High-def sales slower than expected

HDTV conference: Retailers hope for better performance in Q4

By Susanne Ault -- Video Business, 8/15/2006

AUG. 15 | BEVERLY HILLS, Calif.—Retailers expressed frustration over slower than expected Blu-ray Disc and HD DVD product sales during the fourth annual HDTV conference here Aug. 15-16.

Among the retailers were execs for Ultimate Electronics, Bjorn’s and Ken Crane’s.

Many retailers noted that they were suffering through more problems with Blu-ray than HD DVD during the formats’ first few months on the market.

But the slim selection of meaningful titles in both formats is working to curb overall consumer adoption of next-generation hardware and software, participants said during the Tuesday session “Are Consumers Still Confused?.”

“This whole high-definition DVD is the worst execution that has happened in the industry,” said David Workman, executive director of the PRO Buying Group, which services indie retailers representing $2 billion in annual electronics sales. “There’s a format war going on, and we need correct software support. So it has been stacked up to create failure. … It’s a race to see who can string the tightest noose [around their format].”

Ken Crane’s CEO Casey Crane and Bjorn’s president Bjorn Dybdahl noted their employees were embarrassed delivering store demonstrations of the first batch of Blu-ray films. Staffers could discern little distinction between the discs and their standard-definition counterparts.

Samsung, which has rolled out the first and still only available Blu-ray set-top player in the market, has admitted to chip problems in earlier units. The manufacturer has since said that this issue has been resolved.

However, Crane mentioned that a Samsung-provided demo disc showed off Blu-ray superiority beautifully on an early Samsung player, suggesting possible mastering issues with certain film titles.

“I took [the Samsung disc] and what we got from the software companies, and it was two different worlds,” Crane said. “Sales are lighter than we anticipated.”

Dybdahl chimed in, “Sales were not anywhere near where we thought they would be for the category.”

Mass merchants were not represented on the panel, and they represent a big portion of high-def format sales. But regional electronic stores, such as Crane’s and Bjorn’s, are considered critical high-end electronics sellers. Regionals make up about 46% of all 1080p high-def TV sales, ahead of nationals’ 42% share.

Many retailers figured high-def hiccups were largely due to studios and manufacturers rushing products to market before the kinks got worked out, in the hopes of earning advantages in the format war.

Warner Home Video officials have said they’ve delayed launching their A-list titles until the complicated technology involved with HD DVD bonus features is perfected (VB, 7-21).

“[Studios] were pushing too hard to get the product out, so you’re going to get execution that is sub-par,” said Jim Pearse, senior VP of merchandising at Ultimate Electronics.

Crane thought he would have an easier time selling the new formats if premiere DVD maker Criterion rolled out product in Blu-ray or HD DVD.

Pearse does agree with many studio executive projections that consumers will start buying into high-def formats significantly this fourth quarter and that 2007 should usher in key Blu-ray and HD DVD growth. Elite titles should be released as more players are expected in the market by year’s end.

“I’m not quite as bitter as some of the panelists,” Pearse said to VB following the session. “But nothing seemed to line up [at launch].”

Also during the conference, NPD Research provided clues to the outcome of the format war, which includes wins for both sides.

Comparing the first six weeks of sales for each technology, 33% more HD DVD players were sold than Blu-ray players. At steeper pricing, Blu-ray players, however, churned out 42% more in revenue.

Ross Young, founder and president of NPD-owned company DisplaySearch, nevertheless believes that new format adoption is inevitable.

“With HD and 1080p TVs flourishing, next-generation DVDs and hardware have a tremendous opportunity to invigorate their markets,” Young said.