CES: Blu-ray growth forecast healthy
However, format still has obstacles for mainstream adoption
By Susanne Ault -- Video Business, 1/8/2008
JAN. 8 | LAS VEGAS—With momentum in the format war on their side, studio members of the Blu-ray Disc Assn. projected healthy format growth this year, according to research provided at a Monday Consumer Electronics Show press conference here.
At an NPD Group CES session immediately following, however, analysts talked of ongoing obstacles for Blu-ray to win widespread acceptance.
BDA U.S. Promotions Committee chair Andy Parsons noted that even prior to Warner Home Video’s decision to exit HD DVD, Blu-ray was proving an overwhelming consumer favorite. The format’s software sales outsold HD DVD sales each week in 2007, at an average 65% to 35% sales ratio, he said.
Due to the strength of Sony’s Blu-ray-enabled PlayStation 3, especially the fall introduction of a cheap $399 model, Blu-ray set-top players and PS3s have collectively sold 3.7 million units lifetime to date in the U.S. HD DVD devices, similarly including set-tops and Xbox 360 drives, have moved 1 million units domestically. The global hardware picture is even more Blu-ray favorable, as the format commands 85% of hardware sold since launch.
In light of the forward momentum, 20th Century Fox Home Entertainment’s executive VP of research and technology Danny Kaye laid out a Blu-ray trajectory that is comparable to standard-definition DVD’s rise since its bow more than a decade ago.
Kaye “conservatively” estimated that in 2008 another 2 million Blu-ray set-tops will be sold and an additional 4 million PS3 systems sold. Counting the existing Blu-ray hardware installation base, by the end of the year, 10 million Blu-ray set-top and gaming playback devices will be in U.S. households.
On the software side, Blu-ray titles generated 5.6 million disc unit sales and $170 million in consumer spending, in 2007. The year ahead will trounce that performance, hitting 40 million discs sold, and churning out $1 billion in consumer spending in 2008, according to the studio.
“This is a very strong explosive year for growth,” Kaye said, predicting that 2008 will kick-off the start of a steep gain for Blu-ray sales in 2009 and 2010, when growth will match that of standard DVD in the third and fourth years following its 1997 launch. “We’re going to see an inflection point [for Blu-ray] where consumers embrace and buy more strongly, ” he said.
During the NPD session, however, VP and senior entertainment analyst Russ Crupnick countered that Blu-ray backers will have to undo a lot of existing consumer confusion about high-definition in general before scoring significant adoption.
Recent NPD consumer surveys found that more than 80% of consumers who reported that they had purchased a next-generation disc had in fact not, as the titles described had not yet been released on either HD DVD or Blu-ray. Similarly, many people reported buying a high-def player when in fact they had not.
Additionally, surveys have said that the format war is not the main reason for consumers to stay on the high-def sidelines.
In an NPD study looking at consumers who said they were unlikely to purchase high-def discs soon, “72% of them said they wanted the prices to come down, and 70% said they didn’t need to replace their DVD player,” said Crupnick. “54% said they were waiting for the format war to end.”
Hardware prices have been sliding since the holidays, when it was possible to find Blu-ray players at less than $300. Crupnick noted a Sony CES announcement to roll out a sub-$200 Blu-ray external drive attachment, which would help computers become fairly cheap Blu-ray players.
Yet high-def software continues to be priced at around $30 a title, representing a significant premium over standard DVDs, which average $16, added Crupnick.
To cozy up to consumers, Crupnick says that studios and retailers need to sharpen their marketing strategies. He wished Walt Disney Studios Home Entertainment’s whimsical, colorful traveling mall tour would be extended inside retail stores.
“You’ll go into an [electronics store] and see the high-def kiosk empty, but everyone is gathered around playing Guitar Hero,” he said. “Someone should act as an HD Concierge whose job it would be to show you the next-generation experience.”
The BDA elevated its marketing through 2007, as noted in the group’s CES session.
“At the end of 2006, there was 26% awareness, and by the end of 2007, 86% of [surveyed] consumers said they knew the Blu-ray brand,” said Ron Sanders, Warner president of Blu-ray marketing. The Blu-ray message “became harder hitting to establish Blu-ray as the successor to DVD.”
This enhancement of the Blu-ray brand was credited to BDA’s “The Future is Blu” holiday TV/print blitz, which was an evolution of the earlier “I Do Blu” initiative to stress Blu-ray’s commanding sales lead over HD DVD products.
Additionally, Disney president Bob Chapek announced that its mall tour will extend to eight more U.S. cities in 2008.
