If the claims and counter claims emanating from the US in recent weeks are to be believed then the format war between HD-DVD and Blu-ray has been decided. Trouble is, both camps claim to in the best position – which has only led to more confusion.
So, what's really going on?
As it stands (in the US at least), a basic summary is that Blu-ray is ahead in terms of software disc sales while HD-DVD holds the upper hand with dedicated hardware players.
But, unsurprisingly, all is not as simple as it seems.
Blu-ray discs are outselling HD-DVD discs by more than two to one in the US and leads the rental market, which is why Blockbuster recently decided to almost exclusively stock the format at the expense of HD-DVD.
Blu-ray is also supported by more major film studios than HD-DVD – with only Universal Studios maintaining an exclusive HD-DVD stance and questions being raised how much longer that will continue.
However, HD-DVD players have outsold Blu-ray players and can claim 60% of the standalone US market - that's 150,000 HD-DVD players sold compared to 100,000 Blu-ray players.
Now, here's where it gets more complicated.
Sony has also sold around 1.5m PS3 consoles with integrated Blu-ray drives in the US – and an equal number outside the States. This means there are potentially ten times more Blu-ray players than HD-DVD players in US homes. Even if Blu-ray does have a lower attach rate of high-definition films to its players, it has a far greater numerical advantage.
Agreeably, not everyone that's bought a PS3 console has done so with Blu-ray in mind but the majority of consoles could eventually be used to play high-definition films.
That said, HD-DVD still has one important ace up its sleeve – the price. HD-DVD players are around 40% less expensive than Blu-ray equivalents, even after price cuts from both camps. It's been suggested that if the price of HD-DVD players falls to entry-level costs of around $200 then first time buyers will adopt the format rapidly - leaving Blu-ray as a luxury purchase.
This still seems the best course of action for HD-DVD. If HD-DVD can attract entry-level buyers instead of DVD then Blu-ray's potential PS3 driven lead can be effectively closed. And, once film studios discover more consumers are using HD-DVD any early allegiance will be ignored.
So, while the market is certainly entering a critical period for both camps it's still too early to call an outright winner. Until then, we'll have to just continue watching this space.
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Trouble for HD-DVD is that a price drop right now to $200 would probably be something of a pyrrhic victory, as I doubt the big players on the hardware side would be able to turn much (if any) profit on what units they sell. And if there's no or not much profit to be had will any other big name manufacturers come on board and actually release players?
The price differential is now down to $100, or 25%, between HD-DVD and Blu-Ray standalones, and it appears that Blu-Ray standalones may have this week begun overtaking HD-DVD.
To understand the importance of Blockbuster, you need to understand the pressures on the video rental companies. The declining price of DVDs means that people will often buy rather than rent. This means they can't charge as much for renting DVDs as they used to, so their margins are reducing. Have you noticed that many video stores are devoting more and more space to games? They make more money renting a game than a DVD. HD movies can be rented for a higher price, so the rental companies are interested in them to help improve their margins.
However stores have limited shelf space, and if they have to carry two formats it means double-purchasing titles available in both formats, and devoting double the shelf space. They're better off having more different titles, than 3 different versions of the same title (4 if you count full screen / wide screen for some titles.) Worse, there's only so much "eye" time with each customer.... show them the same title 4 times and you're losing the opportunity to show them other titles they may be more interested in.
Lastly, there's a huge problem with consumer education. Most people don't really understand the difference between DVD, HD-DVD, and Blu-Ray. It's frustrating for consumers to understand why there are two competing HD formats. When faced with a choice, most people will stick with what they already know. That's why this war is so bad for the industry as a whole.
What does Blockbusters decision mean? Most importantly it means that there is enough demand for Blu-Ray HD rentals for them to justify putting it in all their corporate stores (presumably it will be an option for franchise stors.) For Blockbuster, there is a business case that supports renting (and selling) Blu-Ray. There is NOT currently a business case that supports them renting HD-DVD.
Catch that last bit? The biggest, most important movie rental company in the world just told everyone that there is a business case that justifies their exclusive in-store support of Blu-Ray and that there's money to be made renting HD movies. Competitors will follow suit, and be relieved that Blockbuster has shown that it's okay to support only one format.
The impact of this is much bigger than just Blockbuster customers being able to rent on Blu-Ray. If Blockbuster stays exclusively Blu-Ray (and they certainly don't want to support two competing formats) and other major rental companies follow suit, they will have a huge influence on the renting (and buying) public. People will see Blu-Ray as "the" HD disc format and that's what they'll buy. Once Blu-Ray is seen as the "safe" choice, sales of HD players and movies are expected to increase dramatically. The Blockbuster announcement is a very significant blow to HD-DVD.
What does it mean for the PS3 if Blu-Ray becomes popular? Quite simply increased sales. Possibly dramatically increased sales. Right now the public perception of the PS3 is that the console is over-priced. Price is a reflection of perceived value. People see the PS3 as not having enough value as a games console compared to the competition. Blu-Ray is a significant cost component of the PS3, and few people appreciate the value of Blu-Ray for improving HD games. However, if Blu-Ray is successful over HD-DVD, people will begin to see the PS3 as not just a game console, but also a Blu-Ray player. Given the hugely successful HD TV market, that would increase the perceive value and popularity of the PS3. It will also validate what Sony has been saying all along, and you'll start to see a change of opinion about Sony in the media. (The media always likes to parrot new and controversial stories.... it get's attention. They love to tell people Sony isn't doing well in the games market with the PS3....but it's getting boring and doesn't attract eyeballs anymore. They'd love to have a story like "Sony got it right after all"...people would be interested in that.)
"and it appears that Blu-Ray standalones may have this week begun overtaking HD-DVD."
LOL. Got any numbers to back that up? That must be why, on Amazon.com, Sony's new affordable BR player never got ahead of Toshiba's cheapest player and after less than a week fell back below all 3 of Toshba's HD-DVD players in sales.
Why Blockbuster would want to limit their customers is beyond me. But let's face it, Blockbuster has been mismanaged for years. They bought "Sound Warehouse", renamed them "Blockbuster Music" and promptly ran them into the ground, closing them all. Then they run a "no more late fees" ad blitz only to be sued for charging late fees. Then they wake up and find Netflix taking over their market share in a huge way. Now they put out a press release saying they are siding with Blu-ray, when the High Def market is still undeveloped and undecided.
In reply to the last post. I think people need to look at blockbusters decision this way... Retailers don't like wasting money and blockbuster like all retailers want this war to end soon. Why? This answer is simple... no one wants any stock hanging around that they can't sell. So its clear that the industry itself is going to try and accelerate the decision of what format to stick with, faster than the consumers will. And they better get it sorted sooner rather than later in my opinion. It's stupid that there are two different formats and that I need two different players to watch the films I want.
I think Blu-Ray has already won, due to some seriously clever marketing strategy on sonys half. You only have to look at the figures of how many PS3's are sold compared to HD-DVD players. Blu-Ray may not have completely taken over, but it's certainly managed to push out clear cut facts; that its selling more and has more players. It's enough to topple blockbuster, its only a matter of time before the rest follow. And all this regardless of what the consumer thinks, because we will buy PS3's regardless of Blu-Ray, but will get a Blu-Ray disc just to show it off to our mates. The market is a niche right now, so small figure's are making a big impact, the total amount sold of blu-ray isn’t really that much, but it's everything a retailer needs to make a decision.