Earlier today, JupiterResearch released a new market research report that paints a pessimistic future for the purveyors of Blu-ray and HD DVD hardware and software.

While the conclusions of the report may turn out to be more or less correct, the findings ignore the two most important factors in any forecast for this market -- one, the inherent incompatibility between the competing formats; and two, and the apparent failure of the new formats to generate genuine, broad-based enthusiasm among the trend-setting "early adopter" demographic.

From the Business Wire:

According to the JupiterResearch report "Next Generation DVD: Will the Winner Be HD DVD, Blu-ray, or None of the Above?," while HD DVD and Blu-ray camps are attempting to win over the hearts and minds of consumers with next-generation, high-definition optical disks, HD content has little impact on purchasing decisions. In fact, a mere 24 percent of consumers cited HD content as a motivator to upgrade their home equipment. Because there is a far more extensive catalog of titles available on standard DVD than on either HD DVD or Blu-ray, there is little motivation for consumers to make the switch.

"CDs and DVDs both offered a clear value proposition to consumers when they were introduced to the marketplace. There was a visible difference in the experience that was easily grasped," explained Michael Gartenberg, JupiterResearch Vice President and lead author of the report. "The real competitor that both these formats face is not each other, but rather low cost DVD players with up-scaling capabilities that pass the ‘good enough’ test for most consumers."

Further confusing the issue is the growth and penetration of broadband, which is facilitating content delivery directly to consumers without the need for any optical disk. Combined with ease of use and the ability to move content from room to room as well as onto portable devices, the market for downloadable video content continues to grow each day.

The problem with the JupiterResearch report (and other similar market research reports) is they're talking to a general sampling of consumers when they really should be identifying and focusing on the "early adopter," such as those who bought into DVD and HDTV displays in the first 2 or 3 years of availability.

It's this "early adopter" -- not the average consumer -- who will ultimately make or break a new product category like high-definition disc players. Early adopters have the financial wherewithal and self-generated enthusiasm needed to grin and bear the initial high hardware cost and scant programming choices that are typical in the early stages of these sort of product rollouts. If a new product category doesn't generate enough momentum among the early adopter crowd, it will never put down the sort of roots needed to eventually reach a broader market.

Of course, early adopter acceptance of a new product is no guarantee for broader success, but for consumer electronics, it's often a make-or-break factor.

As I've written here recently, I'm convinced that the biggest inhibitor to bigger near-term sales of high-definition disc players is the fact that there are two incompatible formats. But that finding rarely shows up in these market research reports, and when it does, it's presented only as a secondary or tertiary factor. I believe that's because these surveys are posing the right questions to the wrong people -- the average consumer still has relatively limited awareness of HDTV (30 percent US household penetration), never mind the particulars of Blu-ray and HD DVD.

No doubt it's much harder and more expensive to identify and poll "early adopters." But if it's really important to understand what's happening in this market and how it's likely to play out long term, that's the group that we need to understand today.

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