Blu-ray sales projections lowered due to economy

Overall home entertainment spending to decline 3% to 4%

By Susanne Ault -- Video Business, 11/14/2008

NOV. 14 | LOS ANGELES—Responding to negative economic conditions that are unprecedented in recent decades, home video chiefs at the major studios are moderating their growth projections for Blu-ray Disc software sales in 2008.

Speaking at a press briefing organized by DEG: The Digital Entertainment Group here Nov. 14, Warner Home Video president Ron Sanders and Sony Pictures Home Entertainment president David Bishop each put their estimates for total Blu-ray software sales in 2008 around $750 million. Sanders was slightly more conservative, predicting $650 million to $800 million in Blu-ray sales, with Bishop plotting $750 million to $850 million. The estimates revise predictions by most studios earlier in the year that Blu-ray title sales would hit $1 billion this year. 

Back in June during the first Blu-ray forecasts, Paramount Home Entertainment president Kelley Avery did go against the pack and estimate $750 million, now the new average voiced consensus. 

Year-to-date industry Blu-ray sales have already exceeded $500 million, Sanders said.

Speaking on a panel moderated by Variety Group president and publisher Neil Stiles, studio presidents emphasized that Blu-ray’s ultimate success is not threatened. But given the environment, in which a dramatic number of jobs and amount of consumer savings have been lost, executives are trying to set realistic expectations about consumer spending during the holidays.

“The table is set for a great future,” 20th Century Fox Home Entertainment president Mike Dunn said. “There might be some logs in the way now and hazy at this second with the economy. But look at the quality [of Blu-ray] and portability and accessibility [of home entertainment in general]. Now might be unclear, but the future is set.”

Walt Disney Studios Home Entertainment president Bob Chapek described Blu-ray’s rollout as at the beginning of the critical mass phase, and he noted that strong catalog title sales indicate that people are replacing their DVD libraries with Blu-ray to at least some degree, despite the economy.

Blu-ray’s growth rate in 2008 will be double that of 2007, DEG executive director Amy Jo Smith said. She forecast that Blu-ray will account for 18% to 20% of unit sales of big new releases by the end of the year, using Warner’s The Dark Knight as a prime example.

Sanders described Dark Knight as a potentially “transformational” title for Blu-ray in that it might cause people to buy players on which to view it.

Overall consumer spending on home entertainment is expected to decline 3% to 4% this year, Smith said, driven by a projected 6% drop in DVD sales.

When asked when growing Blu-ray sales will offset DVD declines, both Bishop and Sanders said it might be the end of 2010. Lionsgate president and co-chief operating officer Steve Beeks predicted the industry would turn around by late 2009, when including digital downloads in the home entertainment take.

“It will be toward the end of 2010 when you’ll see us back in the growth business,” said Bishop.

Dunn noted that Fox is especially bullish on Blu-ray’s ultimate rise because of so many HDTV owners saying they want to purchase players in the format, according to studio research.

“Five million households are on the verge of adoption, and 10 million households are right behind that,” said Dunn.

Studio chiefs are additionally heartened by increasing retail marketing and support for Blu-ray. Best Buy is rolling out several new interactive Blu-ray kiosks showing off Web-enabled BD Live features, which should further influence adoption, Paramount's Avery said.

“Making sure that Blu-ray is well represented at retail is key,” said Avery. “We’re still in early stages, but there is a commitment from retail to improve the [in-store] experience.”

Responding to a question from Stiles about whether studios have an incentive to develop digital distribution given their dependence on physical media revenues, Universal Studios Home Entertainment president Craig Kornblau said simply that all studios want ubiquitous distribution of their content.