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Analysts: Pyrrhic Win for Blu-ray

25 Feb, 2008 By: Erik Gruenwedel

With Microsoft pulling the plug on its HD DVD add on for Xbox 360, capitulation to a Blu-ray world for high-def packaged media would appear complete.

Or is it? Some analysts believe Sony Corp.'s dogged desire to eclipse Toshiba's HD DVD has resulted in little more than reduced confusion to an indifferent retail audience.

Following the sometime acrimonious battle, a major question looms as to whether HD packaged media has any relevance in a technological era that is eying Web-based media, say analysts.

“The demise of HD DVD will reduce consumer confusion,” said David Carnevale, VP of multimedia content and services at iSuppli Corp., a Torrance, Calif.-based research firm. “But the biggest question is: Do consumers even care?”

Carnevale said BD players are likely to remain priced on the high side (around $400), compared to DVD, which retails below $60. In addition, upconverting DVD players that play standard DVD movies in 720p resolution are available below $100.

He comments appeared prescient when Sony announced it would bow two new Blu-ray players later this year, starting from $400.

At the grand opening weekend of a Costco in Woodland, Calif., a gathering of curious shoppers milled around a Blu-ray end-cap featuring a $379 Sony BD player on a 52-inch Magnavox 1080p LCD HDTV.

Several aisles over, a Sony PlayStation 3 video game system could be had for $517. The display made scant mention of the unit's Blu-ray drive or that it could play BD movies.

While the HD picture seemed to captivate, no one appeared to be buying the BD player. Then again, there wasn't an HD DVD player around to confuse the issue.

Phil Leigh, media analyst with Inside Digital Media, said studios can't expect explosive growth of Blu-ray movies in the short term unless player and movies prices decline and sales of big screen HDTVs increase.

“Unless the screen is really big, you can't tell much difference between Blu-ray and standard DVD,” Leigh said.

He projects a gradual conversion to bigger TV screens over the next 10 years, a time period he says might eclipse demand for packaged media due to advances in video streams and downloads.

“As new bigger TVs come into the market, Blu-ray gets to be more convenient,” Leigh said. “But there a lot of trends happening concurrently that compete with Blu-ray.”

ISuppli forecast (prior to Toshiba killing HD DVD) called for global shipments of Blu-ray and HD DVD players to rise to 45.4 million units by 2011, up from 6.6 million this year.

The research firm said on-the-fence early adopters who wanted a winner to emerge before buying one would spearhead BD sales going forward.

Michael Pachter, media analyst with Wedbush Morgan Securities in Los Angeles, said he didn't anticipate a boost in BD sales until the fourth quarter.

“I think you'll see a pick up correlated to HD monitor sales, so a big boost at the holidays,” Pachter said.

Jon Peddie with Jon Peddie Research in Tiburon, Calif., said consumers who were afraid of buying the next Video Disc, Betamax or 8-track should rejoice that all the major studios support Blu-ray and that Sony appears committed to the format for the long haul.

“We can expect to see a little bump in BD once the collectors and bargain hunters stop grabbing up the HD DVD stuff,” Peddie said.

But Rob Enderle, media analyst with The Enderle Group in San Jose, Calif., cautioned that reduced confusion at the retail level is the primary benefit for the Blu-ray camp at this moment.

He said general interest remains low for Blu-ray because DVDs are seen by the vast majority to be adequate, more common, and cheaper than BD.

“BD's biggest short-term problem is that DVDs are both entrenched and good enough for most consumers,” Enderle said.

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