What is the Future of Blu-Ray?

The advantage of the PS3 was too much for the backers of HD DVD to overcome as Blu-ray discs outsold HD-DVD discs even though Blu-ray players did not sell as well as HD-DVD players. Warner Bros' switch to Blu-ray exclusively caused retailers like Best Buy and Wal-mart to choose Blu-ray over HD-DVD rather than offer both, making it impossible for HD-DVD to be successful.

Now that there is only one high-definition optical disc format on the market, what is the future?

Without HD-DVD offering low-priced playback products, we expect the Blu-ray manufacturers will compete among themselves but price cuts will not be as severe. In-Stat expects to see $249 pricing in 2008 for Blu-ray players in time for the holiday season if not before. Future price declines will come from lower component prices, increased manufacturing volumes, and eventually more low-cost manufacturers. At some point, as prices come closer to those of upconverting DVD players, top tier manufacturers may stop offering DVD players in favor of Blu-ray players.

Will consumers care? Many consumers who have HDTV sets are not watching HDTV signals on them. The industry has a long way to go to convince consumers that they should upgrade for a better picture. We remain of the opinion that Blu-ray must promote interactive features of the content on the disc. Consumers must be made to feel that they missed an important piece of the movie watching experience by not viewing the Blu-ray disc content. So far many consumers do not feel that way about viewing in standard definition as opposed to high definition, so they will continue to watch DVDs especially with Blu-ray disc prices higher than DVD.

As far as downloading from the Internet, optical discs are a comfortable product for consumers, who are very familiar with DVD. Downloading on the other hand, requires a broadband connection and a home network to bring the content to the TV. Most households do not use their home network, those that do have them, for moving video content around the home. They are not as comfortable with making it work as they are with loading the disc into the player. Downloading is very convenient from the perspective of clicking to view without leaving the couch, but depending on the broadband connection it may require planning ahead. Movies may take hours to download before they can be viewed.

VOD gives the best of both worlds with the convenience of one-click and no need to wait for it, viewing can begin immediately. More and more VOD content will be available in HD, which has a negative impact on the desire for an HD optical disc player. Additionally, CableLabs has recently put their Open Cable Applications Platform (OCAP) onto Sun's Java.net developer's site. OCAP is the initiative, now called “tru2way”, by the US Cable TV industry that will permit devices to connect to two-way digital Cable TV systems. OCAP has its foundations in the Multimedia Home Platform (MHP) and in Blu-ray Java (BD-J). In a couple of years, some consumer devices, including set-top boxes, may be able to provide the online features of Blu-ray to movies that come as VOD from the Cable operator.

However, in the coming year, some Cable VOD services will provide Day and Date delivery of movies when they are first released on Blu-ray discs at the video store. Part of the package is that you get the High Definition VOD viewing instantly, but then get the actual Blu-ray disc in the mail a few days later. So cable operators may provide an up-sell opportunity for Cable TV viewers to purchase Blu-ray players.

In-Stat expects that while Blu-ray players (not including game consoles) will reach the level of millions of units shipping per year, it will never reach the level of DVD player unit shipments. VOD services, Internet downloading, and a lack of consumer interest in HD will all play a part.

Courtesy: David Lemelin, Senior Analyst, In-Stat