Is Blu-ray Taking Hold?

I continue to be a skeptic about the adoption of Blu-ray, even though it has won the war of the high definition DVD standards. The biggest problem is that many Americans are satisfied with the image quality of standard DVDs scaled up for to view on their HDTVs. (The fact that many people buy HDTVs that are too small for the viewing distance could be a factor in this level of satisfaction, but that’s a different topic.) So why spend hundreds of dollars on a Blu-ray player when the one you has already does well enough?

A press release from Futuresource Consulting argues that Blu-ray is on the fast track for adoption. Many people hold up standard DVD technology as the fastest consumer electronics adoption ever, and Futuresource believes that Blu-ray is running ahead of that pace. They call 2008 the third year of Blu-ray availability, and point to more than 10 million players installed by the end of this year. In contrast, DVD players only had 1.5 million units in place at the end of their third year.

Futuresource admits that the PlayStation 3 units contribute a significant number to Blu-ray’s total. Market researcher iSupply is predicting that the PS3 installed base in 2011 will be about 38 million units, while Futuresource is predicting more than 45 million Blu-ray players. If these numbers are accurate, then there will be fewer than 7 million Blu-ray DVD players in homes around the world. That number is considerably smaller than the 37 million DVD players that were out by that technology’s sixth year (2002).

So the key question is whether or not people are buying PS3 consoles in order to play Blu-ray movies on them. I’m guessing that the answer is no. And research mentioned by the president of Warner Home Video would seem to back that up. According to a report in Screen Digest, less than 10% of U.S. PS3 households bought Blu-ray discs to play on their console in October 2007. This increased to more than 15% in December 2007. The increase is hardly surprising, with the holiday gift-giving season, but let’s give the PS3 credit for the full 15%. Reduce the Futuresource numbers so that only 15% of the PS3s are counted as Blu-ray players, and the numbers fall back to about the same as for the original DVD adoption. And the curve is a lot flatter in the early years, so there’s no reason yet to expect the geometric rise in the next three years that we saw with DVD players.

If I were one of the Blu-ray developers, I’d still be anxious about recovering the development costs on this one.