At first glance, it might appear that Toshiba’s decision to pull the plug on future development and marketing of HD-DVD players would bring clarity to the HD prerecorded home entertainment market and an avalanche of sales in Blu-ray Disc players.
Perhaps that will be the case, eventually. However, according to Steve Wilson, ABI Research principal analyst for the Consumer Video Technologies Research Service, several factors, including a relatively high price and the fact that many Blu-ray Disc players are “beta” units, have prevented a stampede of consumers to the format.
In April, ABI Research released new market data showing that the Blu-ray Disc player market won’t hit its stride for 12 to 18 months. “HD Technology Update” spoke with Wilson to learn more.
HD Technology Update: You’ve forecast that it will be 12 to 18 months before the Blu-ray market kicks into high gear. How did you arrive at that conclusion?
Steve Wilson: The first thing to consider is player pricing. All the BD (Blu-ray Disc) announcements for 2008 so far have player prices north of $300, except from Funai, who will be introducing its first player. Panasonic, one of the leaders in BD technology, is pricing its players even higher.
Are player prices going to hit $199 this holiday season? I don’t think so. Consider that current crop of players and even several of the coming players are more like “beta” players. Existing players are missing significant functions, such as Bonus View and BD Live. New players are required to support Bonus View, but many won’t support BD Live.
Some are upgradeable and some require consumers to add an external 1GB flash, but mainstream consumers don’t expect this from CE manufacturers. More than that, however, a lot of these players still have glitches (the occasional freeze, disc compatibility problems), and while it has gotten a lot better, it’s going to continue at least until the platform software gets solidified.
I think 2008 is still a growing year for the BD format. The Tier 1 player manufacturers aren’t going to be active below $200 until the holiday season of 2009. By then, all the new players will be complete through Profile 2 (BD Live), and even then it may only be the leftovers that are priced to move below $199.
HD Technology Update: How does the availability of Bonus View and BD Live support fit into where the market stands and where it’s headed?
Steve Wilson: Bonus View, the capability for picture-in-picture, is something an individual consumer may or may not value. But it is required for all players, and so it becomes more of a player development issue. BD Live, the ability of studios to offer Internet-based services and functions, is at the heart of the transition to this new format. It gives the market longevity far beyond that of standard DVD and opens the door to a raft of new services and features.
It’s fair to say that a lot of consumers don’t care about these new features, but does the BDA want the market populated with a lot of back-level players? Consider BD Live from a studio’s perspective: When a studio sells an SD disc, it interacts with the consumer once. When they sell a BD Live disc, they have an opportunity to interact with customers every time the disc is played.
HD Technology Update: Is the availability of upscaling progressive-scan DVD players impacting consumer acceptance of Blu-ray disc entertainment?
Steve Wilson: Video processing is a real art and never before has there been so much demand to process digital content. Upscaling solutions can leverage the technology curve nearly as much as microprocessors can. Every year, the quality of standard DVD players improves, but a lot of consumers really can’t tell the difference anyway — it’s really more about price.
In addition, CE manufacturers are focusing on the BD market — the DVD market is shrinking. All that’s really happening is that upscalers are helping to maintain what consumers already view as a very satisfactory viewing experience. Unless the upconverting players offer a significant cost savings over BD players, which they do today, they are not going to impact the market.
Once BD player prices start dropping into the $150 to $199 range, there isn’t much room left for upscalers. For the next year or so, consumers who need a DVD player and aren’t ready to spring for a BD player are going to leave with a bare-bones player for $50, or one that might actually project a decent image on an HDTV.
HD Technology Update: While HD-DVD is removed as a market factor, other distribution avenues, including the Internet and VOD, remain. How will they impact the way in which the Blu-ray Disc HD entertainment market unfolds?
Steve Wilson: In terms of picture quality, the forcing function from DVD to BD is nothing like the forcing function from VCR to DVD. That’s pretty well understood. Alternative content sources like VOD and Internet downloads are a secondary effect, but growing every day. Picture quality, player prices, HDTV penetration, BD disc pricing and availability, VOD and PC video usage are all things moderating the adoption of BD players.
The CE market is moving beyond single-function boxes. Entertainment delivery is becoming a services business even more now, and the Internet is an open environment to deliver that service. Betting that the industry won’t figure out how to stream HD content, on demand, to anyone who wants it, inexpensively is not a good bet — it’s only a matter of when.
The future DVD player — the BD player — is about the most computer-intensive platform in the living room except for the gaming platform. It has the feature set, resources and flexibility to be more than just a disc player. I expect BD players to expand in functionality over time and play a broader role in content delivery to the home. As to whether consumers will eventually stop watching discs in favor of downloads, I suppose that too is only a matter of time, but that’s a decade or two away.
HD Technology Update: Why will it take until 2013 for stand-alone BD players to overtake PS3-based Blu-ray players?
Steve Wilson: Sony’s position in the market with the PS3 is growing stronger and their volumes are expected to ramp significantly over the next few years. The cost of BD functionality remains a premium in both the PC market and the CE market. Until super-multi-BD drive prices reach near parity with red laser drives, most business-class machines are going to lack BD support. More so, the graphics support needed for BD playback in low-cost notebooks hasn’t quite reached market yet. PS3 sales are picking up steam, while the CE and PC markets are still trying to get going.
HD Technology Update: Is there anything else you would like to add?
Steve Wilson: NPD finally released some new sales figures, beyond those released right after the holiday. Not surprising, BD player sales dropped 40 percent from January to February and then rose just 2 percent the next month. Sales are so low, NPD says they won’t release figures until later in the year.
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