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Blu-ray Disc Progress Report

Jul 16th, 2008
Six months after the format war victory

As a subscriber to a news service that sends links my way related to Blu-ray Disc, I peruse many articles and columns about the format. I’m still amazed at how many misinformed naysayers and doomsayers are downplaying the format war victory, claiming that Blu-ray Disc is not doing well in the marketplace, and is about to be decimated by download technology. So let’s take a look at the real state of the market and what more knowledgeable experts are saying.

The Entertainment Merchants Association’s 2008 annual report on home entertainment offers quite a bit of data about the market as a whole, analyzing 2007’s performance and making a few predictions. DVD sales continue to erode. 12,177 DVDs were released in 2007; the release rate reached a peak in 2005 with 13,950 DVDs. Regardless, the home video market is at a remarkably healthy $24.1 billion, $15.9 billion in sales and $8.2 billion in rentals in 2007. Nearly 9 million high definition discs were sold in 2007 at a cost of $260 million (and that was during a format war that caused many consumers to assume a wait and see attitude).

High definition disc sales represent a small percentage of overall home video sales, but let’s not forget that the rate of HD disc sales is running well ahead of DVD sales for the same period during that format’s formative years. The report maintains that no later than 2012, the sales of Blu-ray Discs will exceed those of standard definition DVDs and will enjoy sales of $9.5 billion. The total consumer spending on home video in 2012 is expected to be $25.6 billion.

In 2007, high definition television sales rose to 20.7 million units; by the end of the year, the installed base stood at 46.4 million, which represents 34% of all American households. The report reveals that only 44% of those owners watch high definition content; of the remaining 56%, 22% believe they are watching high definition when, in fact, they are not. Consumer education issues aside, the 44% of the better informed and more experienced viewers represents about 20 million potential sales of Blu-ray Disc Players. (More about that a little later.)

As of the end of 2007, high definition disc player sales were dwarfed by DVD player sales. 33 million DVD players were sold in 2007; that installed base now stands at 87.3 million dedicated players. I recently noticed at BJ’s that dedicated progressive scan DVD players were available for $35 (Toshiba) and $45 (Sony); it’s no wonder that mainstream consumers are questioning spending hundreds of dollars on more advanced technology when DVD players have been priced down to throwaway levels. Up-scaling players aren’t even necessary since HD displays will scale internally, some quite well. In contrast only 4.5 million high definition disc players were sold in 2006 and 2007 combined.

PS3 sales in the States hovered at about 3 million by the end at 2007; when surveyed, 87% of PS3 owners responded that they watch Blu-ray Discs on their game console. The EMA believes the PS3 will be surpassed in 2009 by dedicated Blu-ray Disc players. Market research firms estimate that by 2012, the worldwide installed base of Blu-ray Disc players will range from 100 to 130 million homes. Annual sales of Blu-ray Disc players of all kinds are estimated to reach 57.4 million units by 2012. Europe will lead with 26.4 million units, the U.S. will buy 22.6 million units, and Japan will buy 8.4 million units.

Consumers’ motion picture expenditures have a remarkable breakdown: 49% is spent on home video, 25% is spent on cable TV, 23% is spent at the box office, and only 3% is spent on on-demand. Is it any wonder that the studios bring their theatrical releases to home video so promptly? Digital downloads still represent an insignificant portion of the market; $123 million were spent on Internet downloads (that represents 0.51% of the market).

As for 2008, Home Media Magazine reports that consumer spending on Blu-ray Discs and DVDs for the first half of the year is up 1.6% compared to the same period in 2007, $10.77 billion in 2008 versus $10.6 billion in 2007. Unit sales grew 1.1%; consumers bought 412.3 million discs versus 407.9 million discs in 2007. But, according to The Hollywood Reporter, $194 million was spent on Blu-ray Discs in the first six months of 2008, which represents a 350% increase in sales compared to the combined sales of Blu-ray Discs and HD DVDs during last year’s first six months.

In Japan, Amazon shows that BD sales are exceeding DVD sales. Sony’s Resident Evil Trilogy Blu-ray Disc Boxset, for example, outsold its DVD counterpart significantly. And a recent survey revealed that almost 10% of America’s 46.4 million HDTV households are planning on buying a Blu-ray Disc player in 2008.

Parting Thoughts

Blu-ray Disc not doing well? Downloads challenging BDs for future dominance? Humbug! The rate of growth and acceptance of the Blu-ray Disc format considerably exceeds the growth of the DVD format during the same period after its introduction. If DVD was the single most successful product introduction in the history of the consumer electronics industry, we just may be poised for a new champion. If you had any doubts before, lay them aside. Watch for the introduction of an array of Profile 2.0 BD players in the fourth quarter and the holiday season. It may be your time to jump in to true high definition quality.

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