Niche Player Arrives in DVD Format War

Eric A. Taub - International Herald Tribune

No sooner has the battle for the next-generation high definition DVD format ended, with Blu-ray triumphing over HD DVD, than a new contender has emerged.

A new system that is incompatible with Blu-ray, called HD VMD, is trying to find a niche. New Medium Enterprises, the London company behind the HD VMD technology, says that the quality of its system is equal to Blu-ray's but costs less. By undercutting the competition in production, replication and hardware costs, it thinks it can find a market among consumers with less disposable income, particularly outside the United States.

An HD VMD player costs less than a Blu-ray because it uses the red-laser technologies found in today's standard-definition DVD players. The Blu-ray and HD DVD machines use a more-expensive blue laser system. VMD stands for versatile multilayer disc, the company said.

"We do not intend to take on Blu-ray," said Shirly Levich, vice president and product development manager at New Medium. . "We see VMD as a natural extension of mass market DVD product enhanced to HD capabilities. We shall not rekindle the format war."

The industry and consumers may not see it that way, given that the company is promoting its price advantages. While Blu-ray players typically cost more than $300, an HD VMD unit is priced at $199. Sales through Amazon should begin in five weeks, a company spokesman said. No talks have been held with the big-box retailers, like Wal-Mart Stores, to carry the product.

New Medium thinks that its secret weapon is Michael Jay Solomon, one of Hollywood's best-known film distributors, who has been named its chairman.

Although he has yet to approach the studios, Solomon, a former president of Warner Brothers International Television, said his long tenure in the industry would help him succeed in licensing movies for HD VMD. "It's a combination of my good experiences and continual relationships," Solomon said by telephone from Shanghai, where he was visiting with company engineers.

No matter how cheap a player is, it is useless unless major movies are released using its format. To date, New Medium has come up short. Just 17 titles are available to customers in the United States at the company's online store, including little-known movies like "The Enigma With a Stigma" and "Kandukondain Kandukondain," a Bollywood title. Its major suppliers to the U.S. market are Anthem Pictures, Eros Entertainment and SFM Entertainment, all independent distributors.

Some bigger titles, like "Apocalypto," are available in other territories.

Neither Walt Disney, Universal Studios nor Warner Brothers would comment on their interest in releasing movies on HD VMD. But even without major studio titles, Solomon thinks that the company will be successful. The low cost of producing HD VMD master discs, from which the consumer products are reproduced, and the inexpensive consumer players have already attracted the owners of movie rights in China, India and Spain, Solomon said. He says Australia, China, India, Central Europe, Russia and Scandinavia will be major markets.

"We can sell players for $90 and make a profit," he said.

In the United States, Solomon believes that owners of lesser- known titles, like religious organizations and independent filmmakers, will see HD VMD as a cost-effective way to create high- definition versions of their programming.

The Blu-ray camp remains unimpressed. New Medium's price strategy will fail, said Andy Parsons, chairman of the Blu-ray Disc Association, a trade group, because it is based on a false assumption: that Blu-ray technology will always be more expensive.

"When you mass produce blue lasers in large quantities, hardware costs will absolutely come down," Parsons said. "I'm sure we'll eventually be able to charge $90 for a Blu-ray player."

The HD VMD camp "is pitching a solution at a market niche that does not exist," said Carmi Levy, senior vice president for strategic consulting at AR Communications in Toronto. "And even if it is a niche, you will never sell enough to make it a business."

Solomon demurs. "Our idea is to create a player that people can afford. There is room for the two of us."

Unfortunately, those consumers who bought HD DVD players that are now orphaned may not agree.

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Copyright 2012 by International Herald Tribune