One thing about covering the Blu-ray disc beat: There’s never a dull moment! Ever since BD delivered the coup-de-grace to HD DVD in early 2008, there has been an ongoing debate about whether this was a real victory, or a hollow one.
What’s that? Hollow, you say? Yes, there are more than a few analysts who believe that Blu-ray was simply too late to the game, and that the tide is already turning as the distribution of movies and TV shows moves away from packaged optical discs to broadband delivery and video-on-demand.
Even so, supporters of the BD format present compelling arguments that their side will carry the day. Back in October, the Digital Entertainment Group released figures that showed consumers "…spending $161 million on buying Blu-ray discs in the quarter ended September 30…" representing an increase of 66.3% over Q3′08 and 83% over the first nine months of 2008.
In terms of sales percentages, DEG stated that, "…Blu-ray Disc sales accounted for 12% of total consumer spending on new theatrical releases during the quarter." The DEG release also cited Consumer Electronics Association numbers that state BD players and PlayStation 3 consoles are now found in 11.7 million homes, and that Blu-ray rentals were up 44.5% over the same time period last year. Sounds like the BD glass is filling up!
Taking an au contraire view, the Los Angeles Times noted that in the same report, overall DVD sales (BD and red laser) were down 13.9% in the quarter, while total consumer spending on packaged and digitally delivered media dropped by 3.2%. (Intriguingly, the "digitally delivered" part of that equation amounted to $420M of revenue in Q3′09 - an increase of 18% from 2008.) Sounds like the BD glass is emptying!
At the recent Blu-Con 2.0 event in Beverly Hills, executives blamed the drop-off in DVD sales on the recession and predicted that the home entertainment business "…will start growing again in 2012," according to Mike Dunn, 20th Century Fox Home Entertainment president, as quoted in Video Business. Glass half full?
The only problem with that claim is that DVD sales have been slowly and steadily declining for several years now, a trend that precedes the current economic downturn. To wit: A follow-up story in the L.A. Times reported that sales of both CDs and DVDs have dropped 23% from a year ago at Best Buy stores. Accordingly, the CE retail giant has already started reducing the amount of floor and shelf space devoted to both categories.
This follows a similar optical disc downsizing announcement by Wal-Mart earlier this fall. J.P. Morgan analyst Imran Khan was quoted in a Dow Jones Newswire story as saying, "We think the new strategy implies Wal-Mart no longer sees DVDs and Blu-ray discs as traffic drivers." Glass half empty?
Best Buy is already planning ahead for a disc-less future. Earlier this month, it announced a partnership with CinemaNow to create a movie downloading service that will work with any CE devices equipped with network connections. According to a company executive, digital downloads and streaming will constitute a significant, double-digit percentage of revenue from movies watched at home by 2012.
The L.A. Times story envisions that, "…instead of rows and rows of DVDs and CDs, the center of the (Best Buy) store will be a "hub" that emphasizes home connectivity by bringing together Napster and (CinemaNow) downloads with devices needed to watch them."
You can bet that smart phones and NeTVs will be an important part of that mix. Research firm Parks Associates recently predicted that 400,000 NeTVs will be sold by year’s end and nearly 14 million will be ensconced in American households by 2013.
Now, another challenge to Blu-ray has materialized. This past Monday, NCR Corporation and MOD Systems announced a pilot program to allow digital downloads of movies directly to SD cards from specially designed Blockbuster kiosks. One thousand new and classic movies are currently available in the pilot.
The NCR press release emphasized the superior video quality using SD card playback instead of video streaming. (No argument there!) And it mentioned the convenience of "no returns." Once started, consumers would have 48 hours to finish watching a movie before an embedded DRM system locked it out.
As many DD readers know, many LCD and plasma TVs are already equipped with USB ports for connecting flash memory to view photos, listen to MP3 files, and even play MPEG4 video. Panasonic LCD and plasma TVs even include a dedicated SD memory card slot for that purpose.
A quick check at Amazon.com showed 16GB SD cards currently retailing for less than $40. That’s enough capacity to store one HD movie or a couple of SD movies using MPEG4 encoding. It wouldn’t take much imagination to create and brand a keychain SD card for downloading movies at the local grocery or drug store. (Look out, Redbox!)
So - is the Blu-ray glass half full, or half empty? Whatever your position in this debate, keep in mind that networks and studios are in business first and foremost to make money, not to support a media distribution format. Aside from Sony, no other media conglomerate has any real vested interest in the success of Blu-ray. Rather, they are exploring all options when it comes to selling packaged entertainment to consumers.
And if consumers and retailers prefer digital downloads of movies to renting or purchasing optical discs - and that growing trend shows no sign of abating, from my perspective - then the glass really is half-full. C’est la vie…