Posts Tagged ‘Blu-ray’

It’s all in the Way You Spin the Numbers

Ahead of next week’s Blu-Con Blu-ray lovefest in Beverly Hills, the Digital Entertainment Group has just released its latest market analysis numbers for packaged media.

According to the DEG numbers, total consumer spending on packaged media through Q3 2010 came to $12.6B, a decline Y-Y of about 4%, while consumer transactions for home entertainment products were flat for the year. Digital distribution, which includes electronic sell-through (up 37% Y-Y) and video-on-demand (up 20% Y-Y), accounted for 13.5% of the total, totaling $1.7B.

Other interesting tidbits: Blu-ray saw its sell-through increase by 80% Y-Y to $1B. I’m not really sure what that number means, because overall packaged media (Blu-ray and conventional DVDs of movies, etc.) sell-through declined by 8% Y-Y, continued a slow and steady decline that started almost five years ago and has shown no signs of abetting.

The DEG states that Blu-ray hardware sales increased 104% Y-Y, with more than three million “set-top units” sold. According to DEG, this brings the installed base of Blu-ray disc playback devices to 21.2 million units in the USA.

Note that a “Blu-ray disc playback unit” obviously includes Sony PlayStation III consoles, but there’s no reliable way to tell how many of those are being used to watch Blu-ray movies.

Conventional packaged media is clearly in decline. Rentrak numbers show that spending on DVD and BD rentals was down 4.4% Y-Y to a total of $4.4B. That number would be a lot worse if not for Redbox and other kiosk rental operations, which saw an increase in revenue of 55% Y-Y.

DEG also went on to say that 98 million Blu-ray discs have shipped to retail so far this year, up 57% Y-Y. But that number doesn’t tell us anything about how many of them have actually sold. (It’s like the early days of DTV, when manufacturers quoted the numbers of TVs shipped to retail, and not the actual sales numbers.)

A few things can be divined from these numbers. First, as I just mentioned, the decline in packaged media sales shows no sign of slowing down, and the Blu-ray format is doing little to stem the tide. That’s been the case ever since the BD – HD DVD format wars were declared over, nearly three years ago.

Secondly, Hollywood may have some major bones to pick with Netflix’ and Redbox’ business models, but it’s these same two companies that are saving the studio’s chestnuts right now.  (Forget Blockbuster; they’re preoccupied with Chapter 11 bankruptcy proceedings and arranging temporary ‘debtor-in-possession’ financing just to keep their doors open.)

Finally, electronic sell-through is gaining momentum, even faster than video-on-demand. Customers like the idea of consuming entertainment at home through a high-speed broadband connection, feeding some sort of DVR or streaming in real time at lower resolution. They really don’t care whether they have a physical copy of the movie on a disc, as long as they can get it off a server someplace.

Home theater fans will argue that last point with me, but they’re automatically disqualified from the argument because they constitute a niche and a relatively small percentage of the population – a percentage that studios could never make a sustained living from.

No, the average viewer at home doesn’t care about squirreling away DVDs or BDs and hunting for them on movie night. And that’s been pretty clearly reflected in packaged media rental and sales trends for almost half a decade.

It’s all in how you spin the numbers.

3D: Amazed, but Not Interested

A recent study by the NPD Group (3D 3600 Monitor) states that “…20 percent of consumers reported being “amazed” by the 3D demos in stores, versus only 15 percent who felt that way about their experience in the (3D movie) theater.”

Wow. Only twenty percent were ‘amazed?’? That’s not very impressive for a new technology that has been marketed like crazy for the past ten months, and on which most manufacturers are hanging their hopes for a robust holiday TV selling season.

The report goes on to state that “…42 percent of consumers surveyed were at least somewhat interested in watching 3D movies at home, but only 11 percent intend to purchase a 3D television.” More discouraging news, as you’d reasonably expect interest in 3D TV to be peaking now after ESPN’s 3D World Cup coverage and a slew of 3D theatrical releases that earned big bucks at the box office.

Oh, wait: I forgot – Blu-ray releases of most of 2010’s box office 3D movie hits are already tied up in exclusive TV manufacturer bundles for the foreseeable future. It’s that ‘availability of 3D content’ thing again – there’s just not enough of it out there for most consumers to justify the purchase of a new 3D TV right now.

Well, THAT gets old in a hurry!

NPD’s report also showed that consumers have objections about cost, the need to wear glasses, the relatively short time that 3D technology has been available, and whether or not all technical issues with 3D TV viewing have been addressed (whatever they are).

Of those intending to buy a 3D TV, “…more than half say that 3D enhances the viewing experience, and 42 percent agree with the statement that 3D is the future.” So, about 6% of all 1,100 respondents said that 3D enhances the viewing experience. That’s a VERY low number. (What puzzles me is that only about half of the people intending to buy a 3D TV agreed with that statement. Why buy a 3D TV in the first place, if you don’t think it is an enhancement?)

It’s becoming apparent to me that two things are really holding back 3D TV. The first is cost. There are simply too many great deals on conventional (2D) HDTVs out there, and plain vanilla HDTV (never thought I’d say that) programming is available in abundance. For folks that are upgrading older TVs, the jump to HD is big enough for now. 3D can wait. Prices need to drop and drop fast on 3D-ready sets, which can just replace existing 2D-only models.

The second problem is all of the exclusive Blu-ray bundle deals. Between the TV manufacturers who cooked up these schemes and studios who agreed to go along, they’ve managed to shoot themselves in both feet quite nicely. Marketing 101 teaches you that you don’t make a product hard to find or expensive if you expect to sell a lot of it. (Unless it’s an upscale brand with a solid reputation, like Ferrari or Tiffany.)

We’re closing in on Black Friday and a major selling season for TVs, and right now, it looks like most consumers will be ‘sitting it out’ this year with 3D.  (Hey, TV sales are tough all over. 6th Avenue Electronics can’t even get rid of Panasonic 2D 50-inch 720p plasma TVs for $397, and that deal has been running for almost a month!)

Shades of Crazy Eddie…

Tomorrow (Saturday, October 2), 6th Avenue Electronics will celebrate the opening of their new store in Deptford, NJ with a chain-wide blow-out sale on TVs.

And when I say blow-out, I mean BLOW-OUT!

Can’t beat that deal with a stick!

Here’s what caught my eye this morning: 350 Panasonic TCP42C2 42-inch 720p plasma TVs will be sold for $397.95, a discount of $200 from full retail. And if you want something bigger, 250 Panasonic TCP50C2 50-inch 720p plasma TVs will be tagged at $548.95 each – almost $250 off their normal retail price.

There are other goodies to be had. Want an LG 50PK250 1080p 50-inch plasma TV? Get there early enough, and it’s yours for $788. How does an LG 60PK250 60-inch 1080p plasma TV sound for $1188? Or a Panasonic TCP58S2 58-inch 1080p plasma for $1198?

If LCD’s your thing, you can scoop up a Samsung 46-inch 1080p LCD TV for $648, or a Toshiba 46G300 1080p LCD TV for $749. 6th Avenue’s also got a Toshiba upconverting DVD player for $29.95 and a Panasonic Blu-ray player for $100.  The flier in today’s Philadelphia Inquirer goes on to list all kinds of electronic goodies for rock-bottom prices, including a $80 netbook with 7″ LCD screen, an Olympus 10 megapixel digital camera for $65, and a JVC 8 MP pocket movie camera for $70.

Face it. All electronics are commodity products nowadays. No wonder so many TV manufacturers are struggling to make a buck!

Can’t wait to see how low prices go on Black Friday…

3D: Expect a Long Slog

3D: Expect a Long Slog

It took nearly seven years before HDTV really took off. So how can we expect 3D to launch in less time?

There’s been a lot of discussion lately in the trade and consumer press that 3D is at danger of falling back into a novelty entertainment category.

Several prominent movie directors (among them J. J. Abrams) have come out against the format. Christopher Nolan (Inception) said it was too dark. And sloppy 2D-to-3D conversions, such as Clash of the Titans, may scare some people away from the format.

There’s also anecdotal evidence that the initial fascination that movie audiences had with 3D is starting to wear off. The premium for a 3D ticket can be anywhere from $3 to $5, depending on the theater chain and location. And experiences like Titans will make consumers gun-shy about spending 25% to 40% more for a 3D presentation.

But that’s a movie theater issue. What CE manufacturers want is for 3D to take off like HDTV did, back in the late 1990s.

The only problem with that thinking is that HDTV did not take off in the late 1990s at all! As a matter of fact, it moved at a glacial pace for quite a few years.

I installed my first HDTV (Princeton Graphics AF3.0HD) in the fall of 1999, and connected it to a Panasonic TU-DST51W set-top box and antenna to watch a smattering of HD movies on Saturday nights (ABC) and a few sitcoms and hour-long dramas (CBS), along with Monday Night Football games (ABC again).

My TV market (Philadelphia) didn’t have a full slate of HD content available on the top four networks until 2003, five years after the first HDTV stations lit up. Remember NBC’s experimental HD coverage of the Winter Olympics in February of 2002? Remember the Fox network’s 480i ‘high-resolution digital TV?’ in 2000 and 2001?

The fact is; HDTV set sales didn’t hit their stride until the third and fourth quarters of 2005. That’s when the price wars began in earnest and the HD DVD – Blu-ray war was just starting up.  (Coincidentally or not, 2005 was also the high-water mark for DVD sales.)

Consider that HDTV turned the idea of TV viewing upside down. Gone was analog TV, replaced by digital bits and bytes. Gone too were big, bulky cathode-ray tubes, replaced by matrices of tiny pixels actuated by LCD and plasma technology.

Good-bye, VHS tapes – DVDs were well on their way to killing off this format by the start of 2005. And of course we were no longer limited to just 480 lines of picture resolution, but could enjoy programs with 1280×720 and 1920×1080 pixels of picture detail…win widescreen, no less!

Think about it. TV was literally re-invented from 1998 to 2005. And in 2009, we pulled the plug completely and analog TV broadcasts, completing the switch. But that was 11 years after the process started.

For most viewers, 3D is still an expensive novelty

So…manufacturers want people to buy into 3D. Currently, there are a limited number of 3DTV sets for sale, and they’re not as cheap as 2D sets. And there’s not much 3D content available on Blu-ray to watch right now. You can count the number of 3D TV networks on the fingers of one hand.

And the glasses! Depending on which model 3DTV you watch, you may see ghost images. Or, the picture may get darker as you tilt your head. (You may even get a headache after a few minutes.) And the glasses are expensive, and you need a separate pair for every viewer.

Did I mention that most 3D glasses will not work with other brands of 3D TVs? Hey, you could make anyone’s HDTV set-top box work with anyone’s DTV set. Ditto DVD players and Blu-ray players, and set-top boxes. But not 3D glasses.

It also doesn’t help that we’re in a nasty recession. People are reluctant to spend money now, especially with close to 10% unemployment.  So 3DTV winds up being an exotic luxury for now.

I return to my main point, and that is the long adoption curve I anticipate for 3D. The price premium is one drawback, and the other is the fact that millions of U.S. homes just bought one or more new HDTVs within the past three years.

Depending on whose numbers you believe, we are at or around 50% penetration for HDTV, meaning 50% of all homes have at least one HDTV set. I can guarantee that more than half of those sets were purchased after Q3 of 2005. So, where’s the impetus to buy a new 3DTV?

The good thing about a long adoption curve: Within two years, all models of HDTV sets 50 inches and larger will have the capability to play back 3D programming. (They’ll all have network connections too, but that’s another story.) So it won’t matter which set you buy – you’ll have the 3D playback built-in.

The same thing will happen with Blu-ray players and set-top boxes. They’ll be able to process 3D content as easily as 2D content. So you won’t have to buy an expensive special model just to watch 3D Blu-ray discs.

How long a curve are we looking at? I’d say about five years. By then, broadband speeds will have picked up considerably and we’ll be able to access 3D content through Internet TV channels, as well as from optical disc and video-on-demand.

Content drives demand, and there just isn’t enough of it in 3D right now. By 2015, the situation will have changed dramatically and we’ll have 3D movies, games, and TV programs coming out the wazoo.

Until then, expect 3D to penetrate the TV market slowly, in fits and starts…just like HDTV did.

Redbox: A “Blu-race” to the bottom?

Don’t look now, but Blu-ray is coming to your local Acme. Or Walgreens.

Redbox, the “buck-a-night” DVD rental company, will soon be stocking Blu-ray movies at the end of the checkout counter. And you can rent ’em for $1.50 a night.

Redbox stated in a recent press release that it would initially offer Blu-ray discs in 13,300 of its kiosks, expanding across its entire network of 23,000 kiosks by the fall. Each Redbox kiosk holds 630 discs , or about 200 movie titles.

Redbox is on a roll financially, according to a story in Media and Entertainment Daily. The company’s revenue stream grew by almost 44% Y-Y for the second quarter. And they’re getting most of that revenue at the expense of traditional brick-and-mortar video rental stores (read: Blockbuster).

NCR, another player in the DVD kiosk business with the Blockbuster Express brand, hasn’t announced yet when they will be adding Blu-ray discs to their lineup.

At $1.50 per night, it really doesn’t make sense to buy a Blu-ray disc of any movie. The typical BD release is priced around $25 retail, or 16 times the Redbox rental cost. Not that there will be a huge demand for BD movies out of the gate – while the best estimates from The Digital Entertainment Group (DEG) have market penetration of Blu-ray players, Blu-ray drives in PCs, and Blu-ray equipped consoles (like PlayStation 3) at 19.4 million homes so far, there’s simply no reliable way to know how many of those PS3 consoles are being used to watch Blu-ray movies.

To put things in perspective, Netflix has over 14 million customers now. Comcast has slightly more, as does DirecTV. And any subscribers to those services can access video on demand (VOD) or streaming, if their TV and/or set-top box is so equipped. (PlayStation 3 is, and can even stream from Netflix!)

Given that some BD players are now available for less than $100, this could be an incentive for families to finally try out the BD format. Or maybe they will put that PS3 console to work to watch recent releases like The Bounty Hunter or The Book of Eli in full1080p HD…that is, if they have a HDTV screen large enough, and of the correct resolution.

Of course, if the BD movie title they want isn’t available, they’ll probably just rent the red laser version for a buck and be done with it. Redbox is a convenience service, based on a low-cost impulse purchase decision. If the movie is for a kid’s party or to keep the children otherwise entertained, it makes no difference whether it is a conventional DVD or a blue laser disc.

The question is how many videophiles will make use of the Redbox service. My theater at home is set up for HD, with a 92-inch Da-Lite projection screen and Mitsubishi HC6000 projector. So I’m definitely interested in $1.50 BD rentals!

The only problem is, I’ve been watching so many time-shifted TV shows on my 42-inch 1080p plasma in my family room (plus the occasional red laser DVD-by-mail) that the theater hasn’t been used much lately. Picture quality from an OPPO DV983 upscaling DVD player is so good that it isn’t worth bothering with Blu-ray playback on that plasma screen. I should know better, you might say…but I do, and you can’t see much of a difference between the two formats. At least, nothing to nit-pick about. That’s how good the OPPO scaler is.

In a nutshell, this move by Redbox promises to deliver additional revenue to studios, but probably not as much as they would have liked. No one in Hollywood is happy about the bottom falling out of the DVD rental market, but what other choice do they have?

The question is whether enough customers will prefer the improved quality of a BD movie over red laser DVDs and Netflix streaming to justify Redbox’ additional costs in stocking Blu-ray movies. If this doesn’t help the format take off, then nothing will.