I have to take issue with a number of your assertions here.
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Once VC-1 was on the table, Sony relented and added MPEG4 to try to dilute the VC-1 presence on BD. They were not happy with either addition, though; partly, because VC-1 is a cpu-intensive codec so it added costs to the player, but not as much as the costs added to the use of a JAVA-based menuing system; notice how the reviews point out the slow response of the BD menus?
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Sorry, this is simply incorrect. None of the currently-released BD titles have any BD-J content. Therefore, any sluggishness of the BD-P1000 has nothing to do with Java.
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Depending on the display device, H.264 can be pretty good at medium resolutions (VGA/XGA) but it is reportedly a distant fourth in the HD codec wars behind the various MS and DiVX products out there and the theatrical version of Motion JPEG2000.
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You seem to be pointedly avoiding discussion of H.264 High Profile, which wasn't part of the original tests but is considered by most to be at least as good as and probably capable of better than VC-1, and which is in both specs.
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Getting the tools to produce VC-1 or MPEG releases alone won't do the trick because, without BD-50, HD-DVD would have the long-term edge in capacity (30GB, maybe 45GB vs 25GB)
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Most titles currently-released will fit fine on a 25GB disc if encoded in VC-1 or H.264. Yes, it would be at the cost of either including lossless audio or including lots of HD bonus content, but in the short-term it would definitely solve the comparative PQ issue.
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So, as far as 2006-07 goes, the format war has in fact degenerated into an asymmetric race between a fully functioning system (HD-DVD) seeking to bring player prices down to the magic $300 before the competition can get their fundamental product manufacturing flaws fixed. And that doesn't even begin to address the player pricing issues BD faces.
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You're ignoring the fact that by all credible analyses Toshiba is losing nearly $200 per player, which a)makes the prospect of a $300 player difficult, and b)reduces the incentive for other manufacturers to jump into the market. Further, the fact that Toshiba had to throw a very high-powered CPU into the HD-A1 (a 2.4GHz Pentium 4) further suggests cost reduction will be difficult since typical systems-on-a-chip have far less CPU power.
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BD has a *lot* of catching up to do in 07. And job 1 is getting those BD50 discs out the door. Cause otherwise its game over by 08.
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I don't disagree that feasible manufacturability of BD50 is probably a requirement for BD's success, but you overstate the other issues. There will be at least five major brand BD players on the market within the next few months (Samsung, Pioneer, Philips, Panasonic, Sony) plus the PS3. This equals far more retail availability, more advertising, and more features. The $500 or $600 PS3 certainly does reduce the price gap with HD-DVD, and the number of titles will likely catch up and surpass HD-DVD simply due to the far higher studio support. Yes, BD-50 needs to be available. Otherwise there is no inherent Blu-ray deficiency which six months of product and content development won't cure.
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