Retailers expand merchandising of Blu-ray, HD DVD

By Susanne Ault -- Video Business, 1/4/2008

JAN. 4 | Key retailers are moving into the new year with more merchandising space devoted to the fledgling high-definition DVD formats.

In some expansion examples, two Los Angeles-area Target stores have more than doubled their available slots for Blu-ray and HD DVD titles between third- and fourth-quarter 2007. By year’s end, both stores had carved out 60 BD facing slots and 30 HD DVD facing slots within their new release titles wall. In September, the count was 24 and 12, respectively.

Coinciding with its decision to stock Sony’s BDP-S300 Blu-ray player as its only in-store set-top, Target has been giving more space to BD software since early fall. However, the fourth quarter also granted BD a display edge at Best Buy and Trans World, but retailers explain that the unbalanced merchandising has less to do with customer tastes, and rather more to do with the larger number of BD releases compared to HD DVD releases over the last few months.

Blu-ray Disc Assn. launched an e-newsletter in January that listed more than 40 November/December BD new and catalog releases. The HD DVD site www.lookandsoundofperfect.com currently highlights just over 30 releases in the format during those same two months.

“It’s really a function of more titles being available,” said Best Buy spokesman Brian Lucas. “We are still supporting both equally and haven’t staked a position on [the format war]. We are definitely giving more space and presence to next-generation titles. Part of that is once you start selling the hardware, you have a responsibility to help people get the most out of it.”

At one Los Angeles Best Buy, the approximate number of facings was split 190 BD and 110 HD DVD.

Retailers note that BD sales continue to outpace HD DVD sales by an average 2-to-1 ratio. But Trans World sources say that gap started to narrow with the release of certain fourth-quarter HD DVD releases, such as Paramount Home Entertainment’s Transformers and Universal Studios Home Entertainment’s The Bourne Ultimatum.

Trans World began 2007 with a limited number of F.Y.E. outlets carrying high-def software. The chain started spreading the category into additional outlets by mid-year. At the start of 2008, the majority of F.Y.E. stores do include high-def software sections.

Elsewhere at retail, regional mass merchant Meijer added HD DVD titles to its e-commerce site on Dec. 10. As of last October, the site had been offering only BD titles.

During the fourth quarter, a Glendale, Calif., Borders added two high-def software endcaps, each holding a handful of BD and HD DVD titles. Previously the store only stocked standard-definition DVD.

“It is positive that we are seeing more space in general being allocated to high-def,” said Andy Parsons, head of the Blu-ray Disc Assn. Promotions Committee and senior VP at Pioneer. “A lot of people say we haven’t replaced DVD yet, but practically speaking, it took DVD three years to get to a fairly high-penetration rate in households.”

The high-def format launched during spring 2006.

Parsons also is pleased to see that in recent weeks, a Target in his Orange County, Calif., neighborhood shifted its high-def section from the middle of the DVD section into the more prominent new release DVD area.

Studio divisions note that high-def software rentals and sales make up a tiny part of their business, accounting for less than 5% of their 2007 overall DVD revenue. But there nevertheless have been significant gains made in the category.

“At the beginning of the year we started at less than 1%, and now that has gone closer to 5%,” said one studio source. “Unit sales have increased more than six and a half times between December 2006 and December 2007.”

The source has recognized a tilt toward BD at Best Buy and a solidified BD preference at Target. But it is unlikely consumers are yet influenced by retailer decisions, says the studio insider.

“They shop by price, and I think they are still thinking about up-converting 1080p DVD players, and they are not really fully engulfed by the high-def battle,” the source explained. “Also, a lot of [software] is bought online, and they display everything. People walking into a store might not notice if there is 65% BD titles.”

Undeterred by shelving constraints, online retailers Amazon.com and DVDEmpire.com are similarly increasing BD and HD DVD titles to their offerings.

“Sales of high-definition DVDs continue to grow at Amazon,” said spokeswoman Tammy Hovey.