Universal 'tight-lipped' today on its next move

[darrylr]

I dunno...

I hear Sony has been giving out gazillions of dollars the last few days so what's a little more to get 50% of the remaining major studios to switch?

[JohnnyCanuck]

Yeah, I know.

I suspect if there was a buyout provision, it would likely have been tried by the BDA by now. My guess is Paramount's locked in.

[RigPig]

Originally Posted by JohnnyCanuck

Why RigPig?

To be totally contrary, but might it not be in Universal and Paramount's best interest to prolong the format war to the point where it sewers Blu and forces everyone back into the DVD Forum tent for a true HDM common spec? It would certainly be in Toshiba's pure financial interest.

Playing devil's advocate ... but if an exit strategy to Blu means no licensing income (that is, and always has been, the underlying purpose behind everything the BDA and the HD DVD PG have been doing), why might it not be in your best interests simply to do whatever you can to ensure current HDM format failure?

I am not remotely advocating or hoping for that. But if I'm in Universal's executive, I am considering the pros and cons of that very thing (along with maintaining status quo, going dual format, going Blu, or trying to negotiate a common spec within the current HDM formats).

.....what's in Uni's & Para's best interest & their major share holder's interest is to cut loose of this coaster factory asap. The timing of Warner's news release was perfectly executed to cause the most impact....you will see a cascade of momentum to consolidate the remainder of studio support to blu-ray only. Btw if Paramount didn't stipulate a solid early exit clause from their 'contract' then their
attorneys who drafted up the paper aren't worth their hefty retainer. (thats right, they should be skidded with a firm boot print on their collective bottoms) The hd-dvd group's 'response' at CES so far pretty much sums up the benefits to Para/Uni of staying onboard. Toshiba's as well. The firesaling of expensive hardware a few weeks ago & selling it for nothing was telling. It' s like holding a stock for too long that's steadily declined...hoping it'll pop so you can get your money back out. Well it ain't poppin'....at some point you have to get out & cut your losses & just write off the damage. The rest of the studios need to expedite their out & Tosh needs to fab up some 'BD-X2' asap.

[james99]

Toshiba didn't have a firesale. Just BDA FUD.

Discounting a discontinued model is normal business for any company.

[jvillain]

The fact is we don't know what is in the contract.It could have some or none of what you are speculating. When Paramount shifted though BD was already winning the war and the Paramount shift wasn't going to be enough to change that on it's own. So my guess is that they didn't sign a suicide pact.

What ever clauses are in there could have been triggered by recent facts, the Warner change, the YTD sales figures, what ever. It may take some time to crunch the numbers on all the alternatives or they could be talking to the BD side. But I would doubt that changing the format specs or truckloads of money are in the cards at this point. Some commitments from the BDA on marketing are more likely.

My guesses are as full of it as yours. For me the roar of silence from the HD-DVD side is quite an eye opener.

[james99]

Did you really expect HD DVD to release a long term statement overnight?

There response was the right one.

[39sfa]

Quoted from Amir discussing these clauses in contracts

Ah, time for an industry term. The industry I am talking about though is "negotiation." Here, if you are smart, you deploy what is called “anti-schmuck clause.” That is, no matter how attractive the deal may seem, you step back and think, “do they know something I don’t?” What if that thing surfaces later and I look like a fool? Then you think how you can cover that situation with another clause and hence the term.

Shrewd negotiations will always include anti-schmuck clauses in their contract. Indeed, we are usually open in calling it that. Otherwise, the other side usually objects. “Hey, you are getting this for free, what you mean you want to give it back if something happens.” As you can imagine, Warner is assuming this is the end of the format war. If so, then the only escape clause would be of anti-schmuck type since in their mind, it is not supposed to happen.


Then there are performance clauses in the form you are talking about. Those could also be ways one can get out of an agreement although there may be costs associated with it (pay me back what I paid you).

[99semaj]

Originally Posted by james99

Toshiba didn't have a firesale. Just BDA FUD.

Discounting a discontinued model is normal business for any company.

True, but having a quantity that large versus a relatively small installed base means that that they essentially wrote down overstocked assets and "firesaled" it.

[Hoowaa]

Tomato Tomato

[entropy05]

Originally Posted by JohnnyCanuck

Well no doubt they would lose the promotional money, but likely the contract either outright prohibits them from Blu, which means their hands are tied (liquidated damages for that kind of breach of contract would be massive). Or, there would be a specific sum that would allow Paramount to revert back to dual format or go Blu. That sum would likely be significant, high enough that Sony would not simply cough it up.

Or there could be a clause that allows Paramount to terminate their exclusivity agreement if certain conditions are met. Do you not think that Paramount executives would have considered the possibility of Warner dropping HD DVD (as well as other scenarios) before entering into an exclusivity agreement with the weaker side of the "war"?

[JohnnyCanuck]

Absolutely, there could be a number of clauses that govern Paramount's position. However, it is unlikely that HD DVD PG would have offered up $150 million in promotional value without protecting itself from a Paramount change of heart. That's probably why the term of the commitment was relatively short.

The silence from HD DVD PG is deafening. But so is the silence from the BDA. If this was a simple as WB's move ending the war, the press releases from the BDA would be flying.

As far as RigPig and your comment about Universal and Paramount's shareholders ... in terms of immediate stock price, you're probably right. But the principal shareholders are quite possibly in for the long haul and earnings over time, which means something much different that how Wall Street might react Monday. You simply cannot take a simplistic view of what is a complex issue.

[darrylr]

Sony has a press conference at CES in 30 minutes (7:15pm EST) - maybe there will be some gloating then?

[shabbs]

Originally Posted by darrylr

Sony has a press conference at CES in 30 minutes (7:15pm EST) - maybe there will be some gloating then?

Or maybe a new joint venture with Toshiba harmonizing the HDM landscape?

[RigPig]

....well i'll spare you my 'simpleton' approach any further then, & spare James99 my warped perspective on what constitutes a discount. My initial comment was regarding the speed of decline of format support by remaining major studios.....i suspect further large decisions detrimental to hddvd within 1 -2 weeks.
I expect several major retailers making likewise announcements this week...i beleive one has already today. (Target or Wally-world maybe) I think the speed of the hddvd meltdown will be surprising. End of January tops.

[JohnnyCanuck]

And you might be right. Never said you were a "simpleton". I said the factors driving these decisions are more complex than mere sales volume or how many studios are on one side of the divide or the other.