Media Wonk

Paramount's risky transformation - August 22, 2007

Ah those late-night posts.

Transformers director Michael Bay created a stir Tuesday morning with a wee-hours posting lambasting his studio, Paramount, for its decision to HD DVD exclusively in the high-def format war.

“No Transformers 2 for me!” Bay wrote in his personal blog, no doubt sparking panic and weeping across the Paramount lot. “I want people to see my movies in the best formats possible. For them to deny people who have Blu-ray sucks!”

By the end of the day, however, Bay had rather sheepishly withdrawn his comments, apparently after receiving a talking-to by Paramount brass.

“I heard where Paramount is coming from and the future of HD and players that will be close to the $200 mark which is the magic number,” he wrote. “I like what I heard. As a director, I'm all about people seeing films in the best quality possible, and I saw and heard first-hand people upset about a corporate decision.

“So today I saw '300' on HD, it rocks!

“So I think I might be back on to do Transformers 2!”

Well I’m breathing easier.

But the fact is Bay had a point the first time. While Paramount may feel it has sound strategic reasons for its decision, it’s not without downside.

One effect of the decision is to force consumers to make a technology choice in order to watch Paramount’s movies in high-def. There’s a legitimate question to be asked as to whether it’s appropriate for a studio to force that choice on its customers (although of course Paramount and DreamWorks are hardly alone in taking that position).

Even with the much-discussed “inducements” the two studios reportedly received from the HD DVD camp (much of it probably not payable in cash in any case), the studios will be leaving money on the table, at least in the short run.

There’s also the question of whether such a move by any one distributor—even one with a strong release slate-- can really affect the outcome of the format war at this point. Both hardware camps are well dug-in now and it’s unlikely that Paramount’s move, by itself, is going to chase either from the field. In which case, why alienate half the potential audience?

On the other hand, I’m sure Paramount has thought about all of those things, which is why I think the Blu-ray camp has responded so vociferously.

The Blu-ray studios certainly understand the risks Paramount is taking and they know that the reported $150 million in payments to Paramount and DreamWorks Animation-even if they were in cash--won’t cover those risks.

Losing Michael Bay for Transformers 2 because you pissed him off could easily knock $150 million off the worldwide box office gross, which would be a much bigger problem for the studio than how much cash it was able to squeeze out of Toshiba and Microsoft.

The more likely scenario is that Paramount made its decision more or less in good faith, based on its assessment of the strategic business issues at stake, and then did what any business would do. It asked for a reciprocal show of faith from its new exclusive partners.

As one of the only studios in a position to make direct comparisons between publishing in each format, Paramount picked HD DVD. That’s not a good story for Blu-ray, which is why, I suspect, they’re so keen to make it appear to be a simple case or bribery.

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