Blu-ray's Work Is Still Ahead, Say Analysts

By Greg Tarr -- TWICE, 2/25/2008

NEW YORK — Analysts covering the HD Disc market said Toshiba's decision to abandon HD DVD should help spark some new interest in purchasing Blu-ray Disc players, but most don't expect it to drive a windfall of new business to the category.

Ross Rubin, The NPD Group industry analysis director, said that while Toshiba's decision was a win for Blu-ray on retail distribution of HD movies, it doesn't necessarily ensure that Blu-ray will become the next DVD.

"All along, both formats were fighting against the high customer satisfaction that consumers continue to have with DVD, particularly up-converting DVD on high-definition televisions," Rubin said. "We also have the continuing threat of digital distribution looming on the horizon as broadband increases and cable, satellite and teleco TV services continue to increase their selections of HD movies on demand."

Similarly, Paul Erickson, The NPD Group's DisplaySearch DVD and HD market research director, pointed to an NPD study conducted last fall that showed the top reasons consumers are not buying more HD disc players are their high satisfaction with the picture quality of standard DVDs, and the still-high price of HD disc players.

He said consumers can buy good-quality up-converting DVD players for $60, while Blu-ray Disc players start at around $300.

"While industry press has already spent a fair amount of time examining the decline in HD DVD's fortunes over this past week, it is more important to remain realistic about expectations for Blu-ray and the next generation DVD market overall in the face of this development," Erickson said . "Even if all HD DVD products were removed from retail shelves today, the average consumer still will not be buying Blu-ray hardware and software in mass quantities for some time."

DisplaySearch expects the HD player market will parallel sales of DVD players at comparable stages in the products' launch cycles.

Similarly, David Mercer, Strategy Analytics principal analyst, said, "Blu-ray Disc has passed its first real test by beating HD DVD. But a much bigger challenge now lies ahead if BD is to become as successful as DVD, and content owners, retailers and manufacturers must now demonstrate that they can work together to promote BD effectively."

Michelle Abraham, In-Stat principal analyst, said she expects Blu-ray Disc player manufacturers to now take the gloves off in marketing against each other instead of HD DVD.

"They need to convince HDTV set owners, including those who don't receive HDTV signals, that they should buy a BD player," said Abraham. "As long as BD player prices decline and the number of titles available increases greatly, I expect the overall volume of players to increase in 2008."

She said that while Blu-ray will be successful, she doesn't expect it to "reach the heights of DVD," although not necessarily due to the competition from video downloading.

"Downloading today simply cannot produce the same video-quality experience, though future technology may change that," she said. "But with the expectation for content downloading and portability in the future, it makes sense for Toshiba to invest in its flash products."