Warner's $400 mil payoff rumor rides again

Some rumors never die, and this one we heard even before the official Warner press release was issued. Now that the format war is officially over, newspapers and magazines everywhere are looking back on the events preceding Toshiba's announcement. While no one really knows why each studio made its decision, The Globe and Mail cites "analysts" who think the payoff was a factor. Well, we asked Warner point blank about the payoff rumor and Kevin Tsujihara, president, Warner Bros. Home Entertainment Group said that it "was not a bidding war" and that it really came down to Q4 sales. This answer leaves us with the impression that while some money probably changed hands, the real reason why Warner went Blu was because during all of 2007 the Blu-ray versions of Warner's titles always outsold the HD DVD. The bottom line is that regardless of any single payoff, since Warner owns most of the home media market, it had the most to lose if it waited too long to chose a format. [Disclosure: Engadget's parent company's parent company is Time Warner]

[Sam_Smith @ Feb 23rd 2008 1:14PM]

quote: [Disclosure: Engadget is part of the Time Warner family]

I think you meant "Disclaimer: Engadget can't speak i'll of its father"

[pismodude @ Feb 23rd 2008 1:46PM]

Yep, sad- but true...

[ballerv8 @ Feb 23rd 2008 1:44PM]

lol, thats what i was thinking.

[JAmerican @ Feb 23rd 2008 1:57PM]

http://www.youtube.com/watch?v=LGEdDd5zsHo

Says it all!

[Brian Lam @ Feb 23rd 2008 2:23PM]

That's a bullshit accusation. Engadget has no problem saying what it needs to about its parent company. Get a grip, commentards.

[ScareyJ @ Feb 23rd 2008 2:26PM]

"This answer leaves us with the impression that while some money probably changed hands, the real reason why Warner went Blu"

And what about the reason makes us think it was just "some money" and not a number close to the $400 million? What kind of moron would admit that it was a bidding war in exchange for selling out the consumers ability to choose the winner?

Forget HD and BR, here's to downloads and upscaling for awhile.

[Ryan Block @ Feb 23rd 2008 4:40PM]

Sam, I hope you understand the severity of an accusation of impropriety.

I also think if you're going to do that, you should at least be man enough to back it up with some kind of evidence. But you can't, because the piece was written fairly.

Speaking of which, go back and listen to the Engadget podcast, or check out these links, and then really think about how Engadget regards TWX-owned companies:
http://www.engadget.com/2007/05/21/installing-a-vista-cablecard-media-center-pc-part-1-fiasco/

http://www.engadgethd.com/2007/12/12/wealthtv-conspiracy-theorists-issue-anti-engadget-press-release/

[Sam Winter @ Feb 23rd 2008 4:59PM]

"Forget HD and BR, here's to downloads and upscaling for awhile."

HAHAHA. Good luck with your pathetic downloaded "HD"... and "Upscaling" is a myth. I'll enjoy my full HD on Blu-ray

[gandiwashere @ Feb 23rd 2008 6:05PM]

hey ryan block, shake that booty, booty, yeah shake, shake, shake it like a poloroid picture.

[Carbonize @ Feb 24th 2008 2:57AM]

@Sam_Smith - Think you mean ill not I'll

@Sam Winter - I'll stick to my HD downloads thanks. not our fault your internet connection is slower than your mental processes.

[SimonHL @ Feb 24th 2008 6:49AM]

@Carbonize:

"not our fault your internet connection is slower than your mental processes."

So... What you are saying is, that your internet connection is actually faster than your mental processes? Do you have some kind of upper limit in Mbits?

[Carbonize @ Feb 24th 2008 9:07AM]

I'm saying he's a retard on dial up.

Damn! Insults and jokes just don't work when you have to explain them to the minions.

[adam @ Feb 23rd 2008 1:30PM]

just checking to see what comments i've made for contests.

[EatingPie @ Feb 23rd 2008 1:33PM]

I'm not sure why this matters.

Toshiba payed off Paramount to go HD-DVD. The production of Star Trek TOS Season 2 HD-DVD stopped the instant Toshiba cut off money... BEFORE Toshiba's official announcement to drop HD-DVD. While there's some doubt about money exchanged on Warner's part (though it strikes me as likely), there is NO DOUBT AT ALL that Toshiba payed off Paramount.

But one thing cannot be denied: Blu-Ray sold better than HD-DVD for all of 2007, and the gap was continuing to widen in Blu-Ray's favor.

The format war ended with the better format winning. I'm wondering when the sour grapes will finally fall of the branches and we can go back to enjoying quality HDTV.

-Pie

[Carbonize @ Feb 24th 2008 3:01AM]

The better container might of won but the better format did not. People need to stop confusing the two. Whilst Blu Ray was a bigger container the HD-DVD format was the better one for movie releases due to how complete their set up was from the start unlike Blu Ray who's film disc format has still not caught up and will not even begin to do so until Profile 2 comes out. Of course the profile 2 stuff will not work on profile 1 or even 1.1 players.

I am of course referring to PiP and interactivity.

[EatingPie @ Feb 25th 2008 1:46PM]

No, I meant the better FORMAT won.

The profile thing is certainly an issue, but being able to get the best picture and sound quality out of a movie is far, far, far more important.

Weigh the profile issue against burnability, higher capacity, higher quality for the movie experience... and it really pales. The better format wom.

And just to be clear, every player, be it Profile 1.0, 1.1 or 2.0 can play ANY movie regardless of what profile the disc uses (I know you said that, but just being clear!). And there are only a few special features that won't work with you don't have Profile 2.0, since that primarily adds network capability.

-Pie

[Thermos14 @ Feb 23rd 2008 1:36PM]

Awww, it's nice to be part of a family.

[rawhead @ Feb 23rd 2008 1:43PM]

While I don't doubt that Blu-ray (both hardware and software) was selling better, I don't understand the logic behind the claim that Warner would have somehow *lost* money if they continued to support HD-DVD. Even if HD-DVD market share settled at around a low 30%, that's 5 times more than the market share of Macs. Does Adobe lose money by supporting both the Windows and Macintosh platforms?

[chilicoke @ Feb 23rd 2008 6:30PM]

The format war caused format confusion, many people (the majority) were sitting out and waiting for a clear winner; the longer the format war drags, the longer it takes for HDM adaption.

Macs vs Windows on the other hand, do not cause customer confusion on such scale, they are both established operating systems and user of both systems have no problem purchasing softwares for their computers.

[Sam Winter @ Feb 23rd 2008 5:19PM]

@rawhead

I CAN'T BELIEVE you got rated up. That shows how many morons peruse these comments...
Your analogy is completely off base and just plain incorrect. This issue is so simple that I find it hard to believe that you are even serious.

Warner's continued support of HD-DVD would allow the format war to continue, and the format war is exactly what was so costly to Warner's sales. As long as both formats existed, the vast majority of consumers would not buy into high definition media because of the risk of ending up with another Betamax, and thus the poor sales of high-definition discs. Not only have consumers always expected to have one format for home movies, but the costs associated with having to support opposing formats insured that the marketplace would not bear that outcome.

In comparison, the computer industry has always had many competing operating systems, and for home users, the choice has usually been between Windows and Mac. For basic users, both systems contained similar functionality, but They had different ecosystems and served different markets.

[rawhead @ Feb 23rd 2008 7:13PM]

Jesus, settle down. I know the official "It creates confusion" story, but spare me.

"the vast majority of consumers would not buy into high definition media because of the risk of ending up with another Betamax, and thus the poor sales of high-definition discs."


The vast majority of consumers didn't even know there was a "format war" going on.


We've been shown that the *main* reason why next-gen DVDs haven't taken off is because they (both HD-DVD and Blu-ray) have, so far, been unable to differentiate themselves from your standard DVDs. They haven't been able to persuade the average Joe and Jane to go out and spend tons of money so that they can re-purchase their movie collection, and at a higher cost to boot.

And *that* situation hasn't changed a bit since Toshiba withdrew.


You question how serious I am. But I ask you this. Do you really think, now that this format war is "over," all the millions and billions of people who were on the fence will suddenly start buying $300 Blu-ray players in droves?

I'm not a psychic so I can't predict the future. Something like that may happen. But somehow, I doubt it. Blu-ray has a very steep hill to climb up ahead.


"but They had different ecosystems and served different markets"


Precisely the reason why it should be less of a hassle for Warner (and other studios) to continue supporting HD-DVDs. Creating a Mac version of a Windows software (or vice versa) is much more time consuming and costly than creating an HD-DVD version of a Blu-ray disc.


And, if things continued down the same path that they seemed to be at the end of 2007, then it's likely that within a year or two, all the major players (except maybe Sony and Toshibas) would have been hybrid HD-DVD/Blu-ray, which would have made all this "confusion" issue moot. You know who "won" the last DVD "format war"? You know, the one between DVD-R, DVD+R, and DVD-RAM? Yeah, I don't either.

[Poom @ Feb 24th 2008 2:13AM]

I agree with Sam Winter and do not understand why you are highly ranked.

Companies don't just look at the short run like you do. That's just stupid. By prolonging the format war, Warner will lose as consumers are reluctant to buy any HD discs. Stopping the format war would make HD adoption faster and increase its sales on the long run.

Besides, there are also operating and production costs in continuing HD-DVD support. It's not like HD-DVD discs are created with no cost.

[Poom @ Feb 24th 2008 2:34AM]

Oh, and rawhead... I can't believe the last part of your reply... You want HD-DVD and Bluray to co-exist like DVD-R and DVD+R???? Are you crazy???

NO. HELL NO.

[Carbonize @ Feb 24th 2008 3:05AM]

@chilicoke - No people are not waiting for a single format to have won. Blu Ray sales are not about to go through the roof now HD-DVD is dead. The majority of people are driven by two things in a situation like this - cost and easy to get hold of. Look how many years it took for DVD to reach saturation point and that didn't even have any competition.

[rawhead @ Feb 24th 2008 4:21AM]

@Poom

"You want HD-DVD and Bluray to co-exist like DVD-R and DVD+R???? Are you crazy???"

It's not a "want" issue. I'm not expressing my desires here, I'm just raising what I believe to be a valid question.

However, I find your retort... curious. When you go out and buy DVD media these days, do you actually read the label to make sure you're not buying DVD-R instead of DVD+R? When you buy a DVD Recorder, do you read the spec sheets to make sure it can handle all your burned DVD collection?

I'll answer for you; you don't, because you don't need to. Every DVD burner can handle every DVD format there is, and the only difference it may make is how fast you can burn a particular medium (maybe something like 16x for +R, 8x for -R). Is there any confusion there? The answer is no, and if there is confusion for you, then the problem lies not with the DVD burners or the various media.

[Miguelitosd @ Feb 24th 2008 1:47PM]

"The vast majority of consumers didn't even know there was a "format war" going on."

Some do, and adoption of most new tech tends to go in waves.. there're always the early adopters who will buy just about anything new (I fit into that group, usually). Then the tech grows some with more widespread purchasing, not the "masses" yet, but it spreads beyond the early adopters which helps it get out into more homes to get more exposure to those masses.. this seems to usually be at the point where the price comes down and the tech shows up more in places like Costco.

My dad is a good example of the 2nd group. He's usually not an early adopter, but buys some tech (especially TV tech) before it really expands to the masses more. He bought a VCR way back in the day before it really started growing. Did the same with CD, HDTV, etc. He bought when the tech came down in price enough to appeal to him, and usually also him seeing it at Costco helps. In the case of HD-DVD vs Blu-ray.. he told me he wasn't buying either because he saw the two techs and thought of Beta/VHS and didn't want to get burned. Yes the comparison isn't really the same, but that's what he (and a lot of people out there) think, and he told me this about the HDM discs the very first time I talked to him about them.. so he knew about the format "war" and is not a techie person at all.

As little as he keeps up with tech (he basically looks at stuff at Costco when there or from TV commercials) shows that there was this impression of a format war out there even with non tech people.

[guerilla779 @ Feb 23rd 2008 1:47PM]

and the 71st post about HD-DVDs death......................why engadget why ?




what happened to lil stevie and his iINNOVATION posts?

[Carbonize @ Feb 24th 2008 3:06AM]

I don't know why but it certainly has nothing to do with being owned by a company that is backing Blu Ray.

[John @ Feb 23rd 2008 1:53PM]

Christ, get over the damn format war already. I'm tempted to stop reading here since everytime I click "Engadget" on my bookmark bar it pops up some trivial crap about HD-DVD/Blu-Ray. And $400 million dollars for *one* studio to become exclusive? What a bunch of crap. I doubt HDM is even a $400 million dollar industry at this point.

[rockstar @ Feb 23rd 2008 1:54PM]

Well, so what? The most important thing is the format war is over.

[College Guy @ Feb 23rd 2008 2:13PM]

I love my PS3.

[Thinker @ Feb 23rd 2008 2:37PM]

Here is what, in all likely hood happened:
Toshiba: "Now Warner, you know we just paid off ___ a cool $150 million. We are willing to offer you $400 million to go exclusive with us.
Warner: "Give us some time to think about your offer"
Warner: "Sony, Toshiba just offered us $400 million to go exclusive"
Sony: "Give us some time to think about the situation"
Sony: "Warner, we just lowered the manufacturing cost of the PS3 in half, from $800 to $400. Since we are an $80 Billion company, what is $400 million to us."
Warner: "We will start making arrangements for an announcement..."
Sony: "Thanks"

[Thinker @ Feb 23rd 2008 3:26PM]

The overall DVD Movie market is approximately $30 Billion. I understand Warner's market share is 25% which will make it $7.5 Billion. Whatever the numbers are, I don't see $400 million influencing Warners decision. One factor I am sure was the higher sales of Blu-ray versus HD-DVD, and another was the fact that Sony sold 5 Million PS3s (with its built-in 1080p Blu-ray player) the last 3 months of the year. As we all know, sales increased four fold immediately after Sony lowered the price of the PS3 to $399. Yes, we know Toshiba sold a few hundred thousand HD-DVDs at $99. But how can we call that success. If I was in the market for a regular DVD player that does 1080i upconversion and you offered me the 1080i Toshiba HD-DVD player for the same price, the choice is easy. The question is how many HD-DVD movies do you think I am likely to buy if all I am willing to spend on a player is $99? The millions who paid $399 on the PS3 are most likely the same people who paid over $1500 for a 1080p HDTV. Those people are more likely to purchase Blu-ray movies. I believe Warner made the right decision.

[Bengus @ Feb 23rd 2008 4:06PM]

@Thinker
Yeah I think that's very much what happened. If Sony did give Warner Bros an incentive, I believe it was only because its hand was forced. If Toshiba was going to buy off Warner Bros it would have kept the format war going and perhaps caused both formats to fail in the long run.

[Calvin @ Feb 23rd 2008 2:39PM]

It doesn't die because sites like you continue to perpetuate it. Give it a rest already.

[GB @ Feb 23rd 2008 2:41PM]

Why is it so hard to think that Warner accepted $400 mil to switch?

Its a common business practice, and the Warner head made a vague comment as to a payment - it "was not a bidding war" is not equal to "we didn't take a payoff".

[Tony @ Feb 23rd 2008 3:13PM]

Maybe if it was true Warner should take that money and use it to help HDVD owners trade in there disks for blu-ray :) fat chance :)

[Steve @ Feb 23rd 2008 3:43PM]

Of course there was a massive payoff. Depite all of the other involved companies, it was as plain as day how much Sony had riding on BR's success. They couldn't afford another Betamax and everyone knew it because they had invested so much in it.
Had BR failed, it would have taken the PS3 along with it and in turn, it may have buried Sony. A company with a LONG and sad history of trying to push on proprietary format after another only to have it fail miserably. UMD anyone? Satements like "I love my PS3" would be more like "OFMG I own a $700 boat anchor!!" if this had gone the other way. I don't think it's so much a feeling of victory as it is a feeling of relief in the Sony camp.

[Nuclear Rainbow @ Feb 23rd 2008 3:49PM]

luv Blu.

[Snowdog @ Feb 23rd 2008 10:12PM]

Yep Sony paid off warner,and Lady Diana Spencer was killed by MI-5 hit squad and the CIA blew up the WTC. ARGH! The net has become cesspool of unthinking conspiracy lemmings.

Just because you don't like a company/government etc, it doesn't mean anything that paints them in a bad light is true. Try evidence based thinking for a change, instead of I don't like them so anything some other lemming makes up must be true.

The president of Warner home media flatly denied there was a payoff. He is a ranking company officer, he can be charged for making false monetary statements about a publicly traded company that he is an officer in.
http://bluray.highdefdigest.com/news/show/Warner/Warner:_No_Payoff_for_Move_to_Blu-ray/1327

Warner didn't need to be paid because they wanted to end the war. (for reasons obvious to non-lemmings) Blu-ray was clearly the winning side. Siding with the losers would have prolonged the war. Clearly siding with the winner ended it sooner.

That is all there is to it. This was leaking out in December and you can find many references to the number one factor being that Blu ray was outselling HD-DVD dramatically, even outselling HD-DVD in standalone players in December. It was over before Warner announced.

[andy.zini @ Feb 23rd 2008 10:56PM]

We have a close family friend who works for Warner Brothers, and back in 2006, after being prompted by my father about formats, he told us that they were probably going to go with Blu-Ray, saying that it would give them an advantage in royalties.

[Carbonize @ Feb 24th 2008 3:10AM]

See now andy.zini has probably just hit the nail on the head. Whilst people here are saying $400 million is nothing given how much Warner makes from DVD sales how much would they make from a $400 million pay off PLUS twice the royalties per sale they were going to get from HD-DVD sales? And if they have been offered higher royalties then they could easily say they haven't been paid off as it's an ongoing pay off as opposed to a lump sum pay off.

[Jake @ Feb 24th 2008 8:05AM]

LOL, the HD DVD fanboys claimed it was $500million last time.

What changed? This is surely BS, if the figure keeps changing.

HD DVD fanboys, will it be $300million next week?

[Mban19 @ Feb 24th 2008 1:10PM]

This really bring back something from the past. I remember a certain President (Gee a Wonder who that was) who said I never had sex with her. He lie, do you really think they would say something that would get them in some kind of trouble.

[ShadowGod @ Feb 24th 2008 4:46PM]

You Blu fanboys are delusional if you think there wasn't a payoff. You have no fucking clue how business works today if you think there wasn't money involved. Warner supported HD-DVD from the beginning why the hell do you think they switched? Just on a whim? Because Blu-Ray is just sooo much better? LOL Give me a break.

Blu-Ray has won now end it. Don't try to rewrite history to claim that Blu-Ray won this format war on it's on merits. Blu-Ray discs and players cost more money than HD-DVD discs and players. They always have. How does choosing the more expensive format good for consumers? It isn't. Blu-Ray discs cost more to manufacture, how is that a plus?

[Snowdog @ Feb 24th 2008 5:56PM]

Not understanding how business works, is failing to see why the format war hurt everyone and why it made perfect sense for Warner to make the move to end it.

Delusional is claiming that your gut feeling trumps evidence on things like payouts happening. A company officer (Warner President of Home Entertainment) can't sneeze wrong in public without worrying about lawsuits and prosecution, let alone make clear flat denial about half Billion dollar cash payouts unless it is true. If he lied he could looking at fines, prosecution.

You don't need to pay someone to do something in their own best interest (Warner and ending the format war). He didn't have to lie because they didn't need to be paid to act in the best interest of Warner.