No Exit Plan Seen In HD Disc Format War

By Greg Tarr On Jan 7 2008 - 8:00am




Now with hardware manufacturers cutting prices and Web-enabled extra content either available or soon on the way for both formats, the feuding HD disc camps will prepare to take their war to the next level at International CES.

The base messages from each this year remain the same: For Blu-ray Disc it's that BD is the safe bet for consumers due to the high quality of images and sound, larger storage capacity per disc, and the longer list of supporting hardware manufacturers, Hollywood studios and exclusive blockbuster titles.

For HD DVD, it's that "HD DVD is delivering the most affordable solution for high definition, with the best picture and sound quality available, along with a consistent and immersive interactive experience," said Ken Graffeo, Universal Studios Home Entertainment HD DVD strategic marketing executive VP. "What will be new this year is the momentum we'll be showcasing for the format and proof points reinforcing this message."

"To the extent there has been some trepidation on the part of consumers to enter the HD market, it's been caused in part by uncertainty as to which way things are trending," said Andy Parsons, Pioneer Electroincs, home entertainment and business solutions group product planning senior VP, and Blu-ray Disc Promotion Group spokesman. "We've reached a point where consumers can see the trend line pointing solidly at Blu-ray, not just in the U.S., but in Europe and Asia as well."

According to U.S. sell-through estimates from market research firm The NPD Group, HD DVD players (excluding Xbox 360 video game consoles and HD DVD add-on drives) held the upper hand in dedicated player sales — moving 134,339 units between Jan. 1 and Nov. 1, 2007, while Blu-ray Disc players (excluding PlayStation 3 sales) sold 106,846 units in the same period. Combination Blu-ray/HD DVD players sold approximately 6,904 in the period, according to NPD.

Interestingly, the aggressive price promotions of the HD DVD group resulted in lower dollar volume in the period. Sales of HD DVD players totaled $43.3 million, while Blu-ray sales garnered $60.7 million, The NPD Group said. Combo players totaled $7.2 million.

Where the disparity was most evident, however, was in the video game consoles, where sell-through between April 2006 and November 2007 registered approximately 250,000 Xbox 360 consoles with add-on HD DVD drives, while PlayStation 3 units (all of which can play Blu-ray Disc movies) accounted for over 2 million units, NPD said.

How significant video game sales are to the HD disc market remains a strong point of contention: The Blu-ray camps feels that a majority of PlayStation 3 purchasers are using the console to watch HD movies in addition to playing video games.

But the HD DVD group said that's not so.

"As HD DVD's install base grows it will translate into increased software sales. The same can't be said of the competition due to a strategy heavily invested in a gaming platform. Once a compelling slate of games arrives for the PS3 and "buy one, get one" title promotions start to wane, it will be hard for the other side to maintain these artificially inflated software sales. There are numerous reports that show game systems are bought for the primary reason of gaming, not watching movies."

Parsons, however, points to Blu-ray's software sales as evidence of the popularity of PS3 with movie watchers to date.

"If you look at software sales in the U.S., Blu-ray is outselling HD DVD at a 2-to-1 clip and has outsold HD DVD in every single week of the year. This includes, by the way, the weeks where HD DVD had its biggest releases and in the weeks following their much-reported $99 player sale. Additionally, of the top 20 selling high-definition titles, 18 of them are on Blu-ray Disc. In Europe, Blu-ray accounts for 72 percent of the high-definition disc sales and in Japan, over 90 percent of the high definition discs sold are Blu-ray Disc. So when we look at these statistics, coupled with the growing popularity and huge installed base of the PS3 platform, Blu-ray is actually the safest buy."

While Blu-ray Disc may be enjoying a strong following in international markets, Graffeo noted that HD DVD could soon have a strong following in China, where most HD discs eventually may manufactured.

"The China HD DVD only format was approved in the most recent DVD Forum Steering Committee meeting in Taipei," Graffeo said. "While the format will play discs specifically made for the Chinese market, the hardware is virtually identical to HD DVD, which will add to our overall manufacturing advantage. Their support will continue to drive down costs for HD DVD players, and since this is the first time China has approved a Hollywood-backed format, it will also make China a viable market for the U.S. content industry."

Ultimately, HD DVD's salvation may come from the penetration of HD DVD players reaching a critical mass that all studios would find hard to ignore.

The HD DVD camp recently released post-Black Friday sales figures showing total U.S. penetration of HD DVD players, including Xbox 360s with HD DVD add-on drives, at 750,000 units.

Blu-ray backers reported post-Black Friday sales showing total sell-in since launch of 2.7 million players, including PS3s, in North America as of Nov. 24, 2007.

"It is up to the studios to decide what level of market penetration signals a tipping point, but once you hit 1 million dedicated players — devices that we know were bought to watch HD movies now and in the future — it's tough to ignore such a significant customer base," said Graffeo, without saying how tough it has been for Universal to ignore Blu-ray's strong sales gains.

As for the year ahead, Parsons summarized perhaps the whole industry's primary goal: "There's only one — get this format war behind us.

Alert to All Users of the Disqus commenting system:

Because of a recent global security issue, the Disqus website recommends that all users change their Disqus passwords. Heres a URL about the issue:

http://engineering.disqus.com/2014/04/10/heartbleed.html

 

 

 

 

Connect

 

PHOTOS

Enjoy the greatest pictures taken from famous shows and events this year.

Current Issue

Webcast

This TWICE webinar,  hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.