Thread: One more doom and gloom -- Blu-ray boom not enough to rescue DVD sales

$4.24 billion isn't that impressive considering the $25 billion value of the home video market. Hopefully, Sony, Panny and the rest will wake up and drive prices down to mass market levels.


Blu-ray boom not enough to rescue DVD sales: Scientific American

Blu-ray boom not enough to rescue DVD sales

Blu-ray boom not enough to rescue DVD sales Trademark of Blu-Ray DVD technology is displayed at an electronic shop in Tokyo February 17, 2008. REUTERS/Kim Kyung-Hoon

By Paul Bond

LOS ANGELES (Hollywood Reporter) - Since Blu-ray Disc's victory in the hi-definition DVD format war, data have trickled in suggesting a sales boost for Sony's fledgling technology. But if the pace doesn't quicken, home video might not return to sustained growth mode for several years.

In December, when Sony's duel with rival Toshiba was raging and next-generation DVD players and movies were a popular Christmas gift, 63% of next-generation DVDs sold in the U.S. were Blu-ray.

In March, however, the first full month after the format war ended with Toshiba's surrender, Blu-ray's advantage swelled to 81%, according to Redhill Group.

In the first quarter this year, 4.9 million next-gen movies were sold, 3.8 million of which were Blu-ray. That's half of the 9.8 million copies of 536 different titles that have been sold in the U.S. since the inception of Blu-ray and HD DVD.

However, the numbers -- while impressive since mid-February, when HD DVD threw in the towel -- don't make up for sagging traditional DVDs, sales of which might have peaked two years ago in terms of revenue.

Citigroup analyst Jason Bazinet figures that wholesale DVD revenue worldwide, for theatrical releases only, came in at $25 billion in 2006, dropped to $23.1 billion last year and will further decline to $21.4 billion this year.

"The industry appears to be lowering pricing to keep demand aloft," he said in his recent 2008 studio forecast.

Library titles have seen the biggest decline in DVD sales. While Disney makes an exceptional $2.3 million per year on each of its 990 library titles, most other studios generate only $300,000 per title. Time Warner, with 6,600 library titles, makes the least per title because a large number of them are in black and white.

Bernstein Research analyst Michael Nathanson also crunched the numbers and concluded that, even since the end of the format war, folks are only mildly interested in Blu-ray discs.

At the end of 2007, there were at least 3.5 million Blu-ray players in U.S. homes. At most, each of those households had purchased an average of three Blu-ray titles. Nathanson said that the same point in the adoption curve of standard DVD players, each household had purchased as many as 30 DVDs.

The disparity isn't surprising, though, considering most Americans are so happy with their switch from VHS to DVD that they just don't see the value proposition of making another switch to Blu-ray any time soon.

Plus, since the vast majority of Blu-ray players are in homes because Sony has embedded them into the PlayStation 3 video game consoles, many consumers don't seem to care that they even have a Blu-ray player.

Until stand-alone Blu-ray players -- the cheapest is about $370 -- fall to below $200, Americans en masse won't adopt the new technology, experts predict. Nathanson predicts in a recent 27-page report that that won't happen until the end of 2009.

In addition, he says, many Blu-ray households will upgrade only small portions of their libraries, particularly their favorite action and sci-fi films. "We have a hard time understanding why consumers will rush out to Best Buy to pick up the Blu-ray version of 'Caddyshack' or 'Sleepless in Seattle,"' he said.

The analyst figures that early Blu-ray adopters eventually will average about six to 10 titles apiece. But, with the extra $10-$15 per unit Blu-ray commands, it might be enough to put home video back into growth mode.

Taking into account that Blu-ray sales will cannibalize a large portion of standard DVD sales, Nathanson says that during the 2007-2011 period, home video could boast a 2.4% compounded annual growth rate in revenue. Without Blu-ray, he estimates home video would have lost 2.2% each year during that same time frame.

His forecast assumes that stand-alone Blu-ray players, in about 1% of U.S. households by the end of this year, will expand their reach to 25% by the end of 2011. He also assumes that the average price of a Blu-ray disc will drop from $28.50 this year to $24.43 in 2011 and that overall revenue from Blu-ray movies sold in the U.S. will rise from $260 million this year to $4.24 billion in 2011.

Reuters/Hollywood Reporter

Nice article. Short and to the point.
What always wonders me is why they never quote Understanding and Solutions and othe BD b!tches calling themselves reasearch outlets...

Diogen.

THey need to lower the price of blu ray dvds to around 20.00 bucks if they want Americans to buy more. They also need to lower the price of blu ray dvd players as well. THey could make more money on volume alone if they would do this. THey would also move along the transition to blu ray much quicker if they would do these two things. THis is not 1981 with the whole beta max vs vhs. THe American people have more options now for entertainment than just the live tv and vcr. IF they sit around to long trying to gouge the people with higher prices they just might get passed on by , by some new technology that does it better and lower priced. With the country in full recession & some say tettering on depression , with high gas & food prices with no end in sight, it makes no sense to keep the prices so high. WE might all be deciding soon enough if we want to pay 29.99 for a blu ray dvd or fill up our tank with some gas. IF that becomes the norm for more than one year , people will pass blu ray on by and stick to cheaper dvds and upconverting dvd players.

BD could also be more selective. The studios know which movies will sell and which are complete dogs. Just put the movies people want on BD, and leave the rest to DVD.

Note that Disney makes the most... They make a DVD available for a certain period of time then stop making it. Eventually they will release it again (about 7-10 years later). This keeps the market from being saturated. People know that the movie is going back to the Disney Vault and they buy it if they want it when it is available. Other studios could do the same with BD.

Studios do not want to spur sales with discounted prices. The want the margins. They will have to try other techniques to drive sales. Earlier releases on BD, only major movies on BD, limited availability, etc.

Studios like Fox are only releasing male oriented movies on Blu-Ray for the most part. Disney has yet to open up it's catalog on Blu-Ray, but will do so this fall. Sony, Universal and Lionsgate were most diverse with their offerings during the format separation.

The focus always seems to be on sales when comparing BD adoption to DVD adoption at the same point in each one's life cycle. But when DVD first hit the scene, services like Netflix weren't around or just barely in their infancy. With Blockbuster and Netflix barely able to keep up with customer's BD demands, the impact on sales cannot be insignificant. Does anyone know if those sales figures (to rental companies) are included in the totals cited in articles like this one?

They SHOULD lower the prices. I was lucky to get a Panasonic BD-30 when it was on sale for $429.00. Now, it's EVERYWHERE for $499. And when BD50 comes out is it going to drop like a rock? If it does, buy it, it's a very good machine. No problems with it although when updating firmware their representation of letters on the display leave ALOT to be desired. Looks like digital numbers from the 1980s. Even the serial number on the back. Letters and numbers made up of dots rather than stamped on.

As for the discs, yeah....start lowering the prices. $40 for new releases. Even discounted by Amazon it's still a bit on the high side

I wonder how many folks have a title on VHS, then purchased Laser Disc, the DVD version, the special DVD version, the enhanced DVD version then purchased HD-DVD or BD of the same title? While I have over 140 BD titles only about 35 are of DVD titles that I currently own. I have been purchasing BD only since BD first started coming out in '06. I have not bought one DVD even though I have been severly tempted since May of '06. Of course that means that alot of titles on HD-DVD that never came out on BD I am waiting for (BATMAN soon please) but I have been patient.

That said, if you get a nice BD player with good upconversion ability why replace all your DVDS? The article is dead on. The bottom line is the studios need to start producing better flicks. The need to have better production values and they need better stories. Last year there might of been a dozen movies released all year that my wife and I were interested in. The studios must do a much better job if they want to turn this around -- and a better price point on BD would be a start.

As a Blu-Ray supporter I have to say I agree with most of the article. If BD wants to grow at the rate they are hoping, they've got to get more aggressive. At the same time, I don't think it's time to sound the alarm bell yet. If things haven't picked up considerably after this holiday buying season then they can panic.

We shall see...