Paramount's Switch Failed To Turn Market

[sj001]

http://www.hollywoodinhidef.com/blog_detail.php?id=146

Research/analyst firm Understanding & Solutions has issued a report today saying that Paramount's switch to go exclusive HD DVD has failed to turn the market in favor of that format and that Blu-ray continues to dominate the market with stronger studio support and sales volumes.
If they can't get it done with the cheapest players and three of the biggest movies of the year in "Transformers" and "Shrek the Third" from Paramount/DreamWorks and "Bourne Ultimatum from Universal," that doesn't leave them many options.
I wonder how Microsoft/Toshiba are feeling about that $150 million investment, especially since Toshiba's earnings have taken such a hit.

Here is the U&S report in full:

The fast-approaching holiday season is a key milestone in the success of High Definition disc formats in the USA, according to a timely market report by Understanding & Solutions. Performance of both Blu-ray and HD DVD during this second holiday season is crucial in establishing the new generation of optical discs, and may bring the market a step closer to resolving the war between the competing formats.

“Blu-ray and HD DVD player prices have been falling since the summer, culminating in Toshiba’s loss leading sub-$100 HD DVD player, available in the USA last month for a limited time,” says Jeremy Wills, Consultant at Understanding & Solutions. “Price reductions in the USA have continued into December, with Blu-ray players dropping below $300 for the first time, and HD DVD players below $200.”

Understanding & Solutions’ Senior Technology Consultant, Bill Foster adds, “Drive, chipset and other system components are now benefiting from economies of scale. In early 2008 we’re going to see the Bill of Materials for a basic High Definition player, in either format, weighing in at less than $150, and that’s going to impact the high street very soon, providing the consumer with a choice of low price players that allow CE companies a margin for profit.”

In Western Europe by the end of 2008, Understanding & Solutions predicts average player prices (as opposed to entry level model pricing), for HD DVD and Blu-ray of $275 and $475 respectively, with the yet-to-be-launched European 80GB PS3 retailing at just over $500.

Furthermore, by 2011, if both formats still remain, HD DVD and Blu-ray players will both retail at below $100.

“Crucially,” says Wills, “Blu-ray benefits from stronger Hollywood Studio support and represents a greater proportion of High Definition disc production volumes and disc sales. To date, Paramount’s move to sole support of HD DVD has failed to turn the market, despite the HD DVD exclusivity of key titles ‘Transformers’ and ‘Shrek the Third’. Notably, Blu-ray still represented over 70% of High Definition video sales in the USA during the week ‘Transformers’ was released on HD DVD.

“As demand grows and manufacturing volumes build, we’re going to see the costs of releasing on two different formats really start to bite. There may be surprises just around the corner, and we could see a lot more format clarity in 2008.”

Despite all this action in the disc market, consumer confusion still persists. The importance of providing a coherent message through strong retailer support is essential, as many buyers still don’t know what additional inputs are required in order to view High Definition content on a High Definition TV. That said, consumer interest in displays continues unabated. By the end of this year, 34% of US homes will own a Hi Def display, rising to 90% by 2011. In Europe, uptake is slower, with 20% ownership by the end of this year, rising to 66% by 2011.

Broadcasters continue to play their part in driving demand, with almost 100 HD channels now available in the US. However, European operators in countries like France and the UK are still playing catch up, hampered by the fact that there is not enough HD content for original programming 24 hours a day.

[johnno1986]

Great article. Thanks for posting it.

[jeffcapfiat]

What is the e-mail address to warner bros.?

[Go Blu]

What's to be confused about?
There has only been one format.

[krispyjala]

Great article. Thanks for posting yet another affirmation of the failure of HD DVD.

[The Guardian]

The only sad part is how totally over this would all be if they hadn't sold out

[reider]

Originally Posted by sj001

http://www.hollywoodinhidef.com/blog_detail.php?id=146

... Notably, Blu-ray still represented over 70% of High Definition video sales in the USA during the week ‘Transformers’ was released on HD DVD.

“As demand grows and manufacturing volumes build, we’re going to see the costs of releasing on two different formats really start to bite. There may be surprises just around the corner, and we could see a lot more format clarity in 2008.”

The article is great, but the bolded sentence: huh?

[sj001]

Originally Posted by reider

The article is great, but the bolded sentence: huh?

Yeah, not quite sure where exactly they got this... UNLESS, they mean worldwide sales.

EDIT: Never mind, it does say USA sales... whoops.

[Blu-Light]

I see one error in the article. The 70% of the market to BD during transformers week is not correct. Other than that the article is solid, well thought out and correct (well 99% correct)

[Crackbone]

I am sure that percentage is world wide sales.

[Blu Titan]

There is a very interesting article in Home Media Magazine regarding price reductions on High Def palyer. Some of the highlights:

"Blu-ray and HD DVD player prices have been falling since the summer, culminating in Toshiba’s loss leading sub-$100 HD DVD player,”

The report also notes that Blu-ray’s lead in software sales is largely due to better studio support, and that the move by Paramount to go HD DVD exclusive “failed to turn the market.”

As demand grows and manufacturing volumes build, we’re going to see the costs of releasing on two different formats really start to bite. There may be surprises just around the corner, and we could see a lot more format clarity in 2008,” Wills said.

http://www.homemediamagazine.com/

[doctorD]

Good read...if rumors hold true, then it will be a very Blu-sy New Year!

[JohnGalt]

Originally Posted by BlueNeon

As demand grows and manufacturing volumes build, we’re going to see the costs of releasing on two different formats really start to bite.

Advertising aside (since both formats can easily be advertised simultaneously) this makes little sense. The smaller the sales volume the tougher it is to recoup the relatively fixed cost of developing the title but pressing costs go down as volume goes up. What the heck are they talking about?

[Metalthrasher442]

I didn't read the article, but a lot of people are starting to say that 2008 will be the year.

I wonder how much progress each will make...

[davidPS3]

Yes, great info, but let's keep in mind that the website is very pro blu. Nothing wrong with this, but again it is just one opinion of many. At least they don't bash the red team and are fair in their info sharing unlike some red sites out there.

[supersix4]

Originally Posted by johnno1986

Great article. Thanks for posting it.

here here GREATness!

[maconomics]

Great article

[reider]

Originally Posted by JohnGalt

Advertising aside (since both formats can easily be advertised simultaneously) this makes little sense. The smaller the sales volume the tougher it is to recoup the relatively fixed cost of developing the title but pressing costs go down as volume goes up. What the heck are they talking about?

It is quite easy actually. You are correct with all your reasoning, but you missing one significant point - overproduction. Unsold balances are getting bigger and bigger and having two formats doubles that expense.

[JohnGalt]

Originally Posted by reider

It is quite easy actually. You are correct with all your reasoning, but you missing one significant point - overproduction. Unsold balances are getting bigger and bigger and having two formats doubles that expense.

Very good point. But am I right in thinking that these can normally be liquidated for something in excess of the manufacturing and distribution costs plus the per unit portion of marketing & one-time charges? I can't imagine those costs being over a few bucks per disc in volume whereas I can see the prorated fixed costs being nearly equal to the price of a disc for low-volume titles today. Or maybe I'm talking out of my ass again ....

[mystiksuicide]

Beautiful just beautiful. Every article confirms the obvious, Blu-Ray is the format of the future.