Blu-ray hits bumps in the road to HD market dominance

Source: arstechnica.com

Mid-February was a good time to be a Blu-ray backer. Media moguls who had championed the technology were busy floating on yachts in the Pacific, chomping cigars, and stroking white longhaired cats; the billion-dollar payday was at hand. But numbers out last week indicate that standalone Blu-ray player sales plummeted in the early part of this year, and enthusiasm for the hi-def format appears as lukewarm as the applause at an REO Speedwagon concert. Where did all the buyers go?

Last week, both ABI Research and The NPD Group delivered the news: the standalone Blu-ray player market did not suddenly rise up and walk after HD DVD quit the market. Instead, it remained in its bed and took a turn for the worse. NPD reports that player sales dropped by 40 percent from January to February 2008 and increased by only 2 percent the following month.

ABI argues that the Blu-ray player market won’t improve to full health for more than a year, perhaps as long as 18 months. “BD player prices remain high, and supplies are limited,” says ABI Research principal analyst Steve Wilson. “This is good for the market because most current players do not support all the functions that studios place on the discs. Lacking support for—or upgradability to—BD Live! or Bonus View (picture in picture), consumers cannot utilize all the available options. Manufacturers would rather sell more fully-featured models.”

Data source: ABI Research

This is “good” only because the collective companies involved in supporting Blu-ray haven’t been able to get their collective act together. In fact, the only real beneficiary of the current high-prices, underperforming standalone players has been Sony’s games division, which produces the PlayStation 3, a solid (and future-proof) Blu-ray player in its own right.

In answer to the question posed above, it appears that buyers have gone in several directions simultaneously.

PS3. The reported declines in Blu-ray player sales aren’t actually declines at all; they only apply to standalone players. Sony’s PlayStation 3 has been moving serious units, and while standalone player shipments can be numbered in the thousands, Sony sold 257,000 PS3s in March 2008 alone. That represents a 98 percent growth rate in year-over-year sales. Given the high cost of standalone players and the fact that the price didn’t fall after the HD DVD announcement, it’s clear that most people are getting their Blu-ray fix from the PS3.

ABI believes that PS3s will account for a full 85 percent of all Blu-ray players in the wild by the end of 2008. Despite dire headlines regarding Blu-ray that are based on the recent ABI and NPD reports, it’s clear that the format is actually growing the number of players in the field, and in significant ways.

Upconverting players. HD players from both contending formats have long had to face questions about whether the quality boost they offer is “good enough” to drive users to make a pricey upgrade away from a DVD player. While the PS3 represents a good value for money, standalone players typically don’t. They still exist far above the $100 magic number for broad adoption of new consumer electronics devices, and upconverting DVD tech continues to look quite good. On my new 52″ LCD TV, for instance, Battlestar Galactica upconverted over an HDMI connection looks simply spectacular. Sure, it would look better in HD, but good enough that I want to drop hundreds on a new player?

Data source: NPD Group

NPD notes that upconverting DVD player sales are up 5 percent in the first quarter of 2008 over 2007, while those that cannot upconvert dropped by 39 percent.

Download services. But not everyone sees the need for a disc-based player anymore. The 360 has a well-regarded content download service that delivers HD movies right to the console, for instance, and Microsoft has been talking up to the direct download model for content distribution now that its pony is out of the race.

Apple has its own iTunes infrastructure that can serve up video content to iPods, iPhones, Macs, PCs, and TVs, and it now offers 720p rentals for the Apple TV. Amazon and TiVo provide further video download and rental options, while Netflix has been adding to its ever-increasing stable of films that can be streamed online instead of ordered through the mail.

Given the array of such services available, it’s not hard to see how even tech-savvy folks might hang on to a decent DVD player as backup but make use of newer streaming and download services to grab on-demand fare.

HD DVD is dead, and Blu-ray is arguably well positioned to take advantage of that fact. But the format has a long way to go before it supplants DVD as the physical media of choice for the living room. Remember, it took nearly a decade for sales of DVD players to overtake those of VCRs. It was only when DVD players began dropping down around $100 that they truly took off, and Blu-ray has a long way to go before it gets there.

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