Price drops boost high-def hardware
By Susanne Ault -- Video Business, 6/15/2007
JUNE 15 | Recent price cuts look to be accelerating set-top player sales for both high-definition camps.
Blu-ray Disc manufacturers are still playing catch-up with Toshiba’s HD DVD set-top players, which supporters claim represent 60% of the stand-alone high-def player market, with 150,000 units sold through May.
But Sony has reason to feel bullish over the June debut of its $499 second-generation player, which is priced at half the cost of its first-generation player. Certain retailers have enjoyed as much as a 50% jump in sales volume since the model’s introduction. In May, Sony also slashed the price of its first-gen BDP S1 players to $799, from $999.
“With the S1, we’ve seen some really uplifting sales figures since that change,” said Nate Krast, senior product manager at Sony Electronics. “And we’ve had a really stellar pre-sale for the [$499] BDP 300. It’s even greater than our [$999] BDP S1 launch.”
Crutchfield executive VP of merchandise Rick Souder agrees that Toshiba is far out in the lead in stand-alone sales. But he and other retailers argue that Sony cannot be counted out of the race, due to its relatively strong brand cachet.
“Over the years, Sony has gotten a 20% to 30% premium over brands with the same products and features, [i.e.] cameras, TVs and audio equipment,” said Souder. “It is a bigger difference between $499 and [Toshiba’s] $299 players, but I think the $499 Sony pieces will dramatically increase their share of the [high-def] universe.”
Progressive Retailers Organization director David Workman believes that early adopters are more likely to take a risk on either format, as the initial investment has been lowered.
“It’s more of a jump ball now between the formats,” said Workman. “The format war has prevented early adopters from buying at the more expensive levels, but pricing is coming down. People are going to start making a choice. [Certain] consumers might gravitate toward the brands they are most acquainted with.”
Through 2006, the Harris Poll has named Sony the No. 1 overall U.S. brand for seven straight years, topping Coca-Cola, Nike and others.
Toshiba cut its HD DVD player year-end North American forecasts by about 44%, with player unit sales projected to total 1 million rather than January’s 1.8 million forecast. But that fall-off is due to misjudgments about pricing, not competition from Blu-ray player sales, counter Toshiba and HD DVD backers.
“We’ve realized over the last couple of months that the audience was not perceiving the $499 as a great value, but the $299 to $399 range [for Toshiba’s base and upscale models, respectively] really hit the sweet spot,” said Ken Graffeo, Universal Studios Home Entertainment executive VP of HD strategic marketing. For 12 months “through April, we sold 100,000 units. And just six weeks later, we’ve sold another 50,000 units.”
Toshiba said it will include HD DVD drives in all of its notebook computers in 2008.
Through Father’s Day weekend, Circuit City and chains are offering even deeper cuts on high-def products. People could get a $199 base model Toshiba HD DVD player, when additionally purchasing a high-def TV set.
Blu-ray titles continue to move quicker off shelves than HD DVD titles.
But Graffeo talked up HD DVD’s prowess in software title attach rates. The HD DVD Promotion Group estimates that HD DVD titles have sold roughly 1.2 million units to date, versus the 1.5 million units sold so far of Blu-ray titles. Consequently, there have been 4.1 HD DVD copies sold per player, assuming there are 150,000 HD DVD stand-alones plus 143,000 Xbox 360 drives in homes. Comparably, BD’s current U.S. attach rate equals 1.1, when considering a player base of 1.2 million PS3s and 100,000 stand-alones sold.
“We are very pleased with the recent sales success of our HD DVD players, particularly based on the seasonality,” added Jodi Sally, VP of marketing, digital audio/video, at Toshiba America Consumer Products. “In the CE business, the summer is generally a slower selling season, so we expect this uptrend in sales to increase in the coming months, not only due to the seasonality, but as the number of HDTV owners increases as well.”
The Blu-ray front also expects to end on a healthy note at year’s end, as Sony executives project that there will be five to six times as many Blu-ray players sold in 2007 over 2006.
All of this back and forth is leading retailers to believe that both formats are enjoying momentum.
“Suffice it to say, the manufacturers will do what they think necessary to make the category become a real business this fourth quarter,” added Workman, who expects further hardware price cuts through the holidays.
Crutchfield’s Souder added, “I think the format wars are a long way from being over.”
Jennifer Netherby contributed
