High-def discs lag standard, but gaining momentum

Blu-ray sales top 1.5 million units so far this year

By Susanne Ault -- Video Business, 2/15/2008

FEB. 15 | High-definition software sales are trailing standard-definition by half in the formats’ first two years on the market, according to Adams Media Research.

High-def discs, introduced in 2006, sold 8.3 million units by the end of 2007. That compares to 16.3 million units for standard-definition in their first two years at retail, according to Adams. No such gap exists in hardware, where high-def DVD players are on about the same sales pace as were standard DVD set-tops. Due to holiday retail price wars, high-def set-tops even spiked well above standard DVD players in the last weeks of 2007.

However, studios see high-def saddled with some adoption disadvantages that standard DVD avoided.

By standard DVD’s year two in 1998, there were nearly 100 million TV households ready to plug in players, according to Nielsen Media Research. In contrast, just 26.5 million households in 2007 had the required high-def TV set for Blu-ray or HD DVD hardware, according to DisplaySearch.

“You had just a fourth of the marketplace to sell the hardware into,” said one studio executive. “It’s like apples and oranges [trying to compare the pace of standard versus high-def].”

But some sources admit the home entertainment industry should improve high-def marketing, by positioning next-generation software as separate from DVD. Currently, many retail circulars tend to stress a title’s availability on standard DVD, and then in small print underneath, give pricing for BD and/or HD DVD. That secondary positioning for high-def might be hurting its consumer attraction.

Other studio sources note that high-definition faces a much harder battle convincing people to switch from standard DVD players than standard DVD did in swaying people away from VHS. The household penetration of VHS also was lower in 1997 than DVD’s penetration in 2006.

Stir in a format war, which standard DVD never had to face, and studios seem thrilled that high-def has even had this sort of traction. In fact, one studio argues that high-def is enjoying greater sales velocity than standard-def did. At the year two mark, standard-def DVD software sales trumped its year one performance by 6.1 times. Yet year two high-def sales beat its year one by 9.5 times.

BD software sales alone have exceeded 1.5 million units so far in 2008, a mark that hadn’t been hit until July last year, according to studio sources. Also, BD sales through mid-February are five times greater than at the same time last year.

Looking ahead, retailers and studios are forecasting some high-def catch-up in 2008, banking on BD’s eventual win of the format war. Netflix and Best Buy’s public BD drives this week support that prediction.

“I think the format war did expose people to high-definition, but it kept many people on the sidelines,” said Best Buy spokesman Brian Lucas. “Now that we are endorsing Blu-ray, we have to get people to take another look at high-definition. We need to show them the benefits and get them inspired. We think we can do that.”