Futurists: Both formats will grow

HOME MEDIA EXPO: Consumers still confused about Blu-ray, HD DVD

By Jennifer Netherby -- Video Business, 7/18/2007

JULY 18 | LAS VEGAS—Both HD DVD and Blu-ray Disc will have a place in home entertainment’s future and a big one at that, according to research presented at Wednesday panel “The Future of Retail and Home Entertainment” at the Home Media Expo here.

By 2012, high-definition DVD will reach $10 billion in annual sales, surpassing DVD sales, which are expected at $8 billion, according to Adams Media Research projections. Adams believes that high-def sales will be split equally between HD DVD and Blu-ray.

Firm principal Tom Adams said the industry is “slowly getting used to the idea that Toshiba’s not going away.”

But high-def DVD won’t grow as fast as standard DVD did. Part of the problem is a lack of consumer high-def knowledge.

“Consumers are entirely confused,” said Russ Crupnick, NPD movies and music analyst. NPD research shows that 10% of consumers think they already have a high-def player, while research says that closer to 1% actually do.

One of the complaints of consumers is that they don’t understand why they should upgrade to high-def. “More than price, people don’t see a big difference,” he said.

Crupnick said there’s an opportunity for smaller retailers to educate consumers about high-def, but he cautioned them away from heavily investing in it, saying many consumers will buy players and high-def movies at big box stores.

The typical high-def consumer is male, ages 18 to 34, reads men’s magazines such as Maxim, probably owns an iPod, drinks imported beer and makes most of his movie purchases at electronics and game specialty stores, according to Nielsen Media Research.

Other new technologies such as movie downloading and video-on-demand are expected to grow in the next five years, but not as fast as high-definition. Adams projects that movie downloads could reach $160 million in revenue this year, but he said that is optimistic.

Crupnick said NPD has seen a significant drop in movie downloads in the last year.

DVD sales continue to be an important part of the business.

The most important thing retailers can do is focus on customer service. Crupnick suggested retailers look at what companies that score high on customer satisfaction are doing, such as Amazon and Netflix.

Music consumers, who behave similarly to movie consumers, shop an average of five stores for media, according NPD. Over the last three years, consumers have shifted where they are buying DVDs. Between January and May 2004, 54% bought discs at video stores, compared with 42% this year. Purchases at online stores doubled in the same period, from 11% to 21%.

Store loyalty, he said, is a thing of the past.

But consumers are buying more DVDs at video specialty stores, according to Nielsen. In 2006, video specialty shoppers spent 27.9% of their DVD sell-through dollars in that channel, up from 23.4% the prior year. But those same shoppers spent 17.3% of their DVD dollars at Wal-Mart, down from 21.8% the pior year.

At an afternoon panel about DVD manufacturing on-demand, execs from MOD companies said the business is just getting started, but it may offer opportunities for retailers to carry a broader range of content.

Amazon CustomFlix VP of content acquisitions Larry Smith said at his company, some smaller titles sell one or two copies, while others can sell even more.

Workout video You On a Diet: The Workout sold enough to make it the No. 7 top DVD seller on Amazon at one point.