AACS a Costly Nuisance, Replicators Tell DVD Forum

Earlier in the DVD Forum Europe conference, Toshiba consultant Mark Knox confirmed there still is no final adopter agreement on the AACS licence all Blu-ray and HD DVD makers must get. One speaker predicted a Feb. arrival, but Knox told Consumer Electronics Daily he believes the agreement might be ready in Jan. A posting last week on the AACS site indicated the long-delayed license could be near: “In anticipation of the Final AACS Adopter Agreement being available, this Interim AACS Adopter Agreement will no longer be available for download or execution after January 31, 2007, and the AACS LA will not accept submissions of this document after that date.” But that date has been pushed back at least twice since interim licensing documents became available last Feb.

The final license will mandate use of a Verance watermark that will stop a player playing any unauthorized disc, such as one bootlegged in a theater or a “screener” disc not meant for home use, the conference learned. Intel’s Kosaku Hatanaka told the conference there’s no agreement on the “Managed Copy” system needed for the networked digital home he outlined. “We can have a PC in any room, any place, with connected devices,” he said: “Managed Copy will allow a PC in the living room to connect to a TV in the bedroom, or transfer content to a portable device or provide secure streaming. Secure copying to a server will create a new business model. Electronic sell through, with content burned to disc on a PC, will create a new momentum.”

In a panel on authoring and replication, moderator Bill Foster of research firm Understandings & Solutions said some disc producers found dealing with the AACS Licensing Authority “a pain in the neck.” That comment ignited the hottest debate of the day. Foster was seconded passionately by Laurent Villaume, pres. of French replicator Quantum Optical Lab. He reminded listeners that the studios chose AACS as the mandated protection system for both Blu-ray and HD DVD. “Whereas Macrovision was voluntary for DVD, and we did not have to pay to use it, we have no choice over ACCS,” Villaume said: “It is universal. Every HD disc must use it. We have no choice and we have to pay a lot of money,” he said. The license is very expensive. We have to pay $25,000 and then we have to buy the keys for the discs. These have to be delivered by Fedex and it can take 10 days or more. We want it to be cheaper.”

AACS-LA accepts key requests by e-mail, said Masato Otsuka, senior vp and dir. of replicator Memory-Tech’s R&D center and HD DVD verification lab in Tokyo. “It used to be by Fedex and take 10 days but now it can be done by e-mail and we can get keys in 24 or 48 hours,” Otsuka said: “But it’s still too expensive. We must pay $25,000 to become a licensee, then buy an MKB group of keys for around $400. Then we have to pay $1,500 each for the content certificate keys needed to code a disc --that’s $1,500 for each title. And if we need to re-make a disc, even if we only make a small change in the graphics, we have to buy a new CC for another $1,500. It’s too much. We need to see a reduction.”

Warner has ties to AACS-LA on 2 levels, as developer and partner, and as customer. No Warner executives participated in either of the Barcelona conferences due to a previously arranged meeting in Paris, so we spoke later with Steve Nickerson, senior vp Warner Home Video. He agreed AACS-LA should be more communicative and flexible. “It’s a startup, and, like all startups, they are having growing pains from developing the technology and now selling and servicing it,” Nickerson told us: “They probably haven’t done the best job in the world of making that transition. They've gone from zero to 60 pretty quickly. We'll work with them to help fulfill on that.”

At the HDTV conference preceding the DVD Forum meeting, studio panelist made clear the extent to which Blu-ray backers expected PS3 to carry the format. As a conference sponsor, Sony staged Blu-ray demonstrations using its TVs but Samsung’s Blu-ray player, as the company did at the format’s European launch in London last month (CED Oct 23 p2). The event’s only HD DVD demonstration, by U&S, was by PC graphics company Nvidia, but Toshiba clarified its plans for HD DVD’s European launch. Olivier Van Wynendaele, asst. gen. mgr.- Toshiba Information Systems, said the company will begin selling HD DVD hardware Nov. 20-21 in the U.K., Austria, France, Germany, Spain and Switzerland. The first movie titles will be from WHV and independents, he said. The studios aren’t using MPEG-2 coding, but mainly VC1 with some titles compressed with MPEG-4 AVC/H.264.

Panasonic and Samsung Blu-ray players have been selling in Europe since mid-Oct. TDK’s Jean-Paul Eekhout, European spokesman for the Blu-ray Disc Assn., said it’s disappointing PS3 won’t reach Europe until March “but in a few years we will laugh about it.” Eekhout took the chance to note that Blu-ray’s double layer 50GB has 40% more capacity than “competing HD formats,” and that 85% of the studio market share supports Blu-ray, with 85% doing so exclusively. The BDA now sends out a weekly newsletter to 2,500 media. So far the HD DVD Promotion Group has kept a very low profile in Europe.

In a relentlessly upbeat studio panel, Blu-ray champion Sony predicted “PS3 will catapult the format.” “Consumers tell us they want choice,” said Matt Brown, exec. vp-Europe for Sony Pictures Home Entertainment. “[PS3] is just another choice for consumers. The content providers’ job is to provide choice. This is the best one yet.”

Echoing Brown was Franco de Cesare, senior vp-mktg. for 20th Century Fox: “PS3 is what will change things. Wal-Mart is interested in the new format. In Europe we are having discussions with [retailer] Carrefour and other big players. It’s important for dealers to support the format,” he said. Disney justified Blu-ray’s launching with DVD still in the market. “Whatever is out there people are buying. People are buying all the titles,” said Stephen Foulser, Disney vp- mktg. for Europe, the Middle East and Africa. “DVD value for retailers is going down. Retailers are 100% behind new formats. They add value and dealers are absolutely 100% behind getting formats established,” said Foulser. Disney exclusively backs Blu-ray. “We shouldn’t be frightened of change. People update their computer every other year. A BD player will play DVD. DVD has had a pretty good run,” he said: “It’s about time we moved on and offered something better. Customers are not all the same. There is a massive explosion in the size of the pie.”

Paramount, a backer of both formats, agreed there’s a market for prerecorded HD. “We're seeing interest from channels that are not usually leading edge -- across the board. We are seeing the same dealer support in Europe,” said Magnus Hollo, senior vp-international Sales for Paramount Home Entertainment. “We are supporting both formats. We are letting the consumer choose. Time will tell how it pans out,” he said.

“In an ideal world one format would have been better, but it’s very easy for the consumer to choose, consumers choose very clearly and fast,” said Fox’s de Cesare, whose studio also supports Blu-ray exclusively. “We will look at hardware sales. We won’t put movies in stores if there aren’t enough players to play them on,” he said.

De Cesare revealed that Fox will bundle a Blu-ray title with the PS3, but didn’t elaborate. A Fox spokesman in Cal. later told us this would be for Europe only. In the U.S., the first 500,000 PS3s will come with Sony Pictures’ Talladega Nights: The Ballad of Ricky Bobby (CED Oct 23 p5). It’s among Sony’s first 50 GB Blu-ray titles and not available separately until Dec. 12. In Europe, Samsung’s Blu-ray player comes with Sony’s S.W.A.T. and Legends of Jazz “Showcase” from LRS Media (CED Sept 29 p4). Microsoft will bundle the HD DVD add-on for its Xbox 360 with Universal’s King Kong (CED Sept 28 p1).

Brown and de Cesare stressed the value to Blu-ray of Internet connectivity. We asked how panelists would advise relatives, friends and neighbors in choosing an HD player, bearing in mind the format battle and some Blu-ray players’ lack of Ethernet ports for future connectivity.

“My neighbors aren’t early adopters -- they will wait and see. I would tell them to buy a PS3,” Brown said. “Early adopters will buy one of both -- that’s what they do,” Foulser said: “Personally I'd say buy PS3 because it does everything.” Fox’s De Cesare agreed: “I'd say buy Blu-ray because it’s got the best chance of success -- in fact, I'd also say buy PS3. PS2 was pretty clunky for DVD, with no remote control. PS3 is a much better player.” Asked about a dual standard player or disc, de Cesare predicted “the format war will be over before we get this kind of technology.”

After the event we put the same query to WHV’s Nickerson. “If they had an HDTV and wanted more to watch on it, I'd say there is no reason to wait,” he told us: “I'd tell them there are two formats and which player to buy should depend on their brand preference, and whether they want to pay more for more features from Blu-ray or get more value for the money from HD DVD. Consumers make these decisions every day, for instance between plasma, LCD and projection. I wouldn’t involve them in content issues,” Nickerson, whose studio supports both formats, said: “If both formats are out there for a while it will become more and more difficult for a studio to be only on one side. The content issue then goes away. It becomes content neutral -- much like games. Games are either exclusive to one system or are on all formats and format neutral.” -- Barry Fox

Barcelona Conference Notebook…

Warner’s 2nd wave of HD titles for Europe will arrive Dec. 4. They include Syriana, House of Wax, Space Cowboys and The Searchers on both HD DVD and Blu-ray. Exclusive HD DVD titles are Goodfellas, The Polar Express, Superman: Special Edition, Superman II: The Donner Cut and The Fugitive while Kiss Kiss Bang Bang, Swordfish, Full Metal Jacket and National Lampoon’s Christmas Vacation will appear on Blu-ray. The titles join 9 for HD DVD and 5 for Blu-ray to be released Nov. 20, the studio said.

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Sony’s UMD movies for PSP are being re-appraised, the studio told us here. Claude Borna, dir. business strategy and planning for SPHE Europe, acknowledged when pushed that a price about half the current point was needed, and was being tried in Spain. She also conceded that regional coding gave problems at tourist outlets such as airports, but would not agree it should be scrapped. “We are re-appraising UMD for movies, but it’s not dead,” Borna said. “It’s still got legs. I agree it’s too expensive. There will be a re- launch, but not a high profile re-launch. And Christmas may not be the best time,” she said. “It will more likely be at retailer level. We are looking at outlets for tourists, for instance at airports.”