Recession hits Blu-ray's hopes

 

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Posted on 12 Nov 2008 at 10:14

Executives hoping that weak consumer demand for high-definition discs will strengthen in the run-up to Christmas face this rude awakening: it's the economy, stupid.

The format war is over, hardware prices are falling and studio marketing efforts are taking hold with retailers. Yet the economic downturn has become a chief reason for fearing that holiday sales of Blu-ray discs will disappoint.

Hollywood is counting on Blu-ray - winner of a bloody format with now-failed HD-DVD - to become the next-generation format of choice for home entertainment, compensating for a DVD cash cow that's starting to run dry.

But consumer concern about the worsening economy couldn't have spiked at a more inopportune time.

"The economy is the biggest challenge, because there are just so many pieces to the Blu-ray puzzle that consumers face," says Lori MacPherson, GM of domestic home entertainment at Disney. "You need the high-definition television set, you need the player, you need the cables, you need the software..."

MacPherson still believes Disney's seasonal slew of new releases and catalogue titles in the Blu-ray format will help stir previously resistant consumers to check out the HD format. But industry colleagues participating in a panel discussion at the HD3 conference in Los Angeles agreed that the onset of recession won't help.

"The economy is hitting everybody," claims Danny Kaye, executive vice president of research and tech strategy at Fox. "But we still look forward to a great fourth quarter."

If that sounds a bit like whistling past the HD graveyard, it should be noted that there are also distinctly positive bits of news on the home entertainment horizon. "I know the economy is tough right now, but the manufacturers are really bringing down the price of their HDTV sets," Paramount's vice president of marketing Chris Saito says.

Blu-ray player prices also are heading south, though perhaps not as quickly a recession-minded consumers might like. Although several manufacturers are flirting with the $200 (£130) price point long considered key to platform launches, most Blu-ray players still sell for considerably more.

Then there are the discs. Movie releases on Blu-ray sell for upward of $25 (£16), whereas most DVDs retail for $15 (£10) or less.

"We're all constantly looking at (disc) pricing," says Sony's vice president of business development, Rich Marty. "What it amounts to is that we'll wait until after the fourth quarter and see how it goes."

DVD upscaling

Contrarians have suggested the spread of HDTV sets might not prompt a corresponding rush to Blu-ray if consumers opt instead to boost DVD image resolution via so-called upscaling technology. But those kind of image manipulations fail to match Blu-ray standards and won't pass muster with the majority of consumers, Disney's MacPherson says.

"For me, it's the difference between costume jewelry and a diamond," he claims. "Costume jewelry is nice, but I still want the diamond."

Still, despite panelists bullishness on Blu-ray, execs said season sales will be carefully scrutinised in the new year. Depending on how things go with HD discs and other packaged goods sales, it's possible that the industry's go-slow approach on digital downloads could accelerate.

So far, Hollywood has been experimenting with a bifurcated digital strategy, making some titles available for digital downloading and consigning others to "digital copy" editions of DVD releases. Purchasers of such discs can upload a digital copy of a movie from the DVD to a PC.

Author: Reuters