A year removed from vanquishing HD DVD, Blu-ray DVDs are finally getting some retail respect. At least, so says a forecast from market research firm FutureSource Consulting. The UK based firm released a prediction (PDF) this week saying consumers will buy more than 100m high definition Blu-ray discs across the U.S., Western Europe and Japan in 2009. The company expects 80 million units to sell in the U.S. alone.
A large part of the growth is attributed to decreasing prices for both Blu-ray hardware and the discs themselves. Another lesser reason, FutureSource explains, was preparatory overproduction in 2008. To “fill the channel” and “enable retailers to build their in-store displays,” the industry produced more than 200m discs in 2008 despite only selling 36m. Retailers are now ready for a more aggressive sales push.
Blu-ray “has moved from early adopter phase through to early majority” in the U.S., said Mai Hoang, a sr. analyst at FutureSource. The company predicts by 2012, 50% of U.S. DVD sales will be Blu-ray.
Some critics are skeptical of these near term numbers. They think the economy – both by pinching consumer spending and by restraining the funds available for big budget movie production – will slow Blu-ray’s adoption.
There are others who question the longer term cycle and speculate that, consequence of evolving digital delivery technologies, Blu-ray’s fall could be as rapid as its ascent.
All things considered, it’s a tea-leaf reading game. But logic and insider knowledge, at least with regard to Blu-ray’s longevity, if not FutureSource’s 2009 numbers, is on the side of Futuresource. The biggest reason is simple: economics. DVDs remain one of movie studios’ largest revenue generators. Until streaming and VOD services can offer a comparable windfall, content owners are apt to temper the pace of new technologies’ arrival by wielding the weapons imbued in the power of their licensing contracts. Simply put, they’ll limit alternative access to their programming and milk the profits out of Blu-ray until a better money maker is proven out.
Helping out from the other side of the equation is the nature of consumer viewing habits. There, it’s ease and ubiquity that drive major parts of purchase decision making. Until the time comes that digital delivery technologies are more accessible and convenient, mainstream consumers are more likely to favor striking a balance between packaged goods purchases and digital experimentations.
As Netflix Chief Content Officer Ted Sarandos put it in a Wednesday presentation at the Goldman Sachs Technology and Internet conference, with DVDs “because it looks like a CD, there’s a natural inclination to attribute the properties of the music business to the movie business. In fact, the consumer interaction with [a DVD] is quite different.”
For a DVD, or any packaged media, to be displaced by digital, something better has to come alone. With music, Sarandos says, that clearly happened but it’s not so with DVDs, yet: “an MP3 purchase from iTunes is portable enough to listen to where you listen to music. But today a file or a stream is not as portable as a DVD is. When our subscribers rent a disc, the disc we send them through the mail they can watch everywhere they watch movies. In the car. At the weekend house. In the bedroom. Anywhere they go. And when you transact electronically, you’re still rather limited to where you can consume it.”
DVDs are still the most convenient format for personal viewing of videos. Until that changes they’re not in danger of extinction.
Market data put out by NPD earlier this year seems to echo that sentiment too. In its Entertainment Trends in America report, the research firm asked people how they watched movies over the past three months. 67% responded that they watched a DVD they owned themselves. 50% said they watched a rental disc. Only 2% paid for a digital video download.
The same study also found that 41% of consumer movie budgets were spent on DVD purchases and 29% on rentals. 18% was spent at the box office on movie tickets but only .5% was spent on digital formats over the Internet. $8 out of every $10 dollars spent on movies went to DVDs NPD found.
While the NPD survey only looked at data in the short term, it was clear digital delivery isn’t close threatening DVD sales today.
So Blu-ray…100m discs in 2009? Maybe, maybe not. That depends on the crystal ball you look at. But still relevant in 2013, even 2015? …most likely.
Anecdotally, Netflix’ Sarandos added further support to Blu-ray growth projections with remarks that his company will likely see more than 1 million Blu-ray subscribers by year end – a sign that consumer take up on Blu-ray hardware is accelerating.
Netflix is also forecasting its DVD shipments will continue grow over the next five to ten years (Sarandos didn’t specify DVD format). Amazon’s success with CD sales was cited an example. Amazon, Sarandos said, shipped more CD’s in 2008 than it did in 2007 despite the general decline of the CD. “The internet is growing faster than the music business is cratering” he explained, “the ease and comfort of transacting business online will continue to grow for mainstream consumers and it will grow faster than packaged media will decline.” – So from the perspective of Netflix, a business built around DVDs and with its hands well into digital delivery was well – the runway for Blu-ray would appear to be long.
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