Recent Opinions

Syndication

TDG Opinions

Could Internet Video Save Blu-ray?

Colin Dixon, Senior Partner, Advisory

March 29, 2011

TVs 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 million^2, 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

ShareThis

Only published comments... Mar 29 2011, 11:38 AM by Colin Dixon

Filed under: DVD, Internet video, Blu-ray, CE devices, Colin Dixon, video streaming, Internet video delivery, Netflix streaming, HD TVs

Comments

Bill Sheppard said:

Colin, I agree that internet apps make Blu-ray players an even more versatile purchase, especially since the price of many Blu-ray Disc players with a reasonable selection of apps is comparable or less than internet-only set-top boxes such as Apple TV and Boxee. I must disagree with your assertion that Blu-ray Disc player sales have been disappointing, however. Through the first four years of their respective lifecycles (we're approaching the fifth anniversary now) Blu-ray Disc sales have tracked higher than DVD sales at the same point. When you factor in Blu-ray adoption as a percentage of HDTV households (since it's unlikely an SDTV-only household will find Blu-ray particularly compelling) Blu-ray player sales continue to lead DVD sales. In Japan, new player/recorder sales (few player-only models are sold there) are overwhelming Blu-ray vs DVD. Europe is certainly the laggard in terms of adoption, but the trends are similar, just delayed by a year or two (which also reflects HDTV adoption rates). However, I'm not sure that Tesco is the best measure of visibility; while I'll certainly defer to your greater experience of UK-living, my understanding is that Tesco is generally comparable to Walmart, and as such would be expected to feature their lower-priced products.

Best,

Bill

April 1, 2011 4:18 PM

About Colin Dixon

Colin Dixon
Senior Partner, Advisory
Formerly: Senior Executive at Microsoft/Web TV, Liberate and Oracle

Colin Dixon is the senior partner for TDG’s advisory services. He is a Senior Technology Consultant with a background building and managing all aspects of a technical business. His extensive experience includes new media, communications, networking and network management - industries where he has a proven record of developing and delivering top quality products and services on time to meet market needs.

Colin has held senior executive positions at Microsoft/WebTV, Liberate and Oracle where he was responsible for technology and business teams delivering to the Cable, Satellite and IPTV industries. Over the last 15 years, he has led various corporate departments including engineering, business development, product and program management and marketing.

Colin is a published author and accomplished speaker including presentations at major industry shows such as NAB and IBC. He graduated from the University of Reading in England with a Bachelor of Science degree in Electrical Engineering. He holds a Masters in Engineering from the University of Florida and has post-graduate business education experience from Stanford.