THE FUTURE'S IN HAND GADGET MANIA OVERSHADOWS HD-DVD BLU-RAY RACE.

Byline: GREG HERNANDEZ

Staff Writer

Huddling with his buddies around an iPhone display at the Apple store in Canoga Park, Jonathan Saenes says he's looking forward to owning the season's hottest new gadget.

Sure, the 18-year-old will use it to make calls and send e-mails. But it's listening to music and watching movies and TV shows on the tiny screen that has him really excited.

"There's new stuff coming out every day," he says. "We can keep up with it."

Saenes says the new technology makes his life easier and sees little use for cumbersome CDs and DVDs.

"DVDs are definitely going to be gone."

Saenes and his friends belong to a generation of consumers who don't spend much time thinking about the HD-DVD or Blu-ray high-def war that has taken center stage within the home entertainment industry.

Size doesn't matter

While middle-age consumers sort out the pros and cons of each format -- and try to decipher what makes them better than the standard DVD -- younger crowds have moved beyond the whole notion of home entertainment based around a huge screen in the family room.

"Kids care a lot less about screen size and video quality, so they'll watch the handheld stuff," said David Wertheimer, executive director of the Entertainment Technology Center at USC. "They make their decisions first based on social network recommendations and are willing to trade quality for convenience..."

Younger consumers also have not inherited their parents' collector mentality.

"These kids are shifting totally from physical to electronic," Wertheimer said. "Instead of DVDs on shelves, they will have a space for 'favorites' on their MySpace page."

Wertheimer was among the movie and television movers and shakers who participated in a recent home entertainment summit on next-generation DVD formats and beyond.

Studios are betting that high-def DVDs will be a key to growth in the coming years. Still, the appetites and habits of teenagers and twenty-somethings are being watched closely by an industry trying to keep pace with ever-changing technology.

Content not king

"Devices drive the market, not the content," said Ben Keen, chief analyst of Screen Digest and another speaker at the summit. "People buy the device and then they buy the content for the device. If you have all the studios on platforms that deliver the content on attractive devices, then maybe you can start to see a serious business developing."

Keen points to the iPod as an example of a device so popular that young consumers were willing to pay to download music off of iTunes and other sites.

The music industry saw its profits plummet once this same age group of roughly 12-30 embraced the illegal downloading of music on such sites as Napster. While breaking the law, young consumers sent a clear message that they preferred downloading music to buying CDs at a store.

"I don't think the world started stealing music because they wanted to steal music," Wertheimer said. "I think they did it because of the convenience. Kids trust unknown peers more than experts."

Digital retail, because it doesn't require that a physical product be produced, has a very high margin of profit. Most of the studios and television networks are making their product available through iTunes and other services.

Downloading rules?

Pat Fitzgerald, an executive with Disney's Buena Vista Home Entertainment division, said the three biggest reasons that digital downloading has such growth potential are "convenience, convenience and convenience."

"We see it as a very big opportunity for us as a company," said Fitzgerald, executive vice president of worldwide sales, distribution and trade marketing. "I think people have been pleased with the quality."

But the ability of a consumer to access downloaded content quickly has been a major issue and one of the biggest technological issues still to be resolved.

"We're all still working on convenient ways to get it to the consumer," Fitzgerald acknowledged.

The industry is currently far more preoccupied with getting consumers excited about next-generation DVDs that have clearer pictures and better sound as well as far more room for extensive bonus features. Still in its infancy, the high-def formats are being looked to as the instrument for future growth.

But with the format war between Blu-Ray and HD-DVD, the industry has not done itself many favors. Some studios are releasing movie titles in both formats as they try to persuade people to upgrade from standard DVD players to a high-definition format.

Neither format is expected to catch on in a big way until the price for players and for movie titles drop and so far, neither side has shown any sign of backing down.

DVDs dominate, now

Still, until downloading becomes more user-friendly, its packaged media like the DVD should have some time to continue dominating.

Waiting to buy an iPhone from the Apple store at The Grove in Los Angeles last weekend, 27-year-old film student Nathan Peterson looks forward to the day when he can download both music and his movies.

"I haven't bought a CD in years. It's just a waste of space in my apartment," Peterson said. "But I still prefer DVDs because (downloading) quality still isn't up to snuff yet."

Also in line at The Grove store, Eduardo Braniff, 35, acknowledged that it's the youngsters who will likely dictate the way things go.

"Right now, it's mayhem," Braniff said. "But most trends take root with the younger generations."

greg.hernandez(at)dailynews.com

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CAPTION(S):

2 photos

Photo:

(1 -- color) no caption (iPhone)

(2) Andy Conchelos, 13, of Agoura Hills views "Spider-Man 3" on a new iPhone.

Tom Gapen/Staff Photographer