Next Generation Optical Disc Studio Perspectives Richard Doherty Managing Director of Blu-ray and Professional A/V Panasonic Hollywood Labs HDTV Market Penetration - US 60 55.7 100% 48.4 50 44.1 80% 40 32.6 31.8 60% 30 22.2 40% 20 17.1 13.7 8.1 20% 10 7.7 3.8 3.6 0.6 1.6 0 0% 2002 2003 2004 2005 2006 2007 2008 HDTV-monitor households HDTV-receiving households HDTV-monitor households pentration HDTV-receiving household penetration Source: Jupiter Research HDTV Model, 9/03 (US only) DVD and Related Consumer Penetration 9 8 7 6 5 4 Millions 3 2 1 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 DVD Players HDTVs VHS Source: CEA Estimates Studio Content Distribution Channels • Theatrical Release – Medium margin, medium penetration • PPV, VOD – Low margin, low penetration • Broadcast, Cable – Low margin, high penetration (but shrinking) • Internet – Low margin, low penetration (early stages) • DVD Home Video – High margin, wide penetration – DVD release forms the majority of current studio profit! High-Definition Distribution Channels • The move to high-definition brings new revenue opportunities to studios, if leveraged correctly • Current HD delivery methods include: – HD Broadcast (including Cable, Satellite, and OTA) – D-VHS (Universal and Fox) – DVD up-converted (as an alternative to true HD content) – PC (such as WMV HD, or pirated material) • DVD used to be the highest quality movie platform, but now pales in comparison to the HD currently delivered by other methods High-Definition Delivery in the Future The right way to deliver HD content to consumers: Pre-packaged High-Definition Optical Disc • Preserves existing high-margin business model – It is not in studio’s financial interest to allow a lower-margin HD delivery method to succeed • Utilizes existing effective marketing and distribution channels • Allows optical disc to re-emerge as the preeminent, unbeatable format with the highest video and audio quality of any other delivery method – High bitrates allow better picture quality (much lower compression) than can be delivered by broadcast Two leading candidates: HD-DVD and Blu-ray Disc SameSame formform factorfactor asas DVDDVD && CDCD FamiliarFamiliar toto consumersconsumers 120 mm 1.2 mm thick Blue Laser Enables Increased Density CD DVD HD-DVD Blu-ray 0.6 mm 0.6 mm 0.1 mm 1.2 mm 0.1 mm 700 MB 4.7 GB 15 GB (3 x DVD) 25 GB (5 x DVD) (Single Layer Comparison) Consumer Reach Category Blu-ray Disc HD DVD Hitachi, LGE, Mitsubishi, Panasonic, Consumer Pioneer, Philips, Electronics Toshiba Samsung, Sharp, Sony, Thomson Personal HP, Dell, NEC Computers Sony, Panasonic Studios Sony Pictures/Columbia-TriStar Pony Canyon Game Platforms Sony Playstation 3 PanasonicPanasonic Blu-rayBlu-ray DiscDisc RecorderRecorder Panasonic BD/DVD recorder “DMR-E700BD” Dual-layer 50GB Blu-ray Disc, DVD-Video, DVD-RAM, DVD-R, CD-R, CD-RW, Audio CD Format Comparison Blu-ray Disc HD-DVD (AOD) Capacity (single layer) 25GB 15GB Capacity (double layer) 50GB 30GB Industry Partners 13+ 2 Interactive Features Yes ?? Backwards Compatible Yes Yes Blue Laser Yes Yes Studios Seem Eager • Nearly all studios seem eager to move to the next generation optical disc format – New business models – Protect high-margin business – Utilize new copy protection to prevent active piracy • Theatrical, P2P, Professional • Two studios (Universal and Fox) already release consumer HD titles on D-VHS • All studios employ HD post-production infrastructure, and are ready to deploy HD content.