Research firm still predicts Blu-ray high-def winner

By Susanne Ault -- Video Business, 8/22/2007

AUG. 22 | BEVERLY HILLS, Calif.—Research firm Understanding & Solutions reiterated its stance that Blu-ray Disc will prove victorious in the high-definition format war, despite Paramount Home Entertainment’s and DreamWorks Animation’s move to back rival HD DVD exclusively.

During a breakfast update on consumer downloading and high-definition issues here Wednesday, U&S director Jim Bottoms cited as reason the larger number of studio titles produced exclusively for Blu-ray. Also, the Paramount/DreamWorks move to HD DVD exclusivity did not add any new titles to that side, he noted, since the studios until this week supported both formats.

“The weight of industry support is still very much behind Blu-ray,” said Bottoms, preceding his arguments by noting that U&S remains a private entity, not financially benefiting from either side. He said that studios representing 58% market share overall,  based on first quarter video shipments, back Blu-ray.

“We have gone on record before that BD format is most likely to succeed, and we don’t believe [the Paramount/DreamWorks decision] will change that outcome,” said Bottoms.

Another major driver for Blu-ray will be the PlayStation 3, which currently continues to sell below expectations but can still make an impact over the next few years, Bottoms said. He estimates 15 million to 20 million consoles will be in U.S. homes by that time.

Prolonging war

The main consequence of Paramount and DreamWorks’ move to HD DVD is the prolonging of the format war, which U&S previously projected would be decided by first-quarter 2008.

Only a fraction of home entertainment business today, high-def business will be significant by 2011, U&S predicts. The company reports that by then, 40 million HD DVD and Blu-ray set-top players will be sold, representing 36% of U.S. households; 25 million Xbox 360 and PlayStation 3 consoles combined, representing 22% of households; and 20 million PC drives, representing 17% of homes.

There will be 8.7 million software units sold among the two formats in 2007, and 59 million units sold in 2008, U&S predicts.

Although there is growth on the horizon, Bottoms warned that high-def companies need to improve their messages to consumers to maximize revenue.

“There is a lot of confusion with consumers over high-def in general,” Bottoms said. “I heard from a consumer, ‘I was going to buy an HDTV screen, but now I’m going to buy a Blu-ray screen. That is quite typical of the confusion that exists. But the important take away is that there is great opportunity [with high-def], but there still needs to be some work done to turn this all into a reality.”