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Ruined 07-19-07 01:16 PM

Futurists: Both Formats Will Grow
Looks more and more like Dual Format Players will be the norm in the future.


Originally Posted by Video Business
Futurists: Both formats will grow

HOME MEDIA EXPO: Consumers still confused about Blu-ray, HD DVD

By Jennifer Netherby -- Video Business, 7/18/2007
JULY 18 | LAS VEGAS—Both HD DVD and Blu-ray Disc will have a place in home entertainment’s future and a big one at that, according to research presented at Wednesday panel “The Future of Retail and Home Entertainment” at the Home Media Expo here.

By 2012, high-definition DVD will reach $10 billion in annual sales, surpassing DVD sales, which are expected at $8 billion, according to Adams Media Research projections. Adams believes that high-def sales will be split equally between HD DVD and Blu-ray.

Firm principal Tom Adams said the industry is “slowly getting used to the idea that Toshiba’s not going away.”

But high-def DVD won’t grow as fast as standard DVD did. Part of the problem is a lack of consumer high-def knowledge.

“Consumers are entirely confused,” said Russ Crupnick, NPD movies and music analyst. NPD research shows that 10% of consumers think they already have a high-def player, while research says that closer to 1% actually do.

One of the complaints of consumers is that they don’t understand why they should upgrade to high-def. “More than price, people don’t see a big difference,” he said.

Crupnick said there’s an opportunity for smaller retailers to educate consumers about high-def, but he cautioned them away from heavily investing in it, saying many consumers will buy players and high-def movies at big box stores.

The typical high-def consumer is male, ages 18 to 34, reads men’s magazines such as Maxim, probably owns an iPod, drinks imported beer and makes most of his movie purchases at electronics and game specialty stores, according to Nielsen Media Research.

Other new technologies such as movie downloading and video-on-demand are expected to grow in the next five years, but not as fast as high-definition. Adams projects that movie downloads could reach $160 million in revenue this year, but he said that is optimistic.

Crupnick said NPD has seen a significant drop in movie downloads in the last year.

DVD sales continue to be an important part of the business.

The most important thing retailers can do is focus on customer service. Crupnick suggested retailers look at what companies that score high on customer satisfaction are doing, such as Amazon and Netflix.

Music consumers, who behave similarly to movie consumers, shop an average of five stores for media, according NPD. Over the last three years, consumers have shifted where they are buying DVDs. Between January and May 2004, 54% bought discs at video stores, compared with 42% this year. Purchases at online stores doubled in the same period, from 11% to 21%.

Store loyalty, he said, is a thing of the past.

But consumers are buying more DVDs at video specialty stores, according to Nielsen. In 2006, 28% of video purchases were made at specialty stores, up from 23.4% the prior year. DVD purchases at Wal-Mart slid from 21% to 17%.

At an afternoon panel about DVD manufacturing on-demand, execs from MOD companies said the business is just getting started, but it may offer opportunities for retailers to carry a broader range of content.

Amazon CustomFlix VP of content acquisitions Larry Smith said at his company, some smaller titles sell one or two copies, while others can sell even more.

Workout video You On a Diet: The Workout sold enough to make it the No. 7 top DVD seller on Amazon at one point.

Burner_Tbird2 07-19-07 02:33 PM

Re: Futurists: Both Formats Will Grow
Jennifer Netherby said it- its gotta be true! ;)

The format war is just that a war, its in the best interests of each company to win the war as quickly as possible. While the fight is on going each company is losing profits to its competitor. More importantly as there are two players in this current war that necessarily means that at any point there is a winner in sales and a loser. If there is a continual winner in sales that winner will use financial leverage to sell even more units and the gap will widen between winner and loser. This will continue until the loser either accepts they are fighting a losing battle and makes the financially justified decision to remove themselves from competition or gambles even heavier with company assets and tries to artificially lower prices by operating at a loss.

In anycase a stalemate is just not possible, this isn't a war for some political motivation its just dollars and cents. Once a leader emerges the accountants on the losing team will inform those in charge that its time to pull the plug.

Ruined 07-19-07 03:51 PM

Re: Futurists: Both Formats Will Grow

Originally Posted by Burner_Tbird2
In anycase a stalemate is just not possible, this isn't a war for some political motivation its just dollars and cents. Once a leader emerges the accountants on the losing team will inform those in charge that its time to pull the plug.

Sure it is - in today's market there is room for both. Just like DVD+R and DVD-R, or Sirius and XM. Eventually they will find ways to be compatible (Dual format players and/or discs).

Sony will not give up because they bet the farm on Blu-Ray and also because they have the PS3 userbase to sell to.

Toshiba will not give up because if Blu-Ray outright wins and replaces DVD, then Toshiba loses the farm - losing both DVD licensing *and* HD DVD licensing fees. (HD DVD preserves DVD licensing fees through the HD DVD/DVD combo disc and twindisc) Further, it is in Microsoft's best interest to keep HD DVD alive because it not only slows down Sony and makes the PS3 somewhat less attractive, but it also gives them time to market their hidef downloadable marketplace. Toshiba can continue to ramp up its userbase with cheaper standalone players saturating the market, eventually dropping to $199 and below in places like Walmart.

And, the studio with the most influence (Time Warner) has developed their own disc format "TotalHD" which has both formats on the same disc, a format which they will receive licensing fees from if other studios adopt it - which may have to happen if both formats grow as analysts expect. So here too, the most influential content provider wants a stalemate as well to float their hybrid disc format that they will receive royalties from by studios that adopt it. Time Warner also has numerous patents invested in HD DVD, so they will get money from those patents as well when a Blu-Ray owner buys a TotalHD disc!

I don't see how either side could possibly throw in the towel, and I don't see any forseeable way the war can end with both sides spending cash. Both hardware companies behind each respective format have the farm riding on each respective format and the most influential content provider desires a stalemate to promote their own hybrid disc and HD DVD patents.

Rakeesh 07-19-07 04:42 PM

Re: Futurists: Both Formats Will Grow
This is what I've been saying the whole time. It happened with DVD+R and DVD-R.

People kept worrying about one format dieing and whatnot, and eventually that fear lead to the production and later dominance of dual format drives. Now its pretty much impossible to find a single format drive these days, and there are as many DVD+R discs as DVD-R.

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