format war that Warner abruptly ended little more than a year past, the studio has now announced an unfathomable move: revive the corpse of HD DVD in the China Blue High Definition (CBHD) format.

• Arstechnica: HD battle on the eastern front? Warner to support CBHD
• EngadgetHD: Warner Bros. plans to support CBHD, the format war is back on - at least in China

When I ran across this bit of news, all I could think was that this is some crazy stuff to be sure.  After settling in with the victorious Blu-ray to satisfy all my HD needs, I was not expecting another studio backed format war quite so soon.

I am sure all of the early adopters who followed the format war remember the sudden ending when Warner Brothers sucker punched Toshiba with an eleventh hour announcement of Blu-ray exclusivity right before CES 2008.  Toshiba’s contingent was still on a plane heading to the show and thinking that they had pulled the Warner coup on the Blu-ray camp.  Rumors swirled that Sony outbid Toshiba to keep Fox from switching sides and got agnostic Warner to become a true believer in the gospel according to Blu.

Previously known as CH-DVD, the format is more or less an attempt by the Chinese government to shed Western influence and promote homegrown technologies.  Oh, and to avoid the licensing fees that commonly come with Western backed technology, allowing such fees to now be remitted to the Chinese government through the China High Definition DVD Industry Association (CHDA).

The CBHD format was developed by the Optical Memory National Engineering Research Center (OMNERC), based at Tsinghua University.  The software standard is based on a new codec owned by the Chinese government called Advanced Audio Video Encoding Standard in Information Technology, or more simply AVS.  Interestingly, the CHDA/OMNERC AVS Workgroup does have a global membership of companies like ATI, IBM, Intel, LG, Panasonic, NEC, Nokia, Philips, STMicroelectronics, TI, Tektronix, and Sony, many of which are also members of the Blu-ray Disc Association.

The hardware, on the other hand, is basically a slightly modified Toshiba blue laser HD DVD optical drive, containing as much as 90% Toshiba technology.  The use of HD DVD based hardware and discs gave CBHD the same production cost advantages that HD DVD enjoyed over Blu-ray.  Potential manufacturing synergies, back when HD DVD still existed, would further drive down production costs when the Chinese flooded the market with what were essentially HD DVD drives.

In the aftermath of the format war, most observers dismissed CBHD from ever having any real opportunity to gain traction without Hollywood support.  Despite HD DVD’s ultimate demise at the hands of shifting studio backing, the CHDA continued on its way and announced intent to ramp up player production by the end of the year last July.  Following through, the CBHD petitioned Hollywood studios for support, but as recently as last August, they were going nowhere fast without any studios showing interest in another format.

Apparently, the little voices in Warner’s head have convinced the studio that another format, an HD DVD based format, is somehow a good idea after all.  Accordingly, Warner has announced that in the first half of 2009 they intend to make titles available including some high profile titles such as the various Harry Potter titles, Speed Racer, The Golden Compass, and Blood Diamond.

Why, do you ask, would Warner ever consider such an idea?

CBHD discs and players are cheap to make according to OMNERIC, which claims that retooling a DVD production line to CBHD only costs $800,000 compared to the approximately $3 million that it costs to retool to Blu-ray production, and licensing fees to CHDA are lower, further reducing costs.

Wait, weren’t those cost advantages the basis of the HD DVD advantage in the first place that Warner would forsake when it dropped HD DVD?

Why, yes they were.

Apparently, on second thought, Warner may have decided that a cheap HD format might be the only way to compete with pirates, something China has in plenty.  Warner, Paramount, and Fox have been selling DVDs on the cheap in China for about 10 to 25 yuan, which amounts to about a buck and a half to three and a half bucks, putting high quality legitimate copies within the price range of pirate copies that are of dubious and variable quality.  According to Warner executives, CBHD disks will be selling for 50 to 70 yuan, or about seven to ten bucks, and players will be available for about 1,999 yuan, which is just under three hundred bucks.

So it looks like Warner needs cheap disks and players to try to keep pirates in check and Blu-ray is not there yet.  It also may have helped Warner that CBHD has added additional copy protection beyond just the AASC used by HD DVD.  Based on the past success of DRM to stop pirating, I am sure the pirate movies will still flow from China.  Perhaps, by giving the Chinese their own little format, the studio is hoping to keep the problem confined to China; at least until Chinese OEMs decide to start shipping players and disks outside of China for a little gray market profiteering.

Not to mention that Blu-ray players will ultimately be produced predominantly by Chinese manufacturers.  The BDA may be resisting licensing the Chinese, but to get costs down there will be economic pressure to allow it, and many of the players will say things like Sony, Panasonic, and Samsung on the outside.  This means that the Chinese will still have access to Blu-ray hardware as well.

But Warner is apparently still going to release movies on Blu-ray in China anyways.

So, Warner may be bringing it back because it is cheaper than Blu-ray and now the format has the extra copy protection that HD DVD originally declined to give the studios, making it just another attempt by a movie studio to hang onto control of the market in the Internet Age where anything that can be reduced to information flows cheaply through the wires.

Too bad piracy is not so rampant here in the West that those of us who buy legitimate copies could get our HD fix for a mere ten bucks.

Oh, wait, it is; at least every time studio lobbyists go to the government to ask for additional copyright enforcement and more laws and treaties to criminalize file sharing so they don’t have to spend their money on civil enforcement.  Just get the taxpayers to foot the bill.

So in the final analysis, Warner may believe it has some reasons for bringing an HD DVD based format back from the dead.  But as these reasons are ultimately futile, it leaves one wondering exactly what Warner is thinking because reviving the format after the brutal format war does not look like a particularly rational decision.