You would think that owners of high-end home theater systems would be right in Blu-ray Disc's early adopter sweet spot. But at least one maker of high-end home theater servers is hedging its bets. Kaleidescape Inc., on Wednesday introduced two new players with advanced upscaling features designed to produce 1080p images from standard DVDs. One of the new players has a disc tray that allows advanced playback directly from the disc, without first having to load it to the Kaleidescape server, making it suitable for watching rented DVDs in 1080p.

Why would a high-end vendor like Kaleidescape want to give its customers a reason not to upgrade to Blu-ray?

"We have some customers who want Blu-ray just because it's the latest and greatest thing," Kaleidescape CEO Michael Malcolm told Media Wonk. "But believed all along that Blu-ray would not be a successful product because the difference is just not compelling enough compared to DVD. Some early adopters will buy it, but I never believed it would make the leap to the enthusiast or early mainstream market."

Kaleidescape's upscaling technology has some key advantages over other up-converting DVD players. "The biggest advantage is that we know a lot about the content," Malcolm said. "We have a database with pretty detailed information on 70 or 80,000 DVDs, so we know what's on the disc, what type of content it is and where it is on the disc."

Kaleidescape worked close with chipmaker Sigma Designs to develop what it calls Content-Aware Video Processing, which draws on information about the content of a disc to optimize the processing at any given point. In some cases, the information about a disc is stored on the user's in-home server, to which the player is attached. If not, the network-enabled player fetches the information from Kaleidescape's servers over the Internet.

The new Kaleidescape players reflect only the latest advance in the science of upscaling from standard DVDs. Earlier this month, Toshiba indicated that it will introduce its own advanced upscaling player by the end of this year, which the company claims produces images "virtually identical to Blu-ray." The Toshiba player is expected to be much less expensive than Blu-ray players because it does not require the advanced blue-laser optics nor the expensive royalty stack involved in BD hardware and software, AACS and BD+.

Despite his misgivings, Malcolm said Kaleidescape still intends to come out with a Blu-ray compatible player by the end of 2009.

"We fully intend to come out with a Blu-ray compatible player because we want to support Blu-ray, but more because of the codecs," he told Media Wonk. "We need to support H.264, because that's what a lot of people are using for downloads, and you need new hardware support it. We can't support H.264 with our current hardware."

Malcolm said he hopes the have Blu-ray compatible players available by the end of 2009. "One of the big problems right now is that Blu-ray chips are not very available, so that's slowing down the development process."

He added that he is uncertain whether a Blu-ray capable Kaleidescape player would ever allow discs to be transferred to a server hard drive due to the restrictive licensing terms imposed by AACS as well as the studios' long-running effort to stop Kaleidescape from allowing users to import standard DVDs to their servers.

"Some people will still want to playback Blu-ray discs directly so we need to support that," Malcolm said.

UPDATE: How's this for ironic?: Toshiba actually began rolling out its advanced DVD upscaling technology this week in a trio of new laptop computers introduced in Europe. It's using a new chip to achieve the super-upscaling effect branded the Toshiba Quad Core HD Processor, which is derived from, wait for it...the Cell Processor at the heart of Sony's PlayStation 3 game console and Blu-ray player.

The U.S. press release oddly soft-peddles the new laptop's upscaling capabilities. But Toshiba officials were more explicit at an event held yesterday in London.

From TechRadar.com in the U.K:
When asked about the lack of Blu-ray support, Alan Thompson, CEO for Toshiba Europe said: "At this present time we are not using Blu-ray. Blu-ray is just one of many ways that you can get HD content and is not required for accessing HD content."
When pressed further on whether Toshiba was just 'saving face' following the HD format war, Thompson commented: "This upscaling technology was developed before we discontinued HD DVD."
[snip]
When asked if the upscaling tech would be used in new DVD players, Thompson refused to comment but did hint at things to come: "There's absolutely no reason why the technology couldn't be used in televisions."

Paul Sweeting

Paul Sweeting is the Editor of Content Agenda, a business-to-business brand dedicated to the nexus of content, technology and business. This piece was originally published on Paul's blog "Media Wonk" on Content Agenda and is posted on DMW with the author's permission.