Wednesday, November 04, 2009

People are Buying Blu-Ray Players, But Not for Blu-Ray

Regular readers of this blog (okay, I admit that there are no regular readers of this blog) know that I've been skeptical about Blu-Ray. It took far too long to resolve the Blu-Ray/HD DVD battle, and then to actually get Blu-Ray players to market at a reasonable price. However, I'm willing to admit that I was wrong. People are willing to buy Blu-Ray players...just not to play Blu-Ray discs.

The Blu-Con conference was held this week in Beverly Hills, and if there was one overriding theme, it was that the motion pictures studios are really, really desperate. DVD sales were down more than 13% in the third quarter, and the studios depend on the profits from DVDs to underwrite the cost of producing blockbusters. As DVD sales drop, film financing gets riskier. We may be heading back into an era when a single bomb can sink a studio, as the movie "Cleopatra" almost did to 20th Century Fox in the 1960s.

As DVD sales are dropping, Blu-Ray sales are increasing, but at nowhere near the rate needed to compensate for DVD's decline. However, sales of Blu-Ray players are growing proprotionally much faster than sales of Blu-Ray movies. Why? The biggest reason is that the prices of the least expensive Blu-Ray players are now overlapping the high end of DVD player prices--around $99. At that price, why not buy a Blu-Ray player, which can also play DVDs?

Another key reason, and the biggest motivator for sales of Blu-Ray players in the $200 range, is Internet connectivity. The studios thought that the Internet connections on Blu-Ray players would be used for games, chatrooms and other content connected with Blu-Ray movies, but that's not been the case. The biggest use for the Internet connections is to play online movies from Netflix, Amazon.com, CinemaNow and Vudu, and Internet videos from sites like YouTube. The Blu-Ray player manufacturers are in a race to add more and more online services, and retailers are racing to drop prices in time for the Christmas season.

So, are Blu-Ray players going to have a big Christmas? Yes, but I suspect that the movie studios won't be so lucky. The very Blu-Ray players on which they've been pinning their salvation have turned into Trojan Horses, bringing streaming movies right along with them. It's ironic that the success of Blu-Ray players is now no longer in serious doubt, but the success of Blu-Ray as a medium for distribution movies is still questionable.
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