Find an ISF Forum Calibrator

Login & Registration






Lost Password?
No account yet? Register

ISF Forum via RSS

Video Savant Blog

Search

Home arrow Blu-ray News arrow HD Disc Wars

HD Disc War News

cURL error 6: Couldn't resolve host 'pipes.yahoo.com'

   
Hype No Help: Blu-ray, HD DVD Disc Sales Go Ker-Plunk
The annual CEDIA trade show is undoubtedly one of the most anticipated events on the calendars of home video and audio lovers in the US. This year's 4-day event officially kicked into gear on Thursday in Denver, but already it's clear that ringleaders Sony and Toshiba plan to do everything they can to make the Blu-ray versus HD DVD format war the centerpiece of CEDIA Expo 2007.

Sony got things rolling early in the pre-show proceedings on Wednesday by claiming that over the past 9 weeks, sales of dedicated Blu-ray players had passed sales of dedicated players for the Toshiba-backed HD DVD format.

This was interesting news, primarily because Toshiba, since the launch of the HD DVD format, had focused mostly on sales of standalone players, while Sony mostly relied on sales of the PlayStation 3 game console with its integrated Blu-ray disc player. In addition, Sony and its Blu-ray partners focused on maintaining high prices for early adopter buyers, while Toshiba has been much more aggressive on the price of single-purpose HD DVD players, although it too worked the game console angle with an budget-priced add-on HD DVD player for Microsoft Xbox 360 owners.

No one was surprised on Thursday when Toshiba countered the Sony claims by presenting statistics that indicate that Toshiba HD DVD players command 55% market share, with Sony holding just 42% of the market. That doesn't really refute the Sony claims, but it does provide some helpful context.

But as it turns out, probably the most interesting and relevant HD DVD vs Blu-ray factoid to emerge so far from CEDIA is that disc sales are not following the trend for hardware sales. Even as sales of players -- both in standalone and game console form -- are increasing, sales of Blu-ray and HD DVD discs are on a downtrend that resembles a freefall.
Study Cites Reasons for Slow Sales of HD DVD, Blu-ray

However, the study, conducted by the NPD Group, completely ignores the fundamental problems causing slow sales.

From the Business Wire:

The NPD Group reported today some reasons for the slower than expected start of high-definition video players and high-definition content sales (i.e., HD DVD and Blu-ray Disc). NPD's new High Definition Video Report Series examines consumer awareness, ownership, usage patterns, and intent to purchase high-definition players and content, since these new technologies were introduced last year.

Among those who currently own HDTVs, half (52 percent) are familiar with the availability of high-definition DVD players, but only 11 percent expressed strong intentions to buy one in the next six months. Seventy-three percent of HDTV owners reported that their current traditional-format DVD player still works well for them, so they do not need to replace it; while 62 percent said they are waiting for the prices of high-definition players to fall.

Home Theater Specialists Give Exclusive Nod to Blu-ray
The latest development in the Blu-ray versus HD DVD battle of endorsements gives a win to Blu-ray, as reported by the This Week in Consumer Electronics (TWICE) web site:

Home Theater Specialists of America (HTSA), the $500 million buying group for A/V specialty dealers and installers, has formally confirmed that it is backing Blu-ray Disc technology based on sales trends among its 62 members.

The group announced during the recent CEDIA Expo that it will make Blu-ray its exclusive format choice for high-definition disc players. According to the results of an internal study released today, 92 percent of category sales by HTSA members were in Blu-ray players, with the balance comprised mostly of dual-format players that combine BD and HD-DVD playback capability.

Research Reports on BD, HD DVD Ignore 'Early Adopters'

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.

$99 HD DVD Player Arrives: Is Toshiba "Suing for Peace"?

The story I'd most like to ignore -- the ongoing "battle" between HD DVD and Blu-ray -- just won't go away. This time, maybe there's a good reason.

At the end of last week, reports were circulating that Wal-Mart would be doing a pre-Black Friday special by offering a limited number of Toshiba brand HD DVD players for just $199. That news became old news in almost record time, as early this week, word leaked out that Wal-Mart was planning a not-so secret "Secret In-Store Special" where the Toshiba HD-A2 HD DVD player would be sold for $99. In no time at all, Best Buy weighed in with a $99 deal on the same HD DVD player.

Naturally, most observers, commentators and analysts have swiveled their attention in the direction of Sony and Blu-ray, looking for the next price cut gambit. But so far Sony doesn't appear inclined to play "follow the leader," if it means jumping off the edge of a cliff.

Warner Says No Plans for 'Total HD' Dual Disc Releases

Announced at the Consumer Electronics Show this past January, Warner Home Entertainment initially planned midyear releases of its Total HD product, a dual-format disc containing a movie in the HD DVD format on one side and Blu-ray on the other. Those plans were subsequently pushed back into early 2008, but now Warner tells High-Def Digest it has no current plans for Total HD releases.

Circuit City Providing Soft Landing for HD DVD Buyers

There's been a lot of rumor and speculation in recent days that Circuit City is accepting returns of HD DVD players it sold, providing its customers with a credit toward the purchase of a Blu-ray player. This speculation seems rooted in fact, at least based on a report late Wednesday from Gizmodo:

According to a Circuit City employee in Chicago, the consumer electronics chain is trading in HD DVD players bought into their stores "within 3 months of the announcement," as opposed to their 30-day return policy. According to the internal memo announcing the demise of the format, they will either give customers a Blu-ray player - paying the price difference, if any - or a gift card. The trade-in, however, will not be widely promoted and it will be only made available if the customer asks for it.

Although the HD Disc Format War is ended, Blu-ray has a LONG way to go before it is embraced as the marketplace successor to the original DVD format. The fact that something less than 50% of households have an HDTV capable of fully exploiting the new format is a fundamental challenge, but it's also true that there's significant consumer inertia in favor of the original DVD format. Movie downloads are also poised to become more popular over time.

But it seems clear that the biggest near-term challenge and opportunity facing Blu-ray over the next year is to find a way to soothe the bruised feelings of the unlucky millions who put money into HD DVD players and discs. By definition, we're talking early adopters, and the best thing Blu-ray can do to build some immediate momentum among these opinion leaders is to turn them into Blu-ray owners/advocates.

While the actions of Circuit City are smart business and in line with similar "swap" programs reported earlier in Japan and Switzerland, it would be even smarter if Sony, as the Blu-ray group ringleader, adopted a similar, worldwide trade-in program, but also extended it to HD DVD-for BD disc swaps.

While it's crystal clear that Sony has no moral obligation to insulate HD DVD buyers from the inevitable format war fallout, the fact that the HD DVD population is relatively small and Blu-ray's success a long way from assured, makes this something close to a "no brainer."

After all, if it's good business to pour hundreds of millions of dollars into movie studio coffers to attract exclusive Blu-ray support, doesn't it make sense to follow through and make sure those investments pay off?

Circuit City Extends Window for HD DVD Returns to 90 Days

Circuit City should be riding a wave of positive public relations with its policy of accepting returns of soon-to-be-orphaned HD DVD players, now extending its original 30-day limit to 90 days.

As reported by Engadget:

Hot on the heels of news that Circuit City may in fact be offering up a hush-hush trade-in program for HD DVD purchasers comes official word that said retailer is tripling its standard return window in order to appease early adopters. According to company spokesman Jim Babb, it's looking to "take care of [its] customers" by lengthening the return window from 30 to 90 days for all HD DVD player purchases. When returning the unit, users are given store credit...

I have to rate Circuit City's actions here as an extremely savvy way of building customer loyalty. Although there's no doubt a financial cost to Circuit City for taking on this policy, the impact, in view of the relatively small number of HD DVD players sold to date, should pay off in multiples in a fairly short time.

The question now becomes, will we see Best Buy and Wal-Mart, along with the major regionals, adopting similar policies? If that's going to happen, we should know in a few days.

I still think this is something that Sony should be doing on a top-down basis, as the company and the Blu-ray format are both in need of positive PR. But as it stands now, it's looking like this will go down as an opportunity missed for the slumbering electronics giant.

Blu-ray Prices Rising in Absence of HD DVD Competition

Gizmodo is reporting that Blu-ray player prices are on the rise:

I suppose that it is not all that surprising to find out that without competition from the HD DVDs camp, prices for Blu-ray players have gone up. According to data collected by Pricegrabber.com, Blu-ray players have hit a high average of $400 per unit for the year -- about the same price they were at this time last year. This comes after the aggressive price cuts Blu-ray manufacturers employed at the height of the HD DVD battle.

A spreadsheet screen grab accompanying the Gizmo news item shows that the Samsung BD-P1400 player is now selling at $374, versus a low of $301 on January 10, with similar increases shown for the Sony BDP-S300, now selling at $403, versus $307 at the 2008 low (Jan 1); the Sharp BD-HP20U at $440, versus a low of $325 (Feb 15); and the Panasonic DMP-BD30K at $480, versus a low of $401 (Jan 1).

The data at the Gizmodo site (via Pricegrabber) also shows that the LG BH200 combo Blu-ray/HD DVD player debuted at $999 on January 1, bottomed out at $599 on February 1 and now sells at $666.

While Gizmodo is correct about the price increase resulting from a sudden vacuum of competition, there's another angle here that should be beneficial to consumers over the medium to long haul. Rising prices for Blu-ray players are likely to encourage increased manufacturer support for Blu-ray, resulting in a greater variety of players and performance levels.

All consumers appreciate falling prices, but sometimes it's good for prices to go up in the short term, as it gives manufacturers an incentive to pay more attention to a market, with the likely long-term result being  broader choice over a wider range of price points.

In fact, the beginning of the end for the HD DVD format occurred precisely at the moment that Toshiba began aggressively slashing HD DVD player prices, as it guaranteed there would be reduced manufacturer interest in the format. Since Toshiba was virtually alone in building HD DVD hardware to begin with, there was little chance that any other manufacturer would support HD DVD when prices dipped to under $200 and eventually went as low as $99 prior to Toshiba tossing in the towel.

Will Toshiba's $1 Billion "Hit" Inhibit Future Format Wars?

Engadget reports on Toshiba's exit from the HD DVD business and suggests the financial cost should dissuade other companies from entering into this sort of format battle in the future:

There are spicy meatballs, and there are spicy meatballs -- and now there's a figure that will be tossed around for decades to come, one which will instantly represent the caution companies should take when embarking on another format war: a billion dollars. At least that's what Nikkei is reporting that Toshiba's losses on HD DVD totaled in 2007 alone: a 100b, or about $982m USD. It won't drive Toshiba under or anything, but you seriously have to ask yourself, was it really all worth it?

Yes, a billion dollars is a lot of money, but some perspective is necessary here. The actual financial cost of Toshiba's foray into HD DVD is relatively minor in the overall scheme of things. A good illustration of that fact is that even after flushing nearly a billion dollars down the toilet, the company still produced an annual profit of $2.5 billion.

But the bigger point here is that you can't look at the billion dollar hit in isolation -- you have to take into account how much Toshiba might have made over then next decade if HD DVD had been the hit it hoped it would be.

It's ultimately about the risk AND the reward.

And there are "cost" factors other than money to consider. Even though Sony has successfully seen off the HD DVD challenge, it remains to be seen if Blu-ray can eventually attain the same level of consumer acceptance as DVD or VHS previously.

It's probably more important to the ultimate success of Blu-ray that the momentum lost as a result of consumer confusion and disaffection be recovered quickly now that Blu-ray stands alone. If that can't be accomplished, then the cost of the format war is much greater than the short-term health of one company's financial statement.

Best Buy Joins Circuit City in Accepting HD DVD Trade-Ins

Engadget is reporting that Best Buy is adopting a trade-in policy for Best Buy customers who previously purchased an HD DVD player from the retail giant:

Best Buy is following Future Shop, Circuit City and others in reaching out to casualties of the format war. In this case, anyone who bought an HD DVD player from Best Buy before February 23, 2008 can request a complimentary $50 gift card for each player. For those too traumatized to even look at their discontinued hardware and software, Best Buy also announced it's adding HD DVD players and media to its Trade-In Center program, starting March 21. No word on how much a player can net you, but once its updated, check BestBuyTradeIn.com to get an estimate and decide how much holding onto the past is worth.

Update: Best Buy just issued a press release with additional information about the more than $10 million in gift cards it plans to distribute, and details on how to make sure you get yours...

A couple of interesting wrinkles here. First off, Best Buy doesn't appear to be offering a full refund for HD DVD players, but unlike Circuit City they aren't requiring the customer to return the player. Second, it sounds like Best Buy is also accepting trade-ins for HD DVD discs, though it's not clear how much the discs will yield in terms of cash or trade-in-kind.

It's good to see Best Buy addressing the disappointment of customers who picked the wrong side in the HD Disc Format War. It's also interesting to see that they haven't merely copied the Circuit City policy and that they are providing a somewhat more flexible solution, though it's arguable that it's not as comprehensive as the Circuit City policy.

Blu-ray Named in ITC Patent Complaint by Columbia Prof

ZDNet is reporting that a Columbia University professor has filed a complaint with the US International Trade Commission, claiming that several companies and related products, including Sony's Blu-ray technology, are infringing a patent she controls:

The U.S. International Trade Commission will launch an investigation into Sony and about 30 other companies on possible patent infringements related to Blu-ray disc players and other products.

The commission said Thursday on its Web site that the products involved are short-wavelength light-emitting diodes and laser diodes used in such electronics as handheld mobile devices, traffic lights, and high-definition DVD players.

The move is based on a complaint filed in February by Gertrude Neumark Rothschild, a Columbia University professor emeritus who is seeking to block imports into the United States of a range of products that she said were infringing her patent.

At this point it's impossible to know whether this complaint has any merit, or whether this will actually cause practical problems for Sony and the other companies named in the complaint. But this news fits a general trend, where patents are brandished like weapons, with more and more companies threatened with legal action in the hope of a quick and hefty payout. Some companies have even begun to build patent portfolios with the primary goal of creating a deterrent against patent warfare by competitors.

As an aside, I highly recommend the excellent Techdirt web site for anyone who's interested in really understanding the purpose and importance of patents and copyrights for society, and how recent legal and legislative developments are seriously undermining those ideals.

March 24 Update:  Techdirt provides more background on this story, in particular a possible explanation of why this is a complaint filed via the US ITC, not a lawsuit.

Is 29 Million Blu-ray Players by End-2008 Good News?

The web is abuzz today with news of a Strategy Analytics research report that predicts there will be more than 29 million Blu-ray players in consumer hands by the end of this year.

That sounds like it should be good news for anyone with a stake in the success of the Blu-ray format. But the fact is, the very report that paints such a rosy future for Blu-ray raises some serious concerns about that seemingly guaranteed success. I'll explain below why I think the Blu-ray glass is half empty, but first here's the key predictions from the Business Wire press release:

The Blu-ray Disc victory in its recent format war with HD-DVD will propel this technology into 29.4 million homes worldwide by the end of 2008, according to the latest research published by the Strategy Analytics Connected Home Devices service...

...[The] report predicts that global sales of Blu-ray devices will reach 18.8 million units in 2008, including 4 million stand-alone players, 13 million consoles and nearly 2 million PCs. By 2012, annual sales of all BD devices will reach 57.4 million units. The largest market will be in Europe, with 26.4 million, followed by the US (22.6 million) and Japan (8.4 million).

The elephant in the room here is the lopsided contribution that PlayStation3 game consoles are expected to continue to make to overall Blu-ray sales in 2008 -- approximately 7 out of every 10 new "Blu-ray players" to be sold in 2008 year are expected to be disguised as PlayStation 3 gaming consoles.

Make no mistake -- I really admire the PS3 "Trojan Horse" strategy and its critical role in forcing Toshiba and HD DVD off the battlefield. But that strategy doesn't make the cut as an end game. After all, the real value of the mythical Trojan Horse wasn't the deadly firepower of those hidden inside -- it was their ability to quietly open the fortress gates from within to allow entry to a larger invading force.

Taking this Illiad-inspired metaphor to the next step, you might say that Sony is having a really tough time on the enlistment front.

But just as unsettling is the idea that PCs with BD drives, a relatively new product category, will account for 2 million sales units, while sales of traditional, single-purpose dics players with Blu-ray technology will amount to a measly 4 million sales units.

When you add it all up, nearly 80% of 2008 "Blu-ray" sales are actually products that are first and foremost something other than a device designed to watch a Blu-ray movie. Strategy Analytics actually predicts that standalone Blu-ray players will be the main contributor for Blu-ray sales from 2009 onward, but no further details are available in the press release and the full text of the research report is only available by subscription.

It hard to see what's going to propel this fundamental change in fortunes for Blu-ray, seemingly overnight. Hopefully Strategy Analytics or Sony have the magic formula in hand.

Wal-Mart, Amazon Offer Refunds to HD DVD Owners

Wal-Mart and Amazon have belatedly joined Circuit City and Best Buy in offering "make nice" refunds to their customers who purchased HD DVD players. Wal-Mart is offering a full refund but requires the return of the HD DVD player, while Amazon is providing just a $50 refund, but allows its customers to keep the players.

TV Predictions reports on the Wal-Mart refund plan:

Wal-Mart says HD DVD buyers need only to provide the player and their original receipt to get the refund; it's not necessary to return the box in which it came. The full refund offer is good until April 30.

And Gizmodo details the Amazon program:

Amazon is also doling out a $50 credit to anyone who bought Toshiba's folly after Feb. 23, 2008. Naturally, they're encouraging you to use it on a shiny new Blu-ray player, but you could use it to take advantage of their HD DVD fire sale. Unfortunately, they're not doing trade-ins, so this is all you're gonna get.

Note: Gizmodo is incorrectly reporting that the refund is available only on purchases that took place after Feb 23 of this year. In fact, Amazon is limiting the refund offer to purchases made before Feb 23, the day Toshiba announced that it was withdrawing support for the HD DVD format.

Is Blu-ray a Winner, Or a Stumbling, Bumbling Survivor?

There have been a number of recent research studies examining the current state of Sony's Blu-ray next-generation packaged media format, including one from Strategy Analytics a few weeks ago that was dissected here shortly after its release -- Is 29 Million Blu-ray Players by End-2008 Good News?

The key disconnect I found in the SA study is its forecast that 80% of all Blu-ray hardware sales this year are expected to be in the form of either PS3s or BD drives installed in desktop and laptop computers. Therefore, it was difficult to understand the basis for its conclusion that standalone Blu-ray players would suddenly become the leading contributor to BD sales beginning in 2009. This is sort of like a car that goes from 0 to 60 miles per hour in just 10 seconds, suddenly improving to 0-60 mph in less than 5 seconds, with the turning of calendar pages the only explanation offered for a massive change in performance.

Now, a new study by ABI Research suggests that PlayStation 3 will continue to be the main force for Blu-ray sales for another 5 years. As reported by Engadget HD:

Blu-ray still has a lot of convincing to do before ABI believes it's the future, mostly because of upconverting DVD players. According to the analyst's figures, while 35% of DVD players sold today (that low?) upconvert, 60% will by 2013 (again, that low?). The state of Blu-ray hardware going forward isn't to their liking either, with principal analyst Steve Wilson stating "studios better hope that people are playing movies on their PlayStations. Otherwise there's very little installed base." With PS3s accounting for 85% of Blu-ray players in 2008, ABI doesn't see things evening out until 2013, with high prices for dedicated players keeping sales volume lower than studios would like.

I'll concede that these sorts of research reports, in general, are notorious for getting things wrong, usually as a result of focusing on the predetermined needs and desires of the company underwriting or promoting the study, or by the researcher themselves, who are highly motivated to produce the sort of findings that generate widespread business and general news coverage. It's certainly possible that both Strategy Analytics and ABI Research have got it wrong, and that standalone Blu-ray sales are quietly gaining momentum and share against both PS3 consoles and upconverting, standard-definition DVD players.

But that's now how I'd bet things are actually going. And I think the key problem here is that after beating back the HD DVD challenge, Sony has taken a complacent "now we just build it, and they will come" approach to Blu-ray marketing. Maybe I'm missing the forest for all the trees, but about the only time I hear any mass market promotion of Blu-ray is the "...and now available in Blu-ray Disc" tagline added to TV advertisements for the weekly batch of new DVD releases.

And this seems especially strange to me, considering that Blu-ray promotion represents one of those made-in-heaven marketing opportunities, where promotion of one product (Blu-ray) provides positive and complementary promotion for a whole slew of other products, including Sony HDTVs, Sony A/V receivers, Tri-Star and Columbia Picture properties, and PlayStation hardware and software, among others.

But then, the lack of effort by Sony to grow consumer awareness and demand for Blu-ray is pretty consistent with how the entire rollout of both Blu-ray and HD DVD was conducted. There was then -- and remains now -- very little focus on consumers. The format battle was ultimately fought and won almost entirely behind the scenes, with corporate politicking and financial enticements to studios being the blunt weapons of choice. Consumer reaction to HD DVD and Blu-ray was little more than a sideshow.

While there's no question that this strategy worked admirably well for Sony in eliminating the HD DVD challenge, it will not translate to a victory in the consumer marketplace. It's hard to understand how Sony could be dropping the ball so badly.

It seems that something has gone terribly wrong in the HDNA.