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DVD Recorders Ready For A Growth Spurt In U.S.: In-Stat

As shipments of DVD players have slowed down, DVD recorders are poised for growth.

When 2004’s final sales numbers are tallied, In-Stat expects DVD recorder unit shipments will reach over one million in the United States in 2004. By 2008, annual DVD recorder shipments will increase to 20 million as the price difference between a DVD recorder and a DVD player declines.

The DVD recorder market has not taken off as quickly as manufacturers had hoped. However, manufacturers are seeing an increasing growth trend in the last three to four months according to Alberto Reggiani, national DVD marketing manager at Panasonic. “Consumer awareness is increasing as more DVD recorder models are available and retailers are dedicating more shelf space to DVD recorders.” Panasonic has made a large investment in advertising, retail displays and training to improve sales.

DVD recorder prices have been a factor in slower sales, but are becoming less of an issue. DVD recorders were offered for prices as low as $129.99 on Black Friday, which is about $20 less than the previous low. In-Stat expects a number of DVD recorders to be available for $99 during the holidays in 2005. Component suppliers are certainly gearing up for the downward price spiral.

Returns of DVD recorders have been high, as the functions on a DVD recorder are more complex. Some consumers do not understand that they cannot use a DVD recorder to copy their DVD collection. To help with the complexity, DVD recorder manufacturers are creating more user-friendly product manuals.

Lower prices will not be enough to convince all consumers to buy DVD recorders. In a Web-based survey of In-Stat’s Technology Adoption Panel conducted in November 2004, less than 50 percent of respondents plan to buy a DVD recorder in the next two years. These respondents are more technology savvy than the general population. Over 90 percent of the respondents own a DVD player and 66 percent have a broadband connection.

DVD recorder manufacturers and retailers have their work cut out for them. Currently, DVD recorders sell despite poor retail displays. In many retail locations, DVD recorders are displayed on rows of shelves. They are not connected to a TV, so there is no way to demonstrate to the prospective buyer the benefits of DVD recorder features such as electronic program guides. According to Maria Gonzalez, DVD/VCR marketing manager at Samsung Electronics, “a key component of consumer education has to be retailer participation. Explanations have to be made in a way that even non-technical consumers will understand.”

Based on the survey, the most important feature for a DVD recorder is still to play prerecorded DVD discs. Transferring personal videos rated second in the survey. DVD recorder manufacturers can improve the personal video- transfer process by offering simple and easy-to-use personal video-editing applications, such as YesDVD. The problem then becomes demonstrating these additional features at retail to help the consumer understand why they may be interested in one recorder over another.

Time shifting TV with a DVD recorder generated the third highest interest. About half of the respondents who own a DVD recorder or plan to buy one in the next two years were extremely or very interested in a DVD recorder with a hard drive. Over 75 percent want to spend less than $100 extra for that option.

However, In-Stat does not expect DVD recorders with hard drives to be as popular in the United States as they have been in Japan, where more than 75 percent of DVD recorders shipped in 2004 have hard drives. The greatest difference between the two markets is that cable and satellite providers in the United States are offering their set-top receivers with hard drives at subsidized prices. Why buy a more expensive DVD recorder with a hard drive when a cable set-top box with a digital video recorder (DVR) can be rented from the cable operator for $10 a month? Or a satellite receiver with a DVR purchased for $49 after rebates? Still, owning a DVR does not preclude interest in DVD recorders. In the survey, those with DVRs were more likely to buy a DVD recorder within the next 12 months.

On the other hand, VCR/DVD recorder combination products have proven popular in the United States. Consumers easily understand the concept of combining VCR and DVD recorder functions in one box. VCR/DVD recorders make it easy to copy VHS tapes, though they are not supposed to enable the copying of those that are copy protected. Consumers can easily find their way around this restriction. In-Stat has heard of sales people in some stores handing out lists of Web sites that can be consulted for copying instructions.

DVD recorders will continue to replace DVD playback -only functions in combination products like home-theater-in-a-box systems. Manufacturers are working to make the user interfaces and remote controls as simple as possible.

One future feature that is a big question mark is the addition of digital TV tuners to DVD recorders. By FCC mandate, all DVD recorders shipped after July 1, 2007 must have an ATSC tuner or no tuner at all. In 2007, In-Stat expects to see some DVD recorders on the market without tuners and some with tuners. The number of U.S. homes with set-top boxes for TV reception keeps climbing, thereby decreasing the number of homes that would need a tuner in their DVD recorder. DVD recorders without tuners will be less expensive and can still be used for personal video storage as well as recording TV programming output via a set-top box.

In the survey 36 percent of respondents want to be able to record HDTV programs. This is good news for those developing DVD recorders based on blue laser technology that enables recording of HD. These higher capacity DVD recorders are available now in Japan. They are expected to be available at retail in the United States for the 2005 holiday season. The over-$1,000 price point will be a deterrent.

While the growth is in recorders, the DVD player market is not going away yet. Portable DVD players were a hot item in Black Friday ads. Growth in mobile DVD players for cars is expected. However, standalone DVD players have peaked and DVD recorders will replace DVD players in combination products. In a few years, DVD players may disappear from the U.S. market as DVD recorders reach similar price points.