In what could be almost called a "media hysteria" following the NPD Feb/March numbers (for BR standalones), I am glad some people keep their head level and think
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The high def disc format war is over. We all know that. After the format war ended, and Toshiba gracefully bowed-out, a funny thing happened: Prices of consumer Blu-ray players started to climb.
So when NPD Group (National Purchase Diary) announced that the unit sales of dedicated Blu-ray players dropped 40% from January to February, pundits everywhere were taken by surprise. Based on that one month sales figure, analysts and editors everywhere sharpened their editorial knives and began predicting the end of Blu-ray. Even my boss, PC Magazine editor Lance Ulanoff , believes that Sony has lost the war.
The thinking goes like this:
Blu-ray player prices are way too high. Where's the $99 players?
DVD is good enough. After all, you can't really tell the difference, particularly with upscaling DVD players.
The content just isn't there, and what is there isn't good enough.
The Internet means we'll all be watching high-def movies streamed over IPTV (Internet Protocol Television) anyway. I think all these people need to take a chill pill.
Let's take a look at some history. DVD emerged on the scene in 1997, when the first consumer players shipped. But DVD players were incredibly expensive—even as late as 1999.
The first consumer DVD players shipped in the US in March of 1997. As late as mid-1999, relatively mainstream DVD players were costing over $500. At the time, DVD had little or no real competition. VCR prices were dropping, but the convenience of disc, plus the pristine image quality (compared to tape) swayed users.
The lack of substantial competition allowed DVD to ride the technology curve in a relatively normal way. Prices trended downward gradually as technology improved, and today we have upscaling DVD players for $50.
DVD media prices, on the other hand, stayed relatively high for years. It's only in the past two years that prices regularly dipped under $20—maybe because of the arrival of the high definition formats. Now, of course, we see new, mainstream DVD releases at $15, and many older discs for well under $10.
Alas, Blu-ray wasn't able to ride the technology curve as simply as DVD. When Toshiba threw the wrench into the works with HD DVD, Blu-ray players were rushed out the door. As Lance Ulanoff noted, many of these devices use cut-down PC technology, since the dedicated, high definition video chipsets aren't really available yet.
After the first year, Toshiba began slashing prices of HD DVD players, with the lowest cost unit regularly available for under $200, with spot sales at close to that magic $99 price point occasionally happening. Blu-ray technology, being somewhat more complex, couldn't play the price game as aggressively, but I bought a Sony BDP-S300 for under $350 last year.
Now, HD DVD is gone, and we're seeing the first and second generation players priced more appropriately, given their bill of materials. Even so, 2.7 million Blu-ray players were sold in the US in 2007, not counting Playstation 3 sales.
Which brings up another point: Anyone buying PS3 gets a Blu-ray player. So you can safely assume that most PS3 buyers won't buy a standalone player. PS3 sales have been steadily increasing over the past six months. No one really knows the impact of the PS3 on Blu-ray media sales, but the indicators are that Blu-ray content sales are up substantially this year, with Blu-ray disc sales up 351% the first three months of this year.
Now let's throw in one more wrinkle: the economy. Whether you believe we're in a recession or not, it's clear that people are being more cautious than usual about their disposable income. With gasoline at $4 per-gallon, the sub-prime mortgage crisis hammering stock prices and job growth at anemic or negative levels, most people would consider paying $400 or more for a high def disc player something of a expendable luxury.
As for using the Internet to download high def content—that's well and good for some things. But like many people, I both subscribe to Netflix and also own a bunch of DVDs on my own (and a burgeoning Blu-ray collection as well.) People like to collect stuff, view extras, and have their favorite movies, shows, and content right at their fingertips.
Meanwhile, the technology curve is marching on. It's likely we'll see sub-$200 Blu-ray players by the end of 2008, with those magic $99 players maybe making their appearance at the 2009 Consumer Electronics Show. Certainly we'll see $150 players on the show floor then.
So let's not plan the funeral for Blu-ray quite yet. Certainly Neil Young believes it's going to only get better, announcing in early May that he would release his entire music archive on Blu-ray (According to MSNBC, Young was quoted as saying, "Previous technology required unacceptable quality compromises. I am glad we waited and got it right."
Nice article. There are so many factors to consider when examing why sales of standalone players declined. 1. A lot of consumers are prefering the PS3 over the current standalone players. 2. The free movie promotion ended in late january. 3. The HD TV and Blu-ray promotions ended. 4. The CE retail sector is usually slow in the first quater of the year. 5. Most stores were out of stock for the Sanmsung 1400 BD-P and the Sony 300S. 6. Consumers are waiting for the new Sony and Samsung models to arrive. All valid reasons, but what do I know
The same pundits will reverse their positions when Iron Man on BD ships and the ratio of disk sales with DVD is respectable.
At current trends, Iron Man BD will likely be 15% - 20% of DVD sales if we take sales ratios of similar genres, meaning that week will see a nice pop in that BD : DVD ratio number.
Great post and I whole-heartedly agree. I read Ulanoff's article, and he simply sounded like a bitter HD DVD enthusiast.
Great article, great level-headed outlook...the beginning of the year is indeed typically slow in terms of sales for things like Blu-ray, so if the slow trend in Blu-ray player sales are still here toward the end of the summer and during the holidays, then the negative pundits certainly have a definitive concern. Until then, however, it simply sounds like sour grapes.
Lance Ulanoff's anti Blu-ray FUD piece is one of the headlining articles at PC Magazine's website. I responded to the article in the PC Magazine forum, making some of the same points the ExtremeTech article listed. There's also another factor: the current crop of new releases on Blu-ray aren't all that great and this is traditionally a slow time of year for home video. Things will be different this fall when movies like Iron Man and The Dark Knight arrive on Blu-ray.
If the economy can turn around by fall I think a LOT of HDTV monitors and Blu-ray players (and quite a few PS3 consoles) are going to be sold.
All in all a very well-thought out, well written analysis of the situation, and I very much agree with the majority of it.
The only part I think this guy is somewhat inaccurate on is the pricing of DVD movies. Many movies have been at ~$15 prices (at least as a rough sale price during the first week of release... then going down to those prices permanently months down the line) for several years now, predating the release of Blu-Ray and HD-DVD. He makes it sound like this happened around the time of these new formats coming out and directly as a result of them coming out, and that really isn't so.
But other than that, I very much agree with everything said there.
Particularly speaking, this supposed 40% drop in Blu-Ray player prices happened from January to February, right after the holiday shopping season. So, it's pretty logical that the end of that shopping season is largely the reason why sales suddenly go on a decline.
Even if sales were up in early January, it could have been the result of people either using gift cards that they got for Christmas towards the purchase of a Blu-Ray player, or it could have been the result of people receiving HDTVs for Christmas and then deciding to go out and buy a Blu-Ray player to go with it shortly there after. It isn't exactly a mind boggling mystery.
Last edited by Dynamo of Eternia; 05-22-2008 at 07:42 PM.
In truth, many of those pundits out there have been greatly exaggerating the low price levels of new movie releases on DVD. Many try to claim "$15" as the standard price for new movie releases on DVD. That is flat out WRONG.
Some new movie releases do appear at or below that $15 price point. However the vast majority of all new movie releases on DVD originally appear on store shelves at a price point between $18.99 and $21.99. Those are the typical prices for new releases at stores like Wal-Mart, Best Buy, etc. It's also worth mentioning the MSRP for those new release DVDs is typically $24.99 to $29.99. Some stores (such as fye, Sam Goody, Suncoast, etc.) actually charge those prices for new movies on DVD.
Catalog releases in new double dip DVD versions, re-mastered versions, etc. are typically the sort of thing that appear in stores at or below the $15 price level. It just is not common at all for a movie that was in commercial theaters three or four months ago.
The time is overdue for these reporters to get their facts straight in terms of DVD pricing and the comparisons they are drawing with Blu-ray pricing.
In truth, many of those pundits out there have been greatly exaggerating the low price levels of new movie releases on DVD. Many try to claim "$15" as the standard price for new movie releases on DVD. That is flat out WRONG.
Some new movie releases do appear at or below that $15 price point. However the vast majority of all new movie releases on DVD originally appear on store shelves at a price point between $18.99 and $21.99. Those are the typical prices for new releases at stores like Wal-Mart, Best Buy, etc. It's also worth mentioning the MSRP for those new release DVDs is typically $24.99 to $29.99. Some stores (such as fye, Sam Goody, Suncoast, etc.) actually charge those prices for new movies on DVD.
Catalog releases in new double dip DVD versions, re-mastered versions, etc. are typically the sort of thing that appear in stores at or below the $15 price level. It just is not common at all for a movie that was in commercial theaters three or four months ago.
The time is overdue for these reporters to get their facts straight in terms of DVD pricing and the comparisons they are drawing with Blu-ray pricing.
I could be wrong, but I remember 14.99$-17.99$ being the standard walmart price for a new release, but in the recent years it's been creeping up, now it seems to be 19.99$-21.99$ for a new releases.
I could be wrong, but I remember 14.99$-17.99$ being the standard walmart price for a new release, but in the recent years it's been creeping up, now it seems to be 19.99$-21.99$ for a new releases.
The pricing I think has more to do w/ how well a film does theatrically than any other factor. It seems to me that "blockbusters" tend to be in that $14.99-17.99 price range, while lesser known (and grossing) fare rarely drop under $19.99. The other rather disingenuious price comparisons come when they compare those $15 DVDs to their $30 blu variation. Often times those $15 DVDs are bare-bones, while the blus they are compared to are fully stacked w/ special features that are comparabe to (and sometimes exceed) the SE DVDs, which are almost never on sale, and usually run between $19.99-$24.99. Personally, I usually buy SEs over bare-bones anyway, and I don't see paying $5-10 more for better PQ & AQ as asking alot.
The $15 price level has never been common for new release DVDs, even for many big hit movies when they initially appeared on DVD.
Perhaps the reason why so many reporters think $15 is the standard for new DVD pricing is merely because they only remember paying under $15 when they picked up a copy of The Matrix or LOTR: The Return of the King.
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"Pundits: Take a Chill Pill"
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