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Analyst: Blu-ray Infringes Upon DVD Sales

15 Dec, 2008 By: Erik Gruenwedel

The move by studios and consumer electronics manufacturers to push Blu-ray players and movies onto consumers in the fourth quarter is undermining year-end standard DVD sales, according to a research note from Richard Greenfield with Pali Capital.

Greenfield said Wal-Mart’s aggressive stance toward Blu-ray, which included blowing out 150,000 Magnavox players in select stores for $128 on Black Friday, in addition to increased shelf space, would contribute to standard DVD revenue falling 6% in 2008 from previous estimates of flat sales.

“While positive long-term, the installed base of Blu-ray is simply not large enough to make up for lost floor space of standard DVD,” Greenfield wrote.

Indeed, the analyst said BD trends continued to look promising following 1 million unit sales of The Dark Knight, among other titles, and prices hovering around $25, compared to $18 for standard DVD.

“Interestingly, two years into the standard DVD cycle, the DVD installed base was only 1.2 million and players were not nearly as inexpensive as $129 on Black Friday,” the note said.

Greenfield said end-of-the-year standalone BD player sales would reach 2.5 million units and could double or triple in 2009. Sales of the Sony PlayStation 3 console with BD drive should reach 8 million units at the end of the month.

The analyst said current economic conditions continued to produce price-sensitive consumers, negatively impacting new-release sales more than that of catalog fare. He said older title revenue would decline a modest 2%, compared to a double-digit decline for new releases.

Greenfield cited poor word-of-mouth for the relative lackluster home entertainment results for Get Smart, despite generating $130 million at the box office.

“New release titles with strong word of mouth continue to perform well, with the family/animated category remaining healthy,” he wrote.

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