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Forecast Says Despite Paramount's Decision, Industry Still Behind Blu-ray

22 Aug, 2007 By: Chris Tribbey

The decision by Paramount Home Entertainment and DreamWorks Animation to go exclusively with HD DVD is huge in the high-def format war.

But it may not be big enough to take away Blu-ray Disc's momentum, according to Jim Bottoms, CEO of media research firm Understanding & Solutions.

“The Paramount announcement has weakened the Blu-ray offerings,” he told attendees at a Macrovision-sponsored research seminar at The Peninsula Beverly Hills on Aug. 22. “Having said that, it hasn't strengthened HD DVD.

“The weight of the industry is still very much behind Blu-ray … We do not believe, overall, it's going to change the outcome of the battle.”

Understanding & Solutions isn't picking sides, Bottoms stressed, but the sellthrough sales clip this year of Blu-ray Discs compared to HD DVDs (2 to 1, according to Nielsen VideoScan), and the forecast for the rest of the year, had his firm convinced consumers will pick a side with their wallets once and for all by the first quarter of 2008.

How about now?

“We won't see resolution in Q4 this year,” Bottoms said bluntly. “Paramount's decision prolongs [confusion over] the format issue.”

While U.S. consumers are still confused over what it takes to have a true high-def household, they've got one piece of the puzzle figured out: HDTVs. An Understanding & Solutions forecast has 40 million high-def enabled TVs being shipped each year by the end of the decade, more than 12 million of those with screens 37 inches to 49 inches wide.

“Consumers are moving toward larger and larger screen sizes,” Bottoms said.

All content providers and hardware manufacturers eventually will migrate to HD product almost exclusively, Bottoms said, adding the days of $100 high-def set-top boxes are not far away, “and we're not looking at 2011 to get there.” While DVD will still be king in 2011 — and “the revenues are not going to come from digital [delivery] for four to five years” — high-def will be making a lot more noise.

By 2011, 36% of all U.S. households will have Blu-ray and/or HD DVD players, with another 22% of households owning that “important Trojan horse” for high-def: HD-enabled game consoles, Bottoms said. HD-enabled PC drives will be in 17% of U.S. households by 2011.

On the content side, Comcast and DirecTV plan on a combined 500-plus high-def channels in the next year, and while only one in five U.S. households are watching high-def programming today, three out of four will be hooked on HD by 2011, according to the Understanding & Solutions' forecast.

As for the optical format, Understanding & Solutions predicts 669 million high-def units will be sold domestically by 2011. And while Blu-ray has a 90% hold on high-def optical media in Japan, how the war goes in America will determine what people will be watching high-def on worldwide, Bottoms said.

“The United States is going to be the battleground,” he said.

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