Tuesday, February 12, 2008

Another Death Knell for HD DVD - and a Hollow Victory for Blu-Ray

The Warner Brothers decision has fed on through the line - Netflix will no longer buy HD DVDs. We should expect all other rental shops (online and offline) to follow suit.

http://www.homemediamagazine.com/index.cfm?sec_id=2&newsid=12070


Yet does it really matter? This is not the same format war as VHS and Beta. The quality increase (both in terms of picture quality, new capabilities, and convenience) simply isn't big enough from DVD to Blu-Ray or HD DVD. It is unlikely that Blu-Ray will become the new DVD. It's future appears to be more like the laser disc.

In fact the GaMeasure data strongly suggests that HD DVD was killing Blu-Ray, even up until the last quarter (Wave 4). In Wave 3 about 10% of Americans aged 12-65 said they owned an HD DVD, while only 3.8% said they owned a Blu-Ray. For likelihood to purchase in the next 6 months, 7.3% said they would probably or definitely buy an HD DVD, while only 5.5% said they would for a Blu-Ray. In Wave 4 we see that HD DVD was becoming far more successful than Blu-Ray, increasing to 12% of Americans owning one, while Blu-Ray stood still at 4%. Undoubtedly this was due to HD DVD's successful tactic of lowering prices to near DVD equivalent in the run up to Christmas. Despite the Wave 4 data being collected AFTER Warner Brothers announcement, 7% of Americans still said they would definitely or probably buy an HD DVD, beating the 6% plumping for Blu-Ray. An NPD study finds similar results.

http://www.homemediamagazine.com/index.cfm?sec_id=2&newsid=12074


Blu-Ray's victory is a hollow one. What's the real lesson? You need to provide consumers with a large and significant advantage to prompt widespread change from one format to another - witness the failure of the minidisc and the laser disc, and the clear success of the DVD. Blu-Ray and HD DVD could probably only have become the dominant format by selling at the same price or lower than DVD, negating the whole reason for doing it in the first place. In fact Blu-Ray's 'victory' will discourage any further price reductions, sealing its slow demise.


The format to replace the DVD will most likely be the digital download - cheaper, easier, and more convenient.

1 comment:

Michael D. said...

Another thing to consider is that the beneficiary of the format war, Sony, will quickly find themselves at odds with competing strategies, especially among Playstation households. Its the old "razor/razor-blade" strategy; Sony subsidizes the cost of the hardware and makes money on the software. However, SCEA is hard at work on developing an online strategy to rival Xbox Live, which will be opening the door to digital distribution. The question becomes whether PS3 owners will opt for the physical disc or file download? This is a key question we need to monitor in subsequent waves of Gameasure.