OPINION: Blu blues

Blu-ray won the format war but it appears to be losing the peace.

According to the latest numbers from the NPD Group, sales of set-top Blu-ray players (not PlayStation 3 consoles) dropped 40% from January to February before ticking up a scant 2% in March.

Since the rival HD DVD format died on Feb. 19, the hoped-for consumer rush to Blu-ray has yet to materialize.

As the baseball sage Yogi Berra once noted, if people don’t want to come to the ballpark you can’t stop them.

The situation may not be quite as clear as Yogi would have it, however.

To begin with, the first quarter is never a good season for sales of expensive electronics devices; inferring a trend in consumer demand from the first-quarter results is generally a bad idea.

Blu-ray hardware makers also did their best to squelch whatever demand might have been there by raising prices on their players: The average price of a Blu-ray player is nearly $100 higher today than during the fourth quarter, when the format faced competition.

Supplies also appear to have been constrained, leaving shelves bare at retail.

“Many manufacturers were caught unprepared for the rather sudden end of the format wars,” Pioneer senior VP Andy Parsons told the Los Angeles Times. “We suddenly had high demand and a supply constraint, and we’re just now beginning to recover. Many players are still on back order.”

Be careful what you wish for.

Some home-theater buffs may also have been waiting for Profile 2.0 BD players to become more widely available and were reluctant to buy a player now that might not be able to use some of the fancy interactive effects studios are planning for future Blu-ray releases.

Those buyers could come back into the market as we get closer to the third and fourth quarters as hardware makers roll out fully enabled players.

Yet while the first-quarter results may not be quite as dire as they seem, Blu-ray still faces significant challenges.

The very fact that fully enabled players are not already widely available, for instance, two years after launch, reflects one of the fundamental weaknesses of the format. It has already taken too long to get the finished format into the market to accomplish high-definition media’s most critical strategic goal: staving off the downturn in sales of packaged media.

The supply constraints were also predictable (and predicted): Too much new technology from too few suppliers was a bottleneck waiting to happen.

Without the distorting effects of the format war, moreover, Blu-ray is coming face to face with what was always the real challenge facing high-def media formats.

According to NPD analyst Ross Rubin, Blu-ray is now “fighting a battle of apathy, in which most consumers are either unaware of Blu-ray or have yet to be convinced that it’s a better format” than standard DVDs.

Sales of upconverting DVD players—which cost one-fifth of what a Blu-ray player goes for—were up 5% during the first quarter, according to NPD.

Having spent six years battling over which high-def DVD format to adopt, the industry is now dangerously close to having squandered the opportunity to sell the consumer on the idea of upgrading from the current generation of DVD technology.

For that to be happening at a time when American households are fortuitously undergoing a massive upgrade to HDTV and broadcast technology should be far more worrisome than a dip in first-quarter sales figures.

Get more of Paul Sweeting's analysis here.