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New Blu-ray Players Aim to Jumpstart Consumer Interest

By Erik Gruenwedel | Posted: 23 May 2008

Next-generation format Blu-ray Disc will get a boost this summer with the launch of several new standalone players that feature Internet connectivity, picture-in-picture and enhanced audio, among other options.

The studios consider Blu-ray a sequel to the lucrative but mature standard DVD. However, the format has sputtered a bit since Toshiba threw in the towel on rival format HD DVD in February.

The Consumer Electronics Association reported 500,000 standalone Blu-ray players (excluding Sony's PlayStation 3, with a Blu-ray drive) had been sold in the United States by the end of 2007. Bernstein Research analyst Michael Nathanson in a note estimated that about 3.5 million Blu-ray-enabled devices were in U.S. homes — the vast majority PS3s.

Shortages of standalone Blu-ray players and new movies, high prices, as well as educational and economic challenges have contributed to public indifference post-format war, industry observers say.

A recent Harris Interactive poll found that only 9% of respondents (87% of whom owned a DVD player) planned on buying a Blu-ray player in the next year.

The NPD Group reported that few consumers were dissuaded toward purchasing a Blu-ray player because of the format war. Rather, a survey found that most were satisfied with their current DVD player and considered next-generation devices too expensive.

Steve Wilson, principal analyst with ABI Research, said the depressed economy in the United States could lead HDTV and prospective HDTV owners to opt for less-expensive upconverting standard-definition DVD players as they delay buying higher-ticket consumer electronics items such as Blu-ray players.

Indeed, The NPD Group reported a 5% rise in first-quarter unit sales of upconverting players, which upconvert standard DVD to high-def resolution.

Richard Doherty, analyst with The Envisioneering Group, said too much time was spent fighting the format war versus educating the consumer that the Blu-ray player is more than a movie player.

He said the industry has to move beyond the “2.0” moniker — the term used to describe the upgraded Blu-ray players coming down the pike — and focus on the benefits of Blu-ray technology, including improved audio, graphics, picture resolution and interactivity.

“You cannot confuse the consumer into thinking, ‘so should I wait for BD 3.0 and 4.0?’ Doherty said. “There needs to be a more consistent message. Fewer than one in 10 Blu-ray players have all the features. The same [goes] for the movies.”

Tom Adams with Adams Media Research said the new features would prove important to consumers once they understand them.

“There won't be wider adoption until the message is delivered that there is a new [format] standard out there, and these devices have it,” Adams said.

The consumer electronics industry is fighting back with several manufacturers bowing Profile 2.0 and updated 1.1 players that include increased storage capacity, picture-in-picture (Bonus View) and BD Live — the latter allowing connectivity to the Internet.

BD Live is considered a Holy Grail of sorts for studios and marketers as it gives them a pathway into a consumer's living room through the ability to download additional content such as trailers and other bonus material related to a movie. It also enables online shopping and gaming.

Consumer electronics manufacturers Panasonic, Daewoo and Sony announced pending launches of 2.0 players this spring, summer and fall.

Panasonic's DMP-BD50 player — available this spring — retails for $699.95, while the earlier DMP-BD30 (sans full functionality) carried a suggested price of $499.95.

Other players, including Sony's BDR-S550 ($499.95) and Daewoo's DBP-1000, also feature SD memory cards, 1GB of onboard storage, 1080p resolution, True HD and Dolby Digital Plus and 7.1 channel surround sound, among other features.

Sony's ubiquitous PS3 ($399.95) can be retrofitted to 1.1 and 2.0 firmware upgrades. The company said during a recent financial call that 9.24 million PS3s had been sold worldwide through March 31, with another 10 million units projected through next March.

Since October 2007, all Blu-ray players manufactured had to be 1.1 compliant, which primarily means including the picture-in-picture option.

Among 1.1 players, Sharp's BD-HP50U player ($499.95) and LG Electronics' BH200 claim to be 2.0-compliant following firmware upgrades.

Andy Parsons, SVP of advanced product development at Pioneer, said player adoption would take time and be predicated on criteria most important to consumers.

“It depends on the target audience,” Parsons said. “Regarding our 1.0 models, we've had no trouble selling them.”

Indeed, Pioneer just announced pending launches of 1.1 players, BDP-51FD and BDP-05FD — available this summer — with suggested prices of $599 and $799, respectively.

Parsons said BD Live (2.0) undoubtedly provides a real difference from standard DVD. Whether it is important to consumers is difficult to judge at this point.

“How many people watch bonus features on DVD?” Parsons asked. “Everybody likes them, but not everyone watches them.”

He said price is an important component for mass appeal, but warned that prematurely accelerating price declines will hurt manufacturers when margins evaporate as well.

Parsons said the drop off in Blu-ray player sales earlier this year was not due to a lack of demand but rather a shortage of devices.

“The format war ended in February, and suddenly demand came out of nowhere and our dealers were screaming for players,” he said. “There is a natural curve to price reduction. We are still in the early adopter phase, one-and-a-half years into this. You can want prices to come down, but manufacturers have to make money.”

He said Pioneer's Blu-ray player prices have dropped significantly, which he said was the result of careful forward-cost averaging and a commitment to larger production volumes over time.

“We know we can sell more of them now,” Parsons said. “It takes time to build consumer awareness. Right now things are looking very good. Everybody is very bullish. The mood is very good.”

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