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What Has Blu-Ray Won?

August 21, 2008 | Author: Ibex Marketing

To the victor go the spoils. Blu-ray Disc (BD) conquered HD DVD to become the industry’s high definition video disc format, and now that it’s had the market to itself for six months, how has it fared?

One measure of its success can be found in a market report released on Tuesday by Futuresource. The decidedly upbeat overview included a chart that predicts that Blu-ray will top standard DVDs in “sell-through retail value” in the U.S. by 2012, which I take to mean the total revenues for all discs sold in the two formats. This speculation is interesting, especially in light of the report’s finding that Blu-ray has only 5% to 6% unit sales at this point. Even taking into account that Blu-ray discs cost more at retail on average than standard DVDs, Blu-ray has a long way to go before it dominates the U.S. video disc sales.

This small share of the total sales is made more remarkable by “the way the retailers are supporting BD and how much space they are giving over to Blu-ray discs” (quoted from the report press release, attributed to a member of Futuresource). It’s not surprising that retailers are trying to promote a product that costs more, as presumably they make more profit on the higher priced items. Yet the high definition discs aren’t getting much traction.

Futuresource points to the possibility of a Blu-ray player selling in the U.S. this holiday season for $200 to $250, and how this would “stimulate consumer traffic” and give the format a big boost. I don’t read the tea leaves quite the same way. Consumer confidence is down, the economy is uncertain, and it’s going to take a lot lower price to make Blu-ray players attractive to the average consumer, especially when $60 will buy a perfectly serviceable DVD player, and $150 will buy a DVD player will all sorts of bells and whistles like upscaling and other enhancements. Remember that half of the people who have HDTVs but don’t have an HDTV signal source think that they’re watching HDTV. The fact is that a standard DVD on an HDTV is more than good enough for most viewers.

Yes, there are still the legions of PS3 game consoles out there, and yes, their owners are probably starting to watch more movies on them. And I suspect that a lot of them even bother getting the Blu-ray discs to play on them. But the PS3 population is a drop in the bucket compared with the rest of the market. But the Futuresource press release does not make any mention of the threat of alternative delivery methods. With Netflix positioning itself to get out of the physical disc business and replace it with broadband download delivery, it’s difficult to assume that demand for video discs is going continue to grow as it has in the recent past.

I have no doubt that Blu-ray won the war, but I remain skeptical about whether there will be sufficient spoils remaining to have made it worth the effort.