Blu-ray’s future rosy yet full of challenges

In the beginning of DVD, everyone thought that—with the addition of chapter setup and additional material in navigation form—DVD is truly cutting-edge. After ten years, however, the industry is set for yet another revolution with the standardization of Blu-ray. Crucially supported by major movie studios (Walt Disney, Warner, Fox, Paramount, Sony, Lionsgate and MGM) as the successor to today’s DVD format, Blu-ray is set to face ongoing obstacles to win widespread acceptance.

Named after the color of the laser it uses, Blu-ray features high storage capacity, which can hold up to 50GB of high-definition video and audio and other digital content. Blue-ray sales in 2009 and 2010 are expected to match that of standard DVD in the third and fourth years following its 1997 launch, as studios and retailers sharpen their marketing strategies.

With the increase in available Blu-ray and HD DVD titles both formats are seeing increased visibility in stores. Blu-ray with more releases and higher title sales than HD DVD, is also gaining more shelf space. Industry observers see an accurate prediction. They expect shelf space for HD DVD to drop, with the increasing emphasis, both among studios and retailers, on replacing DVDs with next-generation formats. However, the two formats will most likely co-exist for quite some time until HDTVs become more widespread.

Will consumers switch?

A bigger question looms: Can Blu-ray harness lightning in a bottle again like DVD has? Only time will tell. At present, Blu-ray players are still not available in bargain basement prices necessary to sell them to consumers who haven’t made the switch. In a recent NPD study looking at consumer who said they were unlikely to purchase HD discs soon, 72 percent of consumers wanted the prices to come down and 70 percent said they didn’t need to replace their DVD player.

In-Stat expects to see US$249 pricing in 2008 for Blu-ray players just in time for the holidays. Sony CES announcement to roll out a sub-US$200 Blu-ray external drive attachment, would help computers become fairly cheap Blu-ray players.

Future price declines will come from lower component prices, increase manufacturing volumes, and eventually more low-cost manufacturers. At some point, as prices come closer to those of upconverting DVD player, top tier manufacturers may stop offering DVD players in favor of Blu-ray players. Yet HD software continues to be priced around US$30 a title, representing a premium over standard DVDs, which average US$16.

Most consumers who have HDTV sets, however, are not watching HDTV signals on them. Industry observers note that Blu-ray will have a long way to go to convince consumers to upgrade for a better picture. The industry 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 they’re ‘missing out’ hence they will continue to watch DVDs especially with Blu-ray disc prices higher than DVD.

Apparently, some of the new Blu-ray disc players will also include Internet capability for the downloading of movie trailers, and other supplementary material, such as a new commentary from the director or someone associated with the production – all in HD.

Physical media vs. online services

The future of HD DVD players may very well be Blu-ray, but whether they can make a dent in the face of the growing march of computer downloads is quite another story. As standards change and as digital content improves, consumers don’t have to buy a new DVD player. Instead, they can just download an upgrade or even a new version of the online service’s software. Physical media distribution could become a thing of the past, according to Isuppli.

Blu-ray supporters however countered that 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 can take hours to download before they can be viewed.

As far as downloading the Internet, optical discs are a comfortable product or consumers, who are familiar with DVD. Downloading on the other hand, requires a broadband connection and a home network to bring the content to the TV. Sadly, most household do not optimize their home network. They are not as comfortable with making it work as they are with loading the disc into the player.

VOD to help up sell

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 of In-Stat and The Diffusion Group