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Blu-ray Software Sales Spike

27 Mar, 2008 By: Thomas K. Arnold

Blu-ray Disc software sales have seen a sharp spike in recent weeks, since the bruising format war against rival HD DVD came to an end in the middle of February.Walt Disney Studios Home Entertainment's No Country for Old Men realized 9.8% of its total sales from Blu-ray Disc its first five days in stores, according to an analysis of Nielsen VideoScan First Alert numbers conducted by Home Media Magazine's market research department.

Hitman (view trailer), a 20th Century Fox Home Entertainment title also released March 11, fared even better, generating 12.6% of its total unit sales from Blu-ray Disc.

“That one hit the sweet spot,” said Steve Feldstein, SVP of marketing and corporate communications for Fox. “It's a great action title that looks beautiful in high-def — and it's right in the crosshairs of Blu-ray's target demographic of young adult males.”

By comparison, while the format war was raging, unit sales of high-definition discs, either Blu-ray or HD DVD, generally accounted for no more than 2% or 3% of a title's total sales.

Even in the busy fourth quarter of 2007, sales of high-profile new releases were overwhelmingly tilted toward DVD. Fox's The Simpsons Movie generated just 2.8% of its total sales from Blu-ray Disc, while the BD version of Disney's Pirates of the Caribbean: At World's End accounted for 3.7% of total sales.

Only after Toshiba threw in the towel on HD DVD Feb. 19 did Blu-ray sales spike. Warner's Michael Clayton, released that day, generated 5.5% of its total first-week sales from Blu-ray Disc. Sony Pictures' 30 Days of Night, released Feb. 26, snagged 8.9% of its total unit sales from the Blu-ray Disc version.

Home entertainment industry analyst Tom Adams, of Adams Media Research, credits the end of the format war with igniting Blu-ray Disc sales, a trend he sees continuing throughout the year.

“Before, there was a tendency to play it safe and stick with the standard DVD,” Adams said. “But now there's no longer anything to worry about.”

Fox's Feldstein agrees. “Consumers in the high-def marketplace are now purchasing with confidence,” he said. “The confusion in the marketplace that you saw when there were two formats continues to work itself out, and once education campaigns begin and the retail presence [of Blu-ray] expands, we should start to see the numbers soar even higher.”

Fox market researchers estimate Blu-ray Disc sales will hit $1 billion in consumer spending in calendar 2008, up from an estimated $300 million for combined Blu-ray and HD DVD software in calendar 2007.

Adams expects to see a steady uptick in Blu-ray Disc software sales as more players come to market. He projects the year will end with 2.9 million dedicated Blu-ray Disc players in homes, up from 500,000 at the end of 2007, and another 8.4 million PlayStation 3s, with built-in Blu-ray drives, up from 3.2 million at the end of last year.

Adams said early adopters who are buying dedicated Blu-ray players now are likely to be rabid consumers of movies, driving up sales much as in the early days of DVD. At the same time, the expansion of PS3 beyond the hardcore gaming crowd should also lead to an increase in movie sales, since the new wave of PS3 buyers are likely “average consumers who consume movies as well as games.”

The sales gains that have been achieved so far, Adams notes, have come before Hollywood begins an all-out push to drive Blu-ray Disc sales, both through general consumer awareness and education campaigns and a specific effort directed at PS3 owners.

“The promotion to PlayStation 3 homes hasn't really kicked in yet,” he said. “And assuming that works, when you're talking 5 million homes, getting them to buy just one more movie a year can make a significant difference in a small market like this.”

Adams said studios are keen to derive a greater chunk of their sales from high-def software because of the price differential. The average street price for a newly released DVD over its first three months in stores is $20.57, Adams said, while the Blu-ray Disc version goes for $31.31. A similar effect was seen with titles released in the now-defunct HD DVD format.

“The biggest title of last year, in terms of high-definition disc sales, was Transformers (2007 High-Def Disc Awards 5), which derived a little more than 4% of its total unit sales from the HD DVD version,” Adams said. “But in terms of revenue, the percentage was 6% of the total.”

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