Blu-ray didn’t have an easy time of it in the early days, and Jill Bilzi picks her way through the initial problems of format wars and a global recession to find out how the format is faring after six years in the consumer marketplace.
Talk about a difficult birth: Blu-ray turned six years old in June and nothing has come easy to this young technology. Starting with a protracted patent suit after the discovery of the blue-violet laser, Blu-ray has survived a format war, a global economic meltdown and continued consumer confusion over compatibility with its older and more popular sibling, the DVD.
Blu-ray’s stunning graphics and almost distractingly-realistic sound quality have repeatedly triumphed over a series of ill-timed and unforeseen circumstances that nearly kept it from being born at all, never mind growing up. Six years after the first commercial launch of Blu-ray, the format is still struggling to become the de facto standard in high-definition physical optical media. But, say analysts, Blu-ray is resilient enough and surely gorgeous enough to keep gaining market share in a world increasingly dominated by digital delivery of movies and music.
“The whole world’s going digital, yes, but not right away, “says Russ Crupnick, Senior VP of industry analysis at The NPD Group. “Over the next three to five years, we’ll all be doing stuff in the cloud, but Blu-ray’s not going anywhere. I think Blu-ray and digital delivery are going to peacefully co-exist.”
NPD is currently tracking ownership of Blu-ray players at approximately 20% of US households, but the format is not expected to ever reach the 80% ownership rate enjoyed by standard DVD players in US homes. Blame the cloud, blame streaming services, blame the kiosks popping up at every supermarket, blame video on demand (VOD); analysts say they will all play a factor in holding Blu-ray’s ownership level down throughout the format’s lifecycle.
An IHS Screen Digest report released in March forecasts that this year – for the first time ever – consumers will watch more movies online than on DVDs and Blu-ray Discs. The report predicts that online stores and services like Netflix and iTunes will account for 57% of all movie consumption, but only 12% of spending. Internet movies purchased or rented online are forecasted to grow 135% to 3.4 billion titles, but consumers will only spend $1.72 billion on those digital movies, compared to $11.1 billion on DVDs and Blu-ray Discs.
The Blu-ray format began to build sales just as consumers started to move away from physical media. Broadband access and online streaming services such as Netflix, iTunes, Hulu and Amazon Instant Video became popular, as did service providers widening their high-definition on-demand offerings. Consumers no longer have to watch a Blu-ray Disc on their players in order to view high-definition content; they can stream these services directly to a video game console or even a TV, eliminating the need for any extra set-top box.
“I would say that Blu-ray sales have not met sales expectations given the rapid and wide adoption of HDTV,” says Ben Arnold, Director of Industry Analysis at NPD. “As the high-definition set top box companion to HDTV, I would have expected a faster ascent for Blu-ray sales than what has occurred.”
The early format war with the HD DVD platform adversely impacted early buzz for Blu-ray Disc technology, with studios, consumer electronics companies and retailers forced to delay their release plans. Just whether the format war squashed momentum for Blu-ray is unknown, but a far more alarming consequence of the costly technology war with HD DVD is lingering consumer confusion.
Simon Heller, Consultant Director, British Video Association (BVA) Marketing and Communications, says “it is impossible to quantify” how much the format war hurt the initial growth of Blu-ray. “Consumer confusion has not helped to establish Blu-ray and, in the early days of high-definition discs, the BVA couldn’t favour one format over another, which delayed our ability to promote Blu-ray,” he says.
Several industry executives and analysts refer to lingering confusion among consumers over issues that should have been simple to explain, such as Blu-ray’s backward compatibility with DVD.
“Consumers in the early phase were unclear which format to invest in as it wasn’t clear which would win out,” Arnold of NPD says. “Emerging from this, there has also been a perception among consumers – that I don’t think has been effectively addressed by the industry – that buying Blu-ray means buying all new discs, basically a perception that the Blu-ray will not play standard DVD discs.”
In order to compete in the digital universe, Arnold says many manufacturers have “future-proofed” their Blu-ray players by enabling them to support streaming services. And Blu-ray players globally have become extremely affordable, so it’s easier for them to compete with all the $100 to $150 digital media receiver devices like the Roku, Apple TV and the Boxee.
“I don’t think Blu-ray is ‘dead’ or even dying,” Arnold says. “There will always be space for a high-quality physical format. It’s likely the high-definition spec will be taken over eventually by 4K and 8K, but not any time soon.”
Indeed, first-quarter 2012 tallies from the Digital Entertainment Group (DEG) were heartening: physical sell-through of movies was up 2% for the quarter, while catalogue sales on Blu-ray Disc were up 27% and TV on Blu-ray sales were up 54%. The DEG estimates that 2.4 million players were sold in the first quarter, including BD set-tops, PlayStation 3s and Home-Theater-in-a-Box systems (HTiBs).
And analysts and industry executives predict the new UltraViolet platform will help Blu-ray. The latest quoted figures state that consumers have opened around three million UltraViolet accounts to access their movies and TV shows in the cloud.
“UltraViolet adoption by a large number of consumers should result in more physical product being purchased,” says Frank Salvaggio, General Manager for the packaging firm Ross-Ellis.
“Once consumers are familiar with it, UltraViolet should accelerate Blu-ray sales because it greatly extends the ownership model,” agrees Andy Parsons, US Promotions Committee Chair of the Blu-ray Disc Association (BDA), which now has more than 150 members. “Nothing beats Blu-ray for the best HD picture and sound on a proper home theater system, but there are times when we aren’t able to enjoy our content there. UltraViolet is a good solution for this, because it goes where we go, and we can keep the ultimate quality version on our shelves at home.”
Crupnick of NPD concurs: “If people get into the idea of UltraViolet, we could still be talking about physical media many years from now.”
According to NPD, the average US household owns 80 to 100 movies and TV shows. UltraViolet’s premise that a consumer can take his or her favourite titles in their collection and convert them and share them and watch them anywhere “is a pretty good proposition,” Crupnick says.
When asked what will continue to drive Blu-ray sales through the next years of its lifecycle, most executives cite the same key factors: the peerless quality of Blu-ray’s graphics and sound as compared to digital downloads and streaming; the emergence of combo packs that now include a digital copy and/or UltraViolet along with the Blu-ray Disc and DVD duo; and 3D Blu-ray – the BDA reports that the initial 3D TV adoption rate is exceeding that of HDTV.
But above all, it is the quality and collectability of the content on the disc, industry executives say, that is driving sales. Studios can add Blu-ray books, BD Live capability, and obscure bonus tracks, but if a movie, TV show or recording is not first-rate entertainment, it doesn’t matter how pristine it looks or sounds, or how many extras or bonuses come with it.
“Content, content, content,” says Crupnick of NPD. “Ultimately, it’s entertainment, not technology. If you don’t have good stuff to listen to or watch, game over.”
In fact, in much the same way the 1999 release of The Matrix on DVD is often credited with driving mainstream ownership of DVDs, The Dark Knight, released on Blu-ray in 2008, is frequently mentioned as a critical milestone in consumer acceptance of Blu-ray.
“With a technology launch the size of Blu-ray, it’s difficult to put a finger on one single defining event, as there were several,” says Parsons of the BDA. He cites Sony’s 2006 launch of PlayStation 3 with a Blu-ray drive in the console as a “key moment that gave the format a dramatic push forward".
“Almost overnight, there was a relatively huge number of Blu-ray players in households around the world at a very critical time, helping to diminish the perceived risk of buying into and publishing in a new movie format,” Parsons recalls.
And the immediate success of Warner’s The Dark Knight on Blu-ray Disc “showed how well Blu-ray had connected with highly-influential consumers,” Parsons says. The Dark Knight also shattered all existing sales records for Blu-ray titles by selling 1.7 million copies worldwide in its first week of release.
“If I remember correctly, a significant number of consumers were convinced to buy Blu-ray players just to watch this one single title in high-definition,” Parsons says. “Of course, there have been other titles that have also done exceedingly well on Blu-ray, but the timing and impact of The Dark Knight really stands out for me.”
Similarly, 20th Century Fox reported that sales of Blu-ray players at Best Buy stores in the US had doubled in the weeks following the April 2010 release of Avatar. And, while it took The Dark Knight 18 months to sell 2.5 million copies on Blu-ray, it took Avatar only four days after its release to sell 2.7 million Blu-ray Discs worldwide, probably due to greater Blu-ray player ownership in the two years that separate the releases.
Movies from Hollywood’s major film studios have dominated the Blu-ray format, largely because Blu-ray is a costly technology requiring AACS content protection.
“We rarely see Blu-ray releases from independent distributors,” Salvaggio of Ross-Ellis says. “The format is expensive and not affordable for low-volume titles.”
There may be more room for lower-volume projects in the music world. Several independent artists have released collections on audio-only Blu-ray Discs, including Trent Reznor. Reznor’s soundtrack to the movie The Social Network was released on Blu-ray in October 2010; it went on to win an Academy Award. Consumers who pre-ordered the soundtrack were given access to a 5-track downloadable sampler and also got the entire soundtrack in 320kbps MP3 format.
Neil Young has been the most high-profile musical artist to support Blu-ray. He took nearly a decade to put together The Neil Young Archives: Volume 1 (1963-1972), which was released in 2009. The ultra-comprehensive 10-disc set with 128 songs and a 236-page colour hardbound book is packed with hand-written song compositions, ticket stubs, press articles, photos and BD Live content.
Young won his first-ever Grammy Award for serving as art director on the packaging of Archives. In an online statement to fans, Young urges them to purchase the collectible set – and all his future archival projects – on Blu-ray. He writes: “All of my new projects will be available on Blu-ray. It is not going away. As time passes, you will see that Blu-ray is what you want for the utmost in quality, variety and versatility. It is worth it to get into Blu-ray now. Don’t say I didn’t tell you.”