Blu-ray Will Dominate DVD in its Own Sweet Time

Posted in on May 19th, 2008 by Dave

bdp-s550.jpgThese days I see a lot of postings and rumblings about how, now that Blu-ray has defeated HD DVD, there is no sign of rapid price drops or promotions that it would need if it is to also dominate standard DVD. The aspect of these posts that amazes me somewhat is that they seem to come from a position of surprise or disdain – the latter perhaps from HD DVD supporters who somehow believed that HD DVD Discs were cheaper somehow than Blu-ray Discs when in fact across the major studios (even now including Universal), the pricing for the discs were actually the same – or more expensive for the Warner titles pressed on HD DVD Combo discs – only the players were cheaper.

devils.jpgBut I digress. The point is that they somehow hold the expectation that now that Blu-ray is the one and only High Definition disc media, the format should immediately set to the task of dethroning DVD as the dominant format.

I feel that it is time to demonstrate that not only is this really unlikely to happen any time soon, it really does not need to happen any time soon, and in fact it is likely to be an advantage to the studios and hardware manufacturers to put off such domination for as long as they can.

There are two reasons why both the studios and consumer electronics companies prefer to keep DVD around for as long as possible. The first is to maximize profits. The second reason is to maximize profits. I know that technically it is only one reason, but I feel it is such a big one that it warrants being mentioned twice.

105.jpgIt is clear to me at least that the price of Blu-ray titles are artificially high – just as the price of DVD titles and CD titles are artificially high. The cost of manufacturing the discs is not the main factor in determining the price of the final product. While some may attempt to point out that Blu-ray is more expensive to make than DVDs and so they must be sold for more, let me point something out. The first Blu-ray title in the list is this one – 10.5 Apocalypse: The Complete Miniseries – a title released from Echo Bridge. The retail price is $14.95, and the Amazon price is $7.95. This demonstrates that it is clearly possible to manufacture and sell Blu-ray titles cost effectively at sub $10 levels, in reasonable volumes. While this titles is not a dual layer disc, neither are quite a number that sell for over twice the price. The pricing is clearly set at what the market will tolerate, as opposed to being dictated by the cost of manufacture.

happyfeet.jpgOn the hardware and authoring side, the costs are currently significantly higher than for DVD, and I am sure that the hardware manufacturers in particular are keen to make a decent mark up on the players to recoup development costs. Of course as shipped volumes increase, the cost to manufacture will decrease – and no doubt at least some of the savings will be passed on to the consumer, particularly as there is a need to compete with the Playstation 3.

That said, in order to make the best revenues, it is best for all concerned in Blu-ray production if the DVD sticks around for quite some time yet. With both being available you have a standard product and a premium product – much like Laserdisc was to VHS (though for Blu-ray and DVD there is some backwards compatibility). The premium product commands premium pricing. The sooner that Blu-ray dominates, the sooner that the studios and player manufacturers will be in the place that they are now with DVD. Rock bottom pricing with minimal profits and shrinking revenues.

alvin.jpgThe difference between Laserdisc/VHS and Blu-ray/DVD analogy however is that Blu-ray will very likely eventually become the dominant format, where Laserdisc was always a niche product. Currently HDTV and Blu-ray are considered premium products – over time HDTV will become the accepted norm and Blu-ray will dominate DVD. As that becomes the case, I think that the end for DVD will be pretty rapid. Let’s face it – the players and discs can easily be used with exiting SDTVs and DVD libraries. Once the costs for the hardware, disc manufacturing and authoring are comparable with DVD there will be no reason to keep DVD around at all. Standard definition titles could be released on BDs – whole seasons of TV shows on just a couple of discs – and people not interested in High Definition can downconvert any Blu-ray title for their trusty SDTV’s.

Of course, when that happens it will be time for the next ‘big thing’. The reality is that 4k x 2k projectors are likely to hit high end consumer level pricing in a couple of years. At NAB we saw 4k streams compressed to 25 Mbps with great quality. There is also a lot of interest in 3D. Perhaps there will be an extension of Blu-ray to cover these things – or maybe a ‘new’ format. In any case you can bet that when Blu-ray becomes the dominant player, they will have something new up their sleeve to ensure that there is also a premium product.

If you would like to add comments or disagree with my assertions, feel free to comment in the blog entry here.