Wonderful Microsoft Rant and the Fall of HD-DVD

WeasteDevil

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I found this somewhere else on the web (link given at the end) and would normally only post select quotes from such a place, but it's so good that I'm going to repost the lot. Some of the exact numbers used are probably questionable, as are some of his specific points, but in general he factually hits the nail on the head and lays it down perfectly why some of us seriously dislike this company and would take great glee in seeing it come a cropper.

I'll post in chunks with each point clearly labeled such that it's not too difficult to digest all in one go.
 
1. Lessons from the Death of HD-DVD

Lessons from the Death of HD-DVD

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2. Daniel Eran Dilger

Daniel Eran Dilger

Over the last few months, HD-DVD appeared to rapidly fall from its apparent position as promising new disc format–touted by supporters as being technically superior, significantly cheaper, and less restrictive–down to a harsh new reality of scheduled death. However, the fate of HD-DVD wasn’t nearly as unpredictable as some seemed to think. Here’s why HD-DVD’s end should not have been a surprise, what lessons can be learned from its death, and what its demise means for Microsoft.
 
3. A New Format War.

A New Format War.

Six months ago, I presented the format war between HD-DVD and Blu-Ray as a skirmish on the edge of the console video game business. Through the end of 2007, both HD formats had failed to sell more than a few hundred thousand standalone units, leaving HD discs a collective failure on the order of Microsoft’s Zune music player.

While standalone HD disc players languished in the market throughout 2007, Sony advertised Blu-Ray in its PlayStation 3 game console as Microsoft pushed HD-DVD on PCs with support built into Windows Vista and sold a low priced external HD-DVD drive option for the Xbox 360. This appeared to give Microsoft and HD-DVD a strong edge in the market, as it had the monopoly power of Windows behind it.

Both companies wanted to control media playback in the emerging market for HD video, just as they battled to control audio playback a half decade prior, when Microsoft had pushed its PlaysForSure Windows Media Audio players against Sony’s ATRAC Walkman hardware; both efforts lost out to Apple’s iPod. In the new HD video market, Microsoft again wanted to push its Windows Media codecs while Sony wanted to establish its blue-violet laser technology.

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4. The Format War Origins.

The Format War Origins.

Since Sony had no rival video codec software to push, and Microsoft had no real hardware interests to defend, why were they battling for the next generation of video discs rather than working together on a joint standard? Initially, Microsoft did work with Sony. However, the rest of the industry working with Sony on Blu-Ray rejected portions of Microsoft’s technology, sending the company into a furious rivalry against Blu-Ray.

A follow up article on the origins of the format war presented Microsoft’s efforts to push its Windows Media and WinCE as essential, proprietary aspects of both the new HD disc formats. While Microsoft successfully wrote Windows Media (aka VC-1) into the specification of both Toshiba’s AOD and Sony’s Blu-Ray, the Blu-Ray consortium members later selected Java-based technology from Sun as its interactive menu layer rather than Microsoft’s WinCE/HDi.
 
5. The Early Lead of HD-DVD.

The Early Lead of HD-DVD.

Years earlier in 2003, the DVD Forum had selected Toshiba’s AOD format as the successor to DVD because the company promised it would be finished sooner than Sony’s Blu-Ray; the Forum subsequently renamed Toshiba’s format HD-DVD to associate it with DVD, while Sony continued work on Blu-Ray.

At the time, Sony’s efforts looked significantly behind. Blue-violet lasers were already expensive, but Blu-Ray also required retooled manufacturing lines. HD-DVD promised to reach the market faster and cheaper due to its similarities to DVD player assembly as well as support from Microsoft on the PC desktop and in its first-to-market Xbox 360 game console. Microsoft had also sold Disney CEO Michael Eisner on HDi and Windows Media DRM.

It appeared that Microsoft had time, technology, and studio deals all on its side, while Sony’s Blu-Ray was falling behind, more complicated, and lacked support from studios. Those same problems had spelled death for Sony’s UMD, a proprietary mini-DVD disc designed for use on the PlayStation Portable. Blu-Ray was also frequently compared to Betamax, which had fallen to JVC’s VHS format in the 80s after a prolonged format war that confused and irritated consumers.

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6. A Reversal of Fortune.

A Reversal of Fortune.

A series of industry shifts resulted in a weakening of the initially strong presence of HD-DVD long before consumers could even select between them. In 2004, Sony bought MGM. The next year, Eisner left Disney and the company’s ties to Microsoft began to wane. That shifted major studio support towards Blu-Ray.

By the end of 2004, it was also obvious that Toshiba wasn’t going to deliver HD-DVD a year ahead of Blu-Ray as promised. The rest of the industry also began to view Blu-Ray as a more credible format despite the DVD Forum’s official blessing for HD-DVD. Sony had developed hardware partnerships with every major hardware manufacturer, while Toshiba was the only significant manufacturer of HD-DVD players.

Through 2005, Toshiba continued to struggle with HD-DVD. The components required to to render HD video and display Microsoft’s HDi were similar to a low-end PC, and cost roughly $675 just for the bill of materials. That left Toshiba with a major hardware loss when trying to sell the players at a $500 consumer price target. The company was ready to drop HD-DVD that year and join the Blu-Ray consortium, but Microsoft pushed it to continue.

The first HD-DVD players weren’t ready until early 2006. Blu-Ray players debuted just weeks later, priced closer to $1000. By the end of that year, Microsoft began selling an external $200 HD-DVD player for the Xbox 360, just as Sony introduced its PlayStation 3 with an integrated Blu-Ray player.
 
7. HD War Games.

HD War Games.

By the end of 2006, Microsoft had shipped ten million Xbox 360s to stores, while Sony had only sold a few hundred thousand units of the new PS3. However, Microsoft only sold a limited number of its optional HD-DVD drives to Xbox users, while every PS3 shipped with Blu-Ray capabilities.

Compared to standalone HD disc players, Sony’s PS3 not only offered the cheapest Blu-Ray system, but also did a variety of other things, including media downloads and of course games. Throughout 2007, Sony shipped nearly as many PS3 units (6.5 million) as Microsoft sold Xbox 360s (7.3 million). Again, every PS3 played Blu-Ray, while only a small number of Microsoft’s console buyers opted for the HD-DVD option.

Many PS3 buyers were buying them, not as game machines, but on the recommendation of sales people because it was the most economical Blu-Ray player. That surge of Blu-Ray players began creating a market for HD discs that greatly outnumbered the few hundred thousand HD disc players sold outside of the PS3.

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8. The War on Microsoft.

The War on Microsoft.

While the PS3 pushed the Blu-Ray format over the goal line, the entire industry outside of Microsoft, Intel, and Toshiba was lined up behind Blu-Ray. There simply wasn’t any realistic chance that HD-DVD would prevail. This wasn’t a simple physical format war like the old VHS and Betamax rivalry; also at stake were the future of video codecs and embedded interactivity development. This was a battle for software and open markets that went far beyond HD disc movie playback.

Companies like Apple and Sun, neither of which had expressed any interest in building or selling HD discs, were unitedly opposed to HD-DVD because it meant Microsoft would expand its proprietary control over video codecs and the embedded software runtime used for interactivity. The industry in general has actively been pushing to rid itself of dependance upon Microsoft controlled standards.

Ten years ago in 1998, Apple, Sun, IBM, Netscape, Oracle, and Silicon Graphics all collectively backed QuickTime against Microsoft’s ASF as the new container for MPEG-4. ISO members subsequently selected QuickTime over ASF and set in motion the development of open standards for mobile, disc, and high definition media distribution using a standard set of codecs collectively maintained by the entire industry rather than beholden to a specific company.

Since then, Microsoft tried hard to push ASF, derail MPEG-4, and even created its own bastard version of MPEG-4 codecs under the name Windows Media 9. It also worked hard to establish its proprietary audio codecs in the field of portable media players. When those efforts all failed, Microsoft ran WM9 though a sham standards process that rebranded it as VC-1, and set up a satellite group of “partners” to advocate it, all of which were owned or directly controlled by Microsoft.

None of these efforts hid the reality that Microsoft wanted to simply duplicate in media what it had done to the PC desktop: copy existing technology, add proprietary hooks, and then sit back and tax the industry with software fees without adding any value. After having been burned repeatedly, the rest of the industry is now ready to shoot down every effort Microsoft makes to enslave innovation and progress.

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9. Misinformation Wars.

Misinformation Wars.

Added to the strong showing of studios and manufacturers already supporting Blu-Ray since 2005, the impact of Sony’s integration of Blu-Ray on the PS3 left little room for the HD-DVD camp to maneuver. Microsoft’s efforts to support HD-DVD in Windows Vista and on the Xbox 360 had a limited effect because Vista turned out a commercial failure, and 360 sales were in a precipitous free fall, dropping 33% year over year in 2007. Sony had attached Blu-Ray to its PS3 rocket at launch while Microsoft tied two sandbags to HD-DVD: Vista and the Xbox 360.

Apple, Nintendo, and Sony were all working to push OpenGL against Microsoft’s proprietary DirectX. The video industry was pushing behind the ISO’s MPEG-4 H.264 and AAC, aided by the popularity of Apple’s iTunes, rather than the proprietary WMA and WMV/VC-1 codecs Microsoft was working to advance. The embedded industry favored Java over Microsoft’s latest proprietary efforts to own interactivity. HD-DVD died because the industry collectively worked to kill it as a proprietary monster that would enslave users, studios, and developers to Microsoft’s software. It wasn’t a simple disc format struggle.

The public wasn’t aware of what was going on behind the scenes because Microsoft worked diligently to spin a misinformation campaign that suggested that HD-DVD would be cheaper, more open, and deliver more content. Backers were fed talking points that insisted that HD-DVD discs were cheaper to create, that the Chinese would pump out ultra cheap players to support Microsoft, and that HD-DVD’s DRM was somehow easier to get around than Blu-Ray. This was all false.

When charged with the reality that Microsoft is nothing more than a marketing organization pushing inferior technology tied to proprietary standards that will later be leveraged to extort higher prices, the company responds with a smoke screen that declares that its products will be first-to-market and supported by lowballing Chinese manufacturers. At the same time however, Microsoft has only ever delivered late, inferior products that have a higher total cost of ownership. Its supporters have worked hard to bury this reality even as Microsoft continues to raise prices on poor products that have limited competition, such as Windows Vista.
 
10. Reality Distortion.

Reality Distortion.

Despite the industry’s widespread backing of Blu-Ray, Microsoft similarly worked hard to create the illusion that HD-DVD was a viable product. This was critical because HD-DVD was Microsoft’s last effort to force the adoption of VC-1 and HDi. It had already failed to successfully use WinCE in any other embedded market, from smartphones to music players to handheld computers, and had similarly failed to establish Windows Media as a download format against the ISO’s AAC and H.264, widely popularized by Apple’s iTunes.

In a final act of desperation, the HD-DVD camp signed up Paramount and DreamWorks as new exclusive movie studios for HD-DVD. This pitted roughly half of the studios behind each of the two rival formats, with Warner Bros. being unique in offering titles in both formats. Microsoft’s efforts to prolong the format war had nothing to do with players or media, and everything to do with forwarding its proprietary software.

However, consumers were confused by the format uncertainty, which helped to slow sales across the board. Irritated by Microsoft’s refusal to cooperate, Warner Bros. announced a pullout of HD-DVD support right before CES, yanking the plug on Microsoft’s HD-DVD marketing push planned for the show. That signaled an enthusiastic redrawing of the watershed of support behind Blu-Ray, from retailers like WalMart to movie rental groups including Blockbuster and Netflix, and ultimately to Toshiba as HD-DVD’s hardware producer.
 
11. What the Death of HD-DVD Means.

What the Death of HD-DVD Means.

HD-DVD is dead, and with it dies Microsoft’s aspirations to inject its proprietary software in media development. This is also a big strike against VC-1; despite being written into the Blu-Ray standard along with the ISO’s H.264, most Blu-Ray developers are moving toward H.264, which not only allows them to master HD discs, but also deliver mobile and downloadable versions using the same codec for playback on devices such as the PSP and iPod.

The death of HD-DVD also presents further evidence that Microsoft is increasingly incapable of pushing its own proprietary standards using its Windows monopoly. Building support for HD-DVD into Windows Vista did almost nothing to shore up support for the format, and tying it to the Xbox 360 similarly did little to push things toward the outcome Microsoft wanted.

In the 90s, Microsoft maintained an invincible aura praised by loyal pundits; it defeated small companies, bought up rivals and destroyed them, slit its partners’ throats, and put startups out of business. It only ever gave the appearance of maintaining strong relationships with its partner companies. However, in the last ten years, that strong facade has been destroyed by a series of very public failures:

WinCE helped to destroy Palm, but did nothing to advance the state of the art and has since fallen into a distant and increasingly irrelevant third place in smartphones. It has become similarly irrelevant in the small handheld computer market for which it was created, and has failed as an embedded system. Microsoft moved its UMPC plans to use its desktop Windows, dropped any hope of using WinCE as the basis for game consoles, and most recently bought up Java-based Danger to replace WinCE as its mobile strategy. If Microsoft is fully abandoning WinCE, why should partners stick around?

Windows XP has floated along as the default choice for PC consumers, but when Microsoft tried to raise the price and tack on fluff features with the Vista rebranding, buyers demanded to upgrade to the previous version. Microsoft is still shipping Vista to manufacturers, but corporations and end users are frequently reverting to Windows XP, killing Microsoft’s ability to leverage its market position to push new proprietary standards and raise prices for features that were once included for free, such as standard networking.

The Xbox 360 had a strong showing in its first year, but was still unable to match the sales of Sony’s PS2. In its second year, 360 unit shipments were up 30% over the original Xbox after the first year, but 360 shipments also fell 33% year over year as buyers shifted their attention to the newer Nintendo Wii and PS3. The Wii outsold the 360 in 2007 and the PS3 came within a stones throw of matching its sales [update: the PS3 has also eclipsed 360 unit sales as it enters its second year]. Going forward, there is no reason for thinking 360 sales will dramatically turn around, as sales growth fell this year despite the arrival of major hit new games.

In contrast, after a slow initial start in its first year, Sony’s PS2 grew dramatically year over year back to back in 2001 and 2002, and maintained annual sales well above the Xbox 360’s 2006 peak for over six years, selling an average of 16.8 million per year over its seven year lifespan. Sony has similar long term plans for the PS3, while Microsoft has been unable to sell a game console with a lifespan over four years. The 360 is having a late life crisis just as the PS3 is beginning to sell in adolescent volume.

Microsoft’s monopoly power is dissolving, and its ability to create anti-competitive partnerships and exclusive alliances is also falling apart. Its hardware partners have been led on wild goose chases with WinCE, desktop Windows, PlaysForSure, and now HD-DVD, leaving alliances with Microsoft looking more like charity exercises than business decisions.
 
12. Misinformation Is and Misinformation Does.

Misinformation Is and Misinformation Does.

With the mask pulled off the bluffing, blustering HD-DVD, it becomes clearer that the talking points generated by Microsoft’s supporters all have the same source. As new promises are made about the imminent arrival of cheap new hardware from Chinese dumping, new partnerships just around the corner, and the power of Microsoft’s monopoly to make the improbable happen, it will now be increasingly difficult for the public to swallow them.

Those assurances applied not only to the failure of HD-DVD but also the failure of the Zune, which was similarly supposed to take on the world with Toshiba and turn into a Chinese mass production established in place by the influence of Windows and the Xbox. Instead, MTV’s Urge defected from its Zune store partnership with Microsoft to join Real’s rival Rhapsody music store, and Microsoft never even built any significant integration between the Zune and Xbox.

The Xbox itself was also supposed to rapidly turn around in price, but it soon be came clear that the Xbox 360 was actually more expensive to buy compared to the PS3 for users who get a hard drive, HD disc player, wireless networking, and other features left off Xbox models. In order to hide the fact that Xbox sales are dramatically tapering off, pundits only ever counted the 360, PS3, and Wii in cumulative numbers. No other market uses installed base to compare sales. Microsoft certainly doesn’t talk about installed base when comparing the Zune to the iPod.

If the Zune had sold a respectable number of units, it would be praised for its achievement rather than compared to the total number of iPods sold in previous years. Instead, Microsoft gerrymandered a market for “30GB hard drive based music players” in order to briefly claim a slice approaching 10% of weekly sales numbers.
 
13. The End of A Great Illusion.

The End of A Great Illusion.

The reality is that Microsoft is forced to falsify reports and color numbers because reality doesn’t support the illusion of Microsoft’s unquestionable market power. The company is failing in consumer electronics, and every year that passes makes its losses greater and its accomplishments less impressive.

With shrinking sales, the 360 isn’t going to hold off expansion of the PS3. With the death of HD-DVD, Microsoft isn’t going to push into media sales and production. With fire sales of the Zune, Apple is not going to lose its iPod business to the same company that already failed to take it on with its PlaysForSure partners.

The death of HD-DVD says more about Microsoft and its future than the general media seems to recognize. It’s not a format war, its a culture war between industry players working to advance the state of the art collectively in partnerships, and one company working to own everything while contributing very little. It’s not hard to see why Microsoft’s bruised and abused former partners are working to align themselves with open solutions rather than buy into more pain with technology tied to Microsoft. That’s very bad news for a company that exists solely as a licensee of third rate product ideas.

The death of HD-DVD is another lethal wound for Microsoft’s dying empire.
 
Hopefully this wonderful and quite brilliant rant will also go some way to helping Brad in his wish to stop Jason becoming this website's highest poster whilst at the same time not having my good self labeled a spammer.
 
I don't love macs. I just have one, cos my wife's dad gave me his old one. If he'd given me a PC, I'd have a PC.

In fact, I detest the Mackintosh advertising and the whole fecking infantilizing porcelain happy baby simplicity of its aesthetic. The smug cnuts.

It is a bit easier to use mind.
 
Brilliant essay dude. I just came across this post by chance but I'm glad I did. I've emailed it around to a few friends who will enjoy reading it as well. Do you have any updates in your rant re: Bill Gates spilling the beans about a new windows in 2009 etc.?
 
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