HD DVD set-top player sales rebound

Promotional price cuts back on

By Susanne Ault -- Video Business, 1/29/2008

JAN. 29 | HD DVD hardware totaled about 33% of all high-definition set-top unit sales for the week ended Jan. 19, according to NPD Group data, marking a rebound from the prior week when Blu-ray Disc commanded 90% of high-def player purchases.

Likely fueling HD DVD’s rise, which was up from 7% of sales the week ended Jan. 12, were Toshiba’s $100 to $200 price cuts on its HD DVD players, which became effective starting Jan. 13.

Blu-ray set-tops continued to represent the dominant format for the Jan. 19 period, according to the NPD Group, holding 63% of sales. Dual-format players trailed at 4%.

NPD analyst Ross Rubin said HD DVD’s sales jump likely had more to do with consumers’ sensitivity to pricing than any statement on the format war. He noted that consumers continue to overwhelmingly choose upconverting standard-def DVD players over relatively more expensive Blu-ray or HD DVD set-tops. Collectively, high-def set-tops, including dual-format models, encompass less than 10% of overall DVD player sales.

“Both camps face really strong competition from standard DVD up-converting models, which inexpensively render [consumers’] massive DVD libraries well on their TVs,” said Rubin, adding that such upconverting models can be found for sub-$100 pricing. “We’ve seen a consistent trend of the market responding to changes in price and promotion by both camps. So you’ll see a significant shift [in sales one way or the other] in response to the end of a promotion or the beginning of a new promotion.”

After NPD data for the week of Jan. 12 showed overwhelming Blu-ray dominance in the period, format backers roundly spun the data as evidence the format war was virtually decided in its favor, as consumers were influenced by Warner Bros. Entertainment’s late December decision to drop its HD DVD support.

However, NPD analyst Stephen Baker said at the time that price was probably the biggest factor in sales. He said heavy Blu-ray promotions during early 2008 were part of the reason for the format’s surge during Jan. 5 to Jan. 12. Earlier in January, Blu-ray and HD DVD hardware sales were split 50/50, according to NPD.

Many retailers, including Best Buy and Circuit City, have been offering free Blu-ray players with the purchase of an HDTV set of the same brand. These bundles kicked off in the fourth quarter and have continued through January.

However, Toshiba marketing VP Jodi Sally believes stats for the week ended Jan. 19 provide a more accurate picture of the formats than the previous week. The manufacturer’s players pricing rebates ended on Jan. 5, she explains, before Toshiba sales were again extended starting Jan. 13. This days-long sales void hurt HD DVD’s usual pricing competitiveness over its Blu-ray set-top rivals, which, when sold separately, are generally double the price of Toshiba’s entry-level HD-A3.

“All of our promotions had ended at that time,” said Sally. “But if you look at our unit sales at key retailers for the first week of our price moves, Toshiba sales are twice the rate of our average weekly sales during 2007.”

Sally adds that Toshiba data covers Amazon.com, an important high-def hardware seller but an account that is excluded from NPD’s primarily bricks-and-mortar-based weekly data.

Toshiba expects the momentum will continue through Sunday, when the company will run a 30-second Super Bowl ad spot hyping its HD DVD players. The company first plugged HD DVD players during last year’s Super Bowl.

The company does recognize that many consumers could be worried about buying HD DVD players, now that they are not going to be supported with content from Warner. It appears that Toshiba could be tailoring its messages around the idea that despite the studio’s imminent exit, there is little risk to still purchasing an HD DVD player. It offers high-def playback as well as standard-def playback to near high-def quality in an affordable package.

“We still feel this represents a significant value to the consumer,” said Sally. “With a $149 price [for the entry-level HD-A3], you’ll get two free HD DVDs in the box, five movies by mail, and it supports all your standard DVDs, where they are upconverted to near high-def quality. There is no risk to the consumer.”

Sally said Toshiba HD DVD marketing will continue past the Super Bowl with “additional commitments to broadcast, print and radio through 2008.”