After format war, number of Blu-ray ads drop

Companies blame player shortages

By Susanne Ault -- Video Business, 3/28/2008

MARCH 28 | The end of the format war has coincided with the lowest amount of retail advertising for Blu-ray players in months, according to DisplaySearch research.

Between Feb. 10 and March 11, newspaper circular promotions for BD set-top players, counted from a sample of major retailers and discount chains, numbered less than five each week. That is 50% to 100% less than weekly BD circular mentions in November and December of last year (see chart), according to DisplaySearch.

Traditionally, February and March are quiet for consumer electronics sales, with few seasonal events to promote around products. November and December, in contrast, generate heavy holiday retail foot traffic.

Studios and manufacturers said it was critical to continue aggressively promoting Blu-ray after the end of the format war. Hardware advertising has been scarce, however, due to shortages and fewer discounts.

“The biggest, most obvious [reason] is there is less competitive pressure to push [BD] right now,” said Paul Erickson, director of high-def and DVD at DisplaySearch. “There is not as much pressure to turn in a strong performance, and they can look to stabilize the dropping of prices.”

After limiting profits with aggressive promotions that saw some BD player prices fall to $300 in the fourth quarter, manufacturers since February have brought pricing for BD set-tops back up to about $399, said Erickson.

“They were locked into this fierce battle with HD DVD, and now that HD DVD is gone, they can focus on what is more a rational schedule of price reductions over time,” he said.

Panasonic and other manufacturer sources, however, believe any advertising decline has the most to do with current supply shortages of BD players.

Manufacturers did not anticipate that the format war would end this soon and were not prepared for the resulting heightened demand from consumers to buy BD hardware.

“Panasonic didn’t expect Toshiba to pull the plug on that particular day, and now there is more demand for Blu-ray, and we and other brands are reacting to that,” said Panasonic senior group manager Tony Jasionowski. “We’re trying to get more product out. We are on top of this and have made our factory in Japan aware of this in order to increase the availability of product.”

Jasionowski said any supply shortages should be remedied soon.

“The companies are reacting right now, and within the month, you’ll see increased supplies,” he said.

David Workman, executive director of consumer electronics buyer PRO Group, reports that his retail clients are likewise having problems keeping customers satisfied with BD products.

“Pretty much everybody is experiencing shortages—for high-end players from Pioneer or down the line to Sony’s [entry-level] player,” Workman said. “Normally, if they had something to sell, you’d see more marketing out there. You’d be telling people that the format war is over. Blu-ray should represent one of the top growth categories for the year, but you have to have it to sell.”