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The Naysayers Are Still At It

Aug 22nd, 2008
More wrongheaded prognostication

I’m really getting annoyed by “industry experts” who seem to be oblivious to Blu-ray Disc’s stellar growth, industry enthusiasm, and consumers’ embracing this high definition format more rapidly that they did DVD.

I’ve read numerous pessimistic reports based on one consumer survey that indicated limited interest in BD. The findings are presented in the context of a format destined to fail, but there is no comparison to or acknowledgement of DVD’s initial slow growth. Another market analysis firm, without taking into account that BD player supply can’t satisfy demand, recently extrapolated Blu-ray Disc player sales and concluded that in five years, only one-third of player sales will be BD. This firm expects worldwide 2008 sales to total 3% of the player market and rise to only 31% by 2013. And by contrasting a projected 5.5 billion DVD sales with only 180 million BD sales, this company concludes that BD sales will never exceed those of DVD. This ignores the history of a well-entrenched VHS market in 1997, DVD’s initial slow growth curve, and the reality that DVD went on to bury VHS.

The company decided that since there are so many vectors for HD delivery, that BD simply has too much competition. Among the various vectors cited are traditional pay-TV services and the Internet. The report ignores the presence of the very same delivery vectors available to consumers when DVD grew to a great success in spite of those alternatives. And my recent experience with BD-Live, for which it took an outrageous amount of time to download a 2-minute high definition trailer over a high speed connection to the Internet, demonstrated that Internet delivery of high quality HD simply isn’t practical today and make take over a decade before the requisite resources are in place.

Perhaps influenced by the diminished sales of DVDs, the claim is made that video optical discs will sell in the billions annually, but there will be little or no growth in that sector. Never mind that the number of DVD releases has dropped precipitously over the last year or so, or that many consumers have stopped buying DVDs either because they own a BD player or anticipate a purchase, or that there has been considerable Blu-ray Disc sales growth.

In that report, content for Apple’s video iPod, on the other hand, is expected to enjoy significant growth, and the point is made in the context of optical disc decline. How anyone can compare the experience of watching a motion picture on a device that can fit in the palm of your hand with the experience of a large screen supported by large sound is a mystery to me. I’ve always conceded that there is a market for those who place convenience over quality as well as for those whose first priorities are quality and coming as close as possible to the motion picture theater experience.

But even this pessimistic organization estimates a 111% annual growth rate for the BD player installed base between 2008 and 2012. The annual growth rate for BD media is forecasted to be 257% over the same period. Regardless, this organization thinks that electronic distribution of HD poses the greatest threat to physical media.

Such negativity might discourage adoption and cause consumer concern, which could slow or stall the transition from DVD to Blu-ray Disc. And that would be a great shame, since the BD experience is so much better than the DVD experience. Fortunately, more perceptive organizations are watching the market and publishing more realistic and more optimistic views. And we’re also seeing positive indications from the industry. Let’s look at a few in no particular order…

Futuresource Consulting projects that in the United States Blu-ray Disc will outsell DVD by 2012. American consumers are expected to buy 45 million BDs, representing about 400% growth. As player prices drop thanks to advances in technology and the economies of scale, player sales will accelerate. Futuresource expects to see BD players to drop below $250 by the holiday season.

And speaking of less expensive players, NEC Electronics announced the development of the world's first LSI (Large Scale Integration) single-chip that integrates all the main functions required in Blu-ray Disc players. NEC will begin to ship samples to electronic manufacturers in September. Functionally, the chip will provide d/a conversion, the decoding of video and audio (including AVC, VC-1, MPEG-2, Dolby TrueHD, DTS-HD, and others), Profile 2.0 support and associated internal memory, a graphic processing accelerator, Ethernet controller, and an HDCP-compliant HDMI digital port. The chip’s multi-core CPU is reported to deliver 1150 DMIPS (Dhrystone MIPS), but I’m not sure how that compares with the PS3’s Cell Processor. I suspect this chip may be faster than existing player CPUs, but I’d expect the PS3 to remain the speed king among BD players for some time (I’d be delighted to be proven wrong). The most important takeaway is that BD players will quickly become thinner and less expensive; consequently they will become more attractive to mainstream buyers.

No sooner had we reviewed the Panasonic DMP-BD50 Blu-ray Player (and mentioned a number of anticipated fall BD player introductions), the manufacturer announced two new Profile 2.0 players: the DMP-BD35 and the DMP-BD55. It’s our understanding that that 7.1 analog output BD55 will have particularly high quality audio components for very transparent reproduction of lossless audio tracks. I’m curious to learn pricing, perhaps from CEDIA.

Microsoft, a consistent supporter of HD DVD while it lasted, is reported to be developing operating system level native support for data writing on Blu-ray Disc media. This development will spur the inclusion of BD drives in PCs, and since such drives can play BDs as well as record them, it’s a further market stimulus.

Paramount is making up for its support for the failed HD DVD format by offering consumers a $10 rebate if they upgrade from a previous release of specific titles; so far, they include: Transformers; The Godfather; Sweeney Todd; Stardust; Zodiac; and, Old School. Consumers will be expected to send in proofs of purchase for the new BD and the older disc, as well as a rebate form provided in each BD keepcase. The promotion will run from September 2nd through the end of the year. I previously reported Warner’s plans to reduce the prices of selected BD back catalog titles. And Amazon seems to be running one promotion after another that make BDs attractively priced. Along related lines, Blockbuster is aggressively pushing Blu-ray Discs and players in cooperation with Sony Electronics. The chain is reported to be selling between two and three thousand players each week. Blockbuster represents a major brick and mortar outlet trying to educate the consumer and supporting the transition from DVD to BD. These efforts and incentives are emblematic of the industry’s push to promote consumer awareness and to encourage new customers into trying the BD experience.

Lionsgate reported that during its first fiscal quarter of 2008, home-entertainment revenue grew 47%. The studio stated that this improvement “reflected significant and growing contributions from strong Blu-ray high-definition disc sales.” Lionsgate had the seventh-largest U.S. market share of disc spending during the first half of the year, representing 8% of the total market.

Replicator firm Cinram is investing in additional replication lines this summer to respond to the manufacturing load of a slew of Blu-ray Disc titles scheduled for the fourth quarter. The investment will help meet the demands of the growing market. For example, the company will be handling the production of The Dark Knight, which is huge in the motion picture theaters and is expected to be huge in the home market.

Safeway-owned supermarkets in California have DVDPlay rental kiosks for their customers. Those kiosks now offer Blu-ray Discs, and for the same price as DVDs. That kind of exposure couldn’t be more mainstream.

I was disappointed to learn that anaglyphic glasses were included in a recent 3-D Buena Vista BD release. You can forget full color using the old red-blue or red-green trick. I’ve been writing about a better, full-color technique employing 720p and shuttered video glasses for years. Now comes word that the Blu-Ray Disc Association is developing a standard for stereoscopic display of 3-D material. The Society of Motion Picture and Television Engineers and the Consumer Electronics Association are also investigating possible techniques. If things go well, it’s possible that we’ll see the first true 3-D full color BD by 2010 or 2011. The significance is that delivering 3-D via DVD is simply not possible unless one does field switching, essentially reducing the resolution to 240p. Blu-ray Disc can deliver 3-D now with a minimum of development and with backward compatibility with the very first BD players that came to market. This will become another incentive to make the switch from DVD to BD.

Parting Thoughts

Any market prediction requires a view of the big picture. BD player owners - film lovers and home theater enthusiasts - are proselytizing the format. Studios are pushing for market acceptance. Retailers are enthusiastic with the format’s potential. Technology is bringing the prices of players down. The economies of scale will drop disc prices. BD is capable of delivering unique experiences - including what I hope will be true, full color 3-D. And most importantly, the format is growing at a faster rate than DVD did during its formative years. Don’t let any naysayer dissuade you.

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