Colin Dixon, Senior Partner, Advisory
March 29, 2011
Blu-ray Player sales, despite what the industry may say, have not been spectacular. Worldwide households with a standalone player (not including PS3 game consoles) stood at just under 40 million by the end of 2010 with less than 13 million in the US. To add emphasis to the problem you only have to consult your newspaper. As you can see from the picture at right from a UK newspaper March 2011, Blu-ray is completely absent. Instead, cheap DVD players continue to dominate the scene. With 92 million1 US households with a DVD player and annual sales of over 20 million2, DVD still owns the market.
Is the reason for the poor performance of Blu-ray player sales simply that market conditions are not right? Blu-ray player prices have fallen below $150 and can often be found under $100. As well, disc prices have come down and are now often only marginally more expensive than a regular DVD. For example, the Blu-ray version of Unstoppable is available from Amazon.com for just $1 more than the DVD3. Blu-ray content is readily available - every major movie is present in the format and many titles are being re-issued to take advantage of the higher quality. Finally, in most countries sales of flat-panel HD TVs dominate the market; a perfect match for the great quality of Blu-ray delivery. Seemingly everything is in place for the Blu-ray market to take off. Yet it has failed to do so.
With DVD disc sales continuing to decline, the industry is looking to Blu-ray disc sales to pick up the slack. Unfortunately, that is not happening. In 2008, DVD sales were $18.4B; last year, Blu-ray plus DVD sales were $16.3B4. Little wonder, with so few Blu-ray players finding their way into consumers' homes.
Clearly, before Blu-ray disc sales can hope to close the gap on declining DVD sales, Blu-ray players need to be in a lot more consumer homes.
Ironically, the thing credited with hastening the decline of DVD sales could be Blu-ray’s savior. It is becoming increasingly more difficult to buy a Blu-ray player that does not also include Internet video streaming features. And this functionality is resonating with consumers. Nearly 40% of Blu-ray players in consumer homes are now connected to the Internet5. Further, in Netflix homes the players are more popular still. According to our latest research, subscribers that use Blu-Ray players to stream Netflix video are already watching 4.5 hours a week. This means they're probably watching more Internet video on the players than DVD and Blu-ray movies!
Consumers have been telling TDG for a long time that video-related Internet features of DVD players are strong differentiators for sales of the machines. As far back as 2008, nearly 50% of people intending to buy a DVD player said they were interested in seeing the latest movie trailers and previews from the web through the device6. And interest has not dimmed. Just last week, I asked my sister in the UK if she could buy a regular DVD for £50 or a Blu-ray with BBC iPlayer built-in for £100, which would she choose? Without a moment’s hesitation she chose the Blu-ray. Is there any doubt that the Netflix client carries equal weight with the 20+ million Netflix subscribers in the US?
For Hollywood, the imperative to get Blu-ray players in more consumer households is clear. If this doesn’t happen, disc sales will continue to fall, as will disc-associated revenue. Internet streaming seems to be the trigger feature capable of spurring the purchase of just about any disc player, meaning services such as Netflix streaming could, in the end, save Blu-ray and in the process help stem the bleeding in physical disc sales. Ironic indeed when you consider the industry is blaming the decline of DVD sales on Internet delivery.
1DEG Quarterly, Issue32, spring 2009, p15
2James Plath, DEG end-of-year report reveals Blu-ray sales rose 68 percent, DVDtown.com, January 7, 2011
3Amazon.com, accessed on March 25, 2011 to verify this pricing
4Ibid. Plath
5Michael Greeson, The In‐Home CE Ecosystem of the U.S. Broadband Households: 2010, TDG, Q4 2010
6Michael Greeson, Consumer Receptivity to Web-Enabled DVD features, TDG, 2008
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