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Analyst: Blu-ray Infringes Upon DVD Sales

By Erik Gruenwedel | Posted: 15 Dec 2008

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.

User comments

Commented by Anonymous
Posted on 2008-12-17 11:44:21

Although the stats quoted above are correct, you are not comparing like with like. The DVD was released in North America in March 1997. According to DEG, sales of DVD hardware in North America were: 0.3 million in 1997; 0.9 million in 1998; and 3.6 million in 1999. Sales of DVD disks in North America were: 5.5 million in 1997; 25.1 million in 1998; and 98 million in 1999. Thus by the end DVD's third year the installed base was 4.8 million players and 129 million DVDs had been sold. The Blu-Ray disk was introduced in June 2006 so it is now also reaching the end of it's third year. Although the installed base of BD players will be 10.5 million (including PlayStations) at the end of this year, estimated sales of Blu-Ray disks this year have been around 20 million. Thus, although the installed base of Blu-Ray players will be 120% higher than DVD players, at the same stage in the cycle, the estimated sale of Blu-Ray disks will be only 20% that of DVD, again at the same stage in the cycle.


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