Will Blu-ray Be Responsible for Death of the Disc?

Blu-ray’s copy protection arm last week approved a long-awaited managed copy license agreement that will give consumers the ability to make a digital copy of their Blu-ray discs. That got me started thinking: Can Blu-ray ever win big in the marketplace?

Blu-ray may have a presence in 11 million U.S. homes, but truth be told, those players are mostly PS3s, where the main use is, not surprisingly, playing games. And in spite of that presence, its win in the standards war, and continued adoption of HD TVs, the sell-through of Blu-ray discs to consumers is a testament to Blu-ray’s sad state. Three years in, sales for Blu-ray discs in the U.S. are on track for full-year sales of $1-2 billion in the U.S., while DVD sales in 2000 – three years after the first DVD video players were sold in the U.S. – were humming along at a $4 billion-a-year clip.

In large part, Blu-ray still isn’t succeeding — even with all its advantage — because there are plenty of alternatives. No doubt, many consumers find regular ol’ DVD players look pretty good on their HD screens and, if they don’t, they can always buy a cheap upscaler instead. A consumer can also choose to do away with discs altogether, getting content from one of the many of the over-the-top streaming services at their disposal.

But it’s not just a bounty of consumer choice that has Blu-ray singing the blues. No, its also choices Blu-ray itself has made. Opting for a premium pricing structure compared to standard DVD has no doubt contributed to tepid demand.  While Blu-ray disc prices have been coming down, a quick click over to Amazon shows Blu-ray prices are still significantly higher than regular DVDs — despite consumer’s pinched wallets.

But perhaps the biggest contributor to Blu-ray’s disappointing results is an obsession with restriction rather than innovation.  The best example of this is the standard’s managed copy efforts, which aren’t so much a solution to but rather a symptom of its continued lack of compelling consumer offerings. Sure, on the surface managed copy looks like a win, but peeling back the layers shows how limited this effort is: not only do consumers have to buy a new player to use it (managed copy), they’ll also have to fork over more dough for the right.

Sound like a winner to you?  Me neither.

To be certain, no one can blame home entertainment chiefs for being wary of piracy, particularly as higher-speed broadband allows movie transfers to happen in hours – even minutes – and not days. But the continued efforts to stifle innovation will eventually turn consumers against Blu-ray.

When Bill Gates predicted Blu-ray and HD-DVD would be the last optical disc standards, some snickered. But as Blu-ray continues to stumble, Microsoft, Apple and others are making significant strides toward digital distribution. The irony is that if Blu-ray continues to release half-measures guaranteed to disappoint, blame for demise of the disc may ultimately lie with Blu-ray itself — not digital distribution.

Question of the week

Will Blu-ray be as successful as its predecessor, or will digital distribution become the new home video standard?
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Michael Wolf

Chief Analyst NextMarket Insights

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5 Comments Subscribers to comment
  1. Chris Albrecht Monday, June 22, 2009

    Hey Cameron,

    That’s a good point about generational differences. There was a great piece written a few years back (I can’t remember by whom) talking about how MP3 killed the music snob since any music collection (packed with rare B-Sides only printed in Japan) could be cut and pasted.

    True story: We played Boston’s “More Than a Feeling” to close out our wedding ceremony.

  2. Cameron McClurg Wednesday, June 17, 2009

    Didn’t we have this conversation a couple years ago regarding buying CD’s versus digital download (itunes, etc.)? I remember hearing how much people wanted to collect physical CD’s, not to mention having those same feelings myself. The problem is that those analysts who were saying that grew up with physical records, tapes and CD’s as their only proof for claiming they “had” Boston’s latest album (which wasn’t quite as good as their first!). Nobody said that who had only grown up in a purely digital age. And as much as we hate to admit it, we don’t drive the markets anymore.

    But regardless, doesn’t digital (or should I say non-physical) always beat physical? Like Chris mentioned, who wants to store all that physical media, let alone lug it around when they move? As long as I can still enjoy the content on my terms, I couldn’t care less where the content exists.

    In ten years when we pull out a DVD to play for the kids, they’ll look at us the way we looked at our parents when they pulled out the 8mm projector.

  3. Chris Albrecht Wednesday, June 17, 2009

    I’m actually getting rid of my upscaling DVD player and all of my DVDs this weekend (purging unnecessary items in anticipation of my move). The Roku works just fine and I’m happy to free up the space under my TV and on my shelves. Plus, my Xbox will stream 1080p this fall — why do I need to buy over-priced DVDs for movies I’m realistically only going to watch once?

    Having said that, I get that there are collectors out there who *must* have the box sets lined up all purdy in their bookcase.

    1. I think physical DVDs are still something many will want, but like newspaper readers, they may ultimately be a dying breed and not enough to sustain a business on. Thought – are movie studios and their wishes of physical media prosperity the new-newspapers?

  4. Celeste LeCompte Wednesday, June 17, 2009

    I think that no matter what Blu-ray does to improve its licensing and bonus features, digital distribution is going to rule the day; why else do people want to create digital copies of their discs? They want them to be loosed from the physical media. Even the content providers seem to want it too; Disney wants to use Blu-ray to enable digital distribution of its content (p. 15: http://pro.gigaom.com/2009/06/the-emergence-and-evolution-of-over-the-top-video-2/#briefing). That can’t be good for the future of disc-based media distribution.

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