A High-Tech Rumor Mill

FT pushes thinly sourced Blu-ray scoop too far while Variety and others hold their fire

Sony has been trying to convince consumers for three years that its Blu-ray technology is the high-definition successor to the conventional DVD, while Toshiba has been trying to do the same with its HD DVD.

After Warner Brothers Entertainment announced on January 4 that it would put out its movies exclusively on Blu-ray, the end of this format war drew closer. But Warner’s decision still left two of the seven major studios supporting HD DVD.

Many outlets gave us solid reporting on the Warner announcement and its implications. But in the following days, some coverage descended into the rumor mill. The desire to publish a scoop on what seemed a logical conclusion—that Paramount and Universal, the two major studios still on HD DVD—would switch exclusively to Blu-ray led to some irresponsible prognostication, especially on the part of the Financial Times. The incident illustrates the perils of reporting on the technology industry, with its speed-of-light changes and the cloud of rumor that constantly envelops it.

First some background. The battle between Sony and Toshiba over the next generation of media delivery has been raging for years in the tech press, which has often compared it to the format war between Sony’s Betamax and JVC’s VHS in the late seventies and early eighties, though smart pieces point out the differences.

The two new formats are not identical—Blu-ray costs more and holds more data than HD DVD, for instance—but the technological superiority of either one is not obvious.

What’s been clear all along is that it was to the advantage of the Hollywood studios—and consumers, who don’t want to buy a technology that may soon be outmoded—to choose one format and bury the other. The high prices for the discs and players, combined with the fact that most people don’t own high-definition TVs on which to see the new formats in their full glory, meant that neither format has sold widely. Studio support split between the two, and for a long time neither appeared poised for a victory.

That is, until Warner Brothers’ move in early January, which sparked a flurry of articles predicting Blu-ray’s ultimate triumph.

It gave us headlines like CNET’s “Warner goes Blu-ray exclusively, delivering crushing blow to HD DVD”, the FT’s “Breakthrough for Blu-ray as Warner gives full support,” and The Wall Street Journal’s “Blu-ray Lands a Big Fish: Warner” (link for non-subscribers). All fair analyses of the news.

But then the rumors started.

On January 8 the Financial Times published a confusing article on the front page of its Companies & Markets section that began:

Paramount is poised to drop its support of HD-DVD following Warner Brothers’ recent backing of Sony’s Blu-ray technology.

This is a nice scoop—if it’s true. Problem is, the article doesn’t tell us where the information came from. The only attribution regarding the switch comes in the fourth graph, when “people familiar with the situation” say that Paramount:

is understood to have a clause in its contract with the HD-DVD camp that would allow it to switch sides in the event of Warner backing Blu-ray.

The reporters are stretching here. What does it mean to say that the clause “is understood” to exist? Either their sources should know for sure that the escape clause exists or they shouldn’t get space on the page.

As for the article’s main point, the shift itself, so far the FT appears to have jumped the gun: Ten days after the story, which made the move sound imminent, Paramount still hasn’t abandoned HD DVD. And Paramount denied the rumor the same day the story ran.

The next day, Variety offered its own anonymously sourced scoop but presented it better than the FT did.

The two remaining studios backing HD DVD could switch sides soon, ending the high-def format war instantly…

Daily Variety has confirmed that Universal’s commitment to backing HD DVD exclusively has ended. And Paramount has an escape clause in its HD DVD contract allowing it to release pics on Blu-ray after Warner Bros.’ decision to back that format exclusively.

Neither studio is ready to throw in the towel immediately, however. Universal is committed to a series of promotions for the high-def format in coming months, and Par has said its current plans are to keep supporting HD DVD, which it backed exclusively in August.

We would certainly rather have names, but this is a far more responsible way to use anonymous sourcing. First of all Variety uses the conditional “could switch sides,” and it notably doesn’t repeat the FT’s assertion about Paramount’s switch, just the fact that the escape clause exists (which the studio stopped short of denying).

Furthermore, contrary to the FT’s claim that “Paramount is poised” to switch, we get: “Neither studio is ready to throw in the towel immediately.”

But even after this piece, Universal issued a denial, with executive Ken Graffeo saying: “Contrary to unsubstantiated rumors from unnamed sources, Universal’s current plan is to continue to support the HD DVD format.”

Would Universal’s continued loyalty to HD DVD prop up the format’s prospects? Maybe. Melissa Perenson, blogging for PC World on Universal’s refutation:

If Universal and Paramount do stick to their guns, we could still see the two formats continuing to persist for a while more.

Responsible sourcing is especially important in the tech sector, where news happens fast and a rumor about a product or company can have a huge ripple effect. The tech site Slashdot was right to link to the FT story under the heading “Paramount to Drop HD DVD?” Note the question mark. But not everybody was so cautious. The FT story got repeated in the press and on blogs, with some sites retracting the claim.

The format war is in part a publicity battle and news outlets need to be careful that the competing companies don’t draw them into the struggle. That is cause to vet sources especially carefully. It’s also a reason not to declare the end until the end. Warner’s switch may very well signal the victory of Blu-ray. But HD DVD isn’t quite dead yet and even if it does disappear, Blu-ray’s win still may only be a temporary victory.

A few pieces stand out by giving us this context.

On January 7, The Wall Street Journal gave us “In Blu-ray Coup, Sony Has Opening But Hurdles, Too.” (link for non-subscribers). The last sentence of the first graph tells us that Sony’s “victory comes at a high cost and may be fleeting.” Why? The reporters tell us that:

Sony’s push for Blu-ray—which analysts estimate as an investment of hundreds of millions of dollarsm—has cost the company in areas such as the key videogame market…

Even with major studios on board, Sony must still win over consumers to Blu-ray. Consumers were arguably better off with HD DVD technology, which generally cost less to produce…

And as Danny King says in TelevisionWeek, it may be that neither Blu-ray nor HD DVD wins.

Downloadable movies, which don’t require an expensive player and DVDs, may render physical discs obsolete before Sony can finish its victory lap.

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Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.