High-def hobbles holiday expectations

Sales projections for formats scaled back from earlier estimates

By Susanne Ault -- Video Business, 10/13/2006

OCT. 13 | New Blu-ray Disc players are now shipping to retailers for holiday sales, but even with the influx, earlier expectations for both the HD DVD and Blu-ray formats are being scaled back.

Warner Home Video recently halved its 2006 sales projections for high-definition DVD hardware and software, based on unforeseen limitations on hardware availability.

During the Oct. 6 High Def 101 conference in Los Angeles, Warner’s senior VP of market management, Steve Nickerson, said consumers spent $30 million on high-def hardware and software through September, down from about $60 million the studio originally expected would be spent in the period.

Clipped quantities of Sony’s much anticipated PlayStation 3 videogame console and Blu-ray movie player, as well as limited quantities of other players, will likely continue to hobble early high-def revenue, said Nickerson. For the fourth quarter, Warner estimates about $750 million will be spent on high-def hardware, down from its initial projections of $1.5 billion to $1.9 billion. About $150 million will be spent on software, according to Warner’s revised forecast, down from earlier $225 million to $500 million projections.

Blu-ray hardware manufacturers, in particular, have been conservative in launching products. While HD DVD leader Toshiba is readying its second generation version of its HD-A1 model in time for the holidays, most Blu-ray manufacturers are still trying to get their first products out by year-end.

Panasonic’s Blu-ray player started shipping mid-October to mostly specialty electronics stores.

High-def supplier sources estimate that Panasonic is initially shipping about half the number of machines that Samsung—the first company to put a Blu-ray player on the market—initially shipped to retail. To date, Samsung has shipped more than 10,000 units of its player to retailers.

Certain retailers, including Tweeter, are not expecting the Sony Blu-ray player until mid-November. Last week, BestBuy.com was listing a Nov. 13-20 availability date for the player.

Previously, Sony had been circling an Oct. 25 bow. Sony did not comment at deadline.

Philips is set to street its player at the end of October, confirmed company VP Marty Gordon. He didn’t comment on shipment size, but high-def sources indicate quantities will be similar to Panasonic’s somewhat narrow launch.

“All the [Blu-ray] manufacturers are being fairly careful about putting something together that works,” said Frank Roshinski, Tweeter VP and general merchandising manager for video. “They are dealing with more advanced discs coming, involving Java technology. It’s a little bit frustrating—I want to get this out and sell. But I also don’t want to take a lot of returns from people who are unhappy.”

Early negative Blu-ray reviews could lead manufacturers to tread cautiously to shelves with players after Samsung took hits from consumers upset over operational problems.

One high-def software source said he wishes manufacturers would go to market more assertively with their players, especially since restricted PS3 launch quantities will leave an unanticipated void at retail.

“The consumer electronics business is such that normally when they see their competition falling down, they’ll try to take the most advantage,” the supplier said. “But nobody is doing that. It is concerning why they aren’t being more aggressive with quantities. With the PS3 [situation], why aren’t they changing strategies?”

Nationwide Marketing Group, a buying group for 2,500 primarily indie electronics retailers, is willing to wait for perfected Blu-ray players but is hungry for accurate estimates about when players will arrive.

“The problem is generally getting information in a timely way,” said Jeannette Howe, executive director of Nationwide’s specialty electronics division. “We always hear after the fact when something has been delayed.”

Tweeter’s Roshinski said he is mostly pleased with the initial hardware performance of both formats. Across Tweeter’s 150-store chain, about 1,000 Toshiba players and about 660 Samsung Blu-ray players have been sold.

Roshinski said Tweeter has already garnered 200 pre-sales on Toshiba’s next generation HD DVD players. But he knows that he could attract even more customers if additional players were available.

“Having two to three players means not being able to do that great of a category presentation,” Roshinski said. “By Dec. 1, I should have on the floor four Blu-ray players, and two HD DVD players, and at that time, I can make a good floor presentation to customers. This Christmas, expectations are limited. But by next Christmas, we should really be able to do the business.”