OPINION: Moving Up

Speaking at the Entertainment Supply Chain Academy conference last week, Warner Home Video president Ron Sanders acknowledged the obvious: relatively inexpensive upconverting DVD players pose a threat to the industry’s efforts to market Blu-ray Disc.

According to Sanders, some 3.5 million upconverters were sold in 2007, compared with just 500,000 Blu-ray set-tops.

Still to be acknowledged: Not so inexpensive upconverting DVD players could also pose a challenge to Blu-ray.

The day before Sanders made his comments as ESCA, Kaleidescape Inc., a maker of high-end home theater systems, introduced two new upscaling DVD players weighing in at a hefty $4,300 and $3,000, respectively.

The high-end model includes an actual disc tray, so you can enjoy the upscaling effect directly from a DVD; the “cheaper” model has no tray, but works as a remote player for movies streamed from your $10,000 Kaleidescape server.

Why would anyone pay $4,000 for an upconverting DVD player when they could buy a Blu-ray player for $400?

In the case of Kaleidescape’s customers at least, cost is generally not an object. These are folks who are already spending tens of thousands on their home theater setups or to install fancy entertainment systems on their yachts (a big market for Kaleidescape).

The Kaleidescape servers also rely on a proprietary upscaling technology, co-developed with Sigma Designs, that it calls Content-Aware Video Processing.

The networked players tap into Kaleidescape’s vast database of DVD titles, which contains detailed information about the content of some 80,000 DVDs, including the type of content (film-based, video-based special features, menu graphics) and precisely where it is on the disc. They then optimize the processing for each bit of content to produce images it claims rival those of Blu-ray.

More to the point, though, Kaleidescape thinks its upscalers are a better solution than Blu-ray for its demanding customers.

“You’re never going to have the variety in Blu-ray that you have in DVD, because for a lot of titles, it’s just going to be too expensive to put them out,” Kaleidescape CEO Michael Malcolm told me. “Plus, people already have huge collections of DVDs that they’re not going to go out and replace with Blu-ray.”

Kaleidescape still plans to come out with a Blu-ray compatible player, Malcolm said, but not until the end of 2009, and even then, mostly so it can integrate Blu-ray’s advanced codecs, like H.264, which is becoming the standard for high-def downloads.

“We’ll have to go to new hardware to support H.264,” Malcolm said.

Also last week, Toshiba quietly began rollout of its long-rumored advanced upconverters, including the drives on three high-end laptop computers introduced in Europe.

Given Toshiba’s positioning of the drives as high-end features, it’s likely that stand-alone players, when ultimately introduced, will carry a premium price above current upconverters.

Like the Kaleidescape players, of course, the Toshiba drives lack the advanced interactive capabilities of Blu-ray, such as BD-Java and BD Live.

But they’re a clear sign that upconverting DVD players are evolving into more than simply the poor man’s high-def.