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Retailers: HD Disc Biz Still Small

4 Jan, 2008 By: Chris Tribbey

For a good part of 2007, the message in the industry was the same: This holiday season would be huge for the future of Blu-ray Disc and HD DVD.

Now that Christmas is over, retailers aren't saying “ho, ho, ho” but instead “ho hum.”

At Netflix, which rents both Blu-ray and HD DVD, more of its subscribers are using high-def, but “it's just creeping up,” said spokesman Steve Swasey, and the holidays showed no boost for either side.

“It was pretty consistent. The consumer adoption is still relatively benign.”

Todd Zaganiacz, president of the National Entertainment Buying Group, was disappointed in high-definition title sales.

“We've seen a slight bump in high-def sales, but it wasn't what we were hoping for,” he said. “I've talked to a handful of retailers who still aren't doing HD. I don't think anybody will ditch it, but there wasn't enough of a bump to get anyone off the fence, or devote more space to either format.”

Still, there was a marked improvement in the fourth quarter over the rest of the year, said Ted Engan, president of the Video Buyers Group, which represents more than 1,800 video rental retailers nationwide. “But it's still a small percentage of our business,” he said.

Much like the slow pace of releases for both formats (roughly 400 releases for each thus far), retailers have been slow to play up Blu-ray or HD DVD over their No. 1 competitor: DVD.

“We've always viewed standard DVD as the real competition and continue to focus heavily on consumer education at the retail level,” said Ken Graffeo, EVP of HD strategic marketing for Universal Studios Home Entertainment.

“DVD still gets top billing,” Zaganiacz said. “A lot of the retailers are doing the same as the consumers, and waiting.”

It's true, the competing sides have been aggressive in getting high-def in front of consumers, and have worked with retailers such as Amazon.com and Best Buy to offer buy-one-get-one deals and free disc incentives with the purchase of a high-def player. But retailers large and small knew DVD sales weren't going to be touched by high-def this holiday season.

Research firm The NPD Group forecasted earlier this year that high-def software sales will hit 4.5 million units, accounting for only 3.5% of the packaged-media business. Ross Rubin, director of industry analysis for The NPD Group, said while specific numbers were not yet available, high-def certainly was not “at a high volume” this holiday.

Selection may be an issue too.

One independent studio head said retailers didn't do enough with high-def in general for the holidays, and snubbed smaller companies' releases.

“We hope retailers will stop looking at who the supplier is, and look at the quality of content,” he said. “That's the only way consumers will have a chance to commit to a format, if they have a broad selection.”

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