Blu-ray Awareness Picking Up

As more and more consumers in the U.S. are jumping on the HDTV bandwagon (especially in wake of the country's transition to digital TV), the familiarity with Blu-ray is also increasing. The NPD Group reports that awareness in the technology has jumped 10% in the past year, from 35% to 45% of HDTV owners. Despite this, only 6% said they would buy a Blu-ray device in the next 6 months (9% for existing HDTV owners).

"With HDTVs now in approximately 40 million U.S. households, that percentage translates to a pool of almost 4 million potential BD player buyers," said Russ Crupnick, Entertainment Industry Analyst for NPD.

The study reiterates what many others have said over the past few months: that customers are still quite happy with their standard-definition DVD players. However, as the life-cycle of these devices come to an end, it's safe to assume that many of those looking for a replacement will invest in a Blu-ray player rather than another standard DVD product. This will rely, of course, on the hope that, by then, the pricing of both Blu-ray hardware and software comes down to a point that the average consumer deems the technology an "acceptable" alternative.

In the meantime, what can retailers and manufacturers do to help ramp up interest in the category? The first recommendation is obvious: demonstrate the benefits of Blu-ray over standard-def fare in your store via a side-by-side comparison. What would make most sense is to do so with an upconverting standard DVD player rather than an old, $50 model: using the latter will only convince the customer that you think he's an idiot. Any consumer that's really interested in getting the best picture quality will need to be convinced that Blu-ray is better than a higher-end upconverting player.

The second recommendation is to offer incentives. People love free stuff, so to include a Blu-ray movie or two with the purchase of a Blu-ray player, or, in the retailer's case, to offer in-store promotions, could help bring attention toward the product category.

Third, make the products easy to use, and tout those features. Consumers that are interested in high-quality video but aren't exactly technophiles, might worry that a Blu-ray player is too complex for them to understand how to use. Show them that this isn't the case.

Finally, carefully outline what is required to fully enjoy a Blu-ray player (i.e. an HDTV and Blu-ray discs; not to mention a favourable audio system) so that your customer doesn't go home disappointed. More important, explain what he can't use one for (e.g. to play old HD DVDs!)

Over time, Blu-ray can make it to become the Compact Disc (or should I say digital download?) of the video world.

HD DVD is Gone, But Has This Really Helped Blu-ray?

It has been more than two months since Toshiba officially announced the end of the high-definition DVD format war by halting production of HD DVD players. The Blu-ray camp sighed a big sigh of relief, and poised itself for an increase in sales. But has Blu-ray really benefitted from winning the format war?

According to a recent study by The NPD Group, it hasn't; or at least not yet. Sales of Blu-ray players actually dropped 40% from January to February in the U.S. From February to March, during the time when the "war" had officially been declared over, there was only a 2% increase in sales.

"That standalone Blu-ray players haven't picked up significantly from HD DVD's loss shows that few consumers were dissuaded primarily by the 'format war'," declared Ross Rubin, Director of Industry Analysis, NPD. "When we surveyed consumers late last year, on overwhelming number of them said they weren't investing in a next-generation player because their old DVD player worked well and next-generation players were too expensive. It's clear from retail sales that those consumer sentiments are still holding true."

I've long said that, rather than focusing on becoming the winning format, both camps should have been more focused on convincing the customer that he needs to upgrade to an HD source, period. Either way, price will remain a factor with budget-conscious customer; not just of the Blu-ray hardware devices, but also software, which are often times almost double the price of a "regular" DVD movie. In fact, I think if the price of software were to drop down to become in line with standard DVDs, more people might be willing to fork over the extra dough for the player.

Interestingly, NPD notes that many consumers who are interested in a better viewing experience are quite content with upconverting DVD players. Sales of these such devices grew 5% during the first quarter of 2008 compared to 2007. Meanwhile, regular DVD player sales dropped a whopping 39%.

Nevertheless, it's only a matter of time before consumers finally pick up on high-definition DVD. Many are already enjoying HDTVs and high-definition TV viewing, so high-def DVD is naturally the next step in the equation. It's also important to note that this study only looked at standalone Blu-ray players: devices like the Sony PlayStation 3 gaming console, which includes a built-in Blu-ray player, has been selling like hotcakes!

HDTV: Who Knew Football Was SO Powerful?

The RetailBRIDGE cites a study that claims 5.5 million U.S. TV viewers purchased HDTVs during the holiday season and football's Superbowl in February 2008. To put this number in perspective, 28 million U.S. households in total own HDTVs. This means that 20% of the current HDTV population in the U.S. jumped on board during the Christmas season and Superbowl timeframe. Wow!

There are obviously other factors that come into play here: amazingly low prices during those few months (and even still today!), the upcoming FCC transition to all-digital TV, and growing consumer knowledge about HDTV overall. But a major surge in sales during those 3 months is great news for the industry; and just reinforces the importance of the holidays and sports. It's incredible when you think just how important gift-giving and sporting events are to the CE business.

The study, which was conducted by Frank N. Magid Associates, reports that one-quarter of the U.S. population now owns an HDTV; and almost 10 million homes now have at least two HDTVs. 30 million Americans say they plan to buy an HDTV this year, and virtually all of them say they'll go HD.

As more and more consumers begin to understand HDTV, and the sources that are required to obtain content, the format is poised for major growth. When will we reach 100% penetration? Judging from the way things are going now, I think we'll get pretty darned close by 2009.

For those who aren't familiar with how to get HD, here's a quick recap of the requirements:

1) Buy an high-definition TV (720p, 1080i, or 1080p, with the latter being the "best" quality possible; but all three technically representing HD-quality)

2) Buy an HD source, like a cable or satellite set-top box, Blu-ray disc player, or Sony PlayStation 3.

3) To access high-definition programming via cable or satellite TV, contact your provider and subscribe to the high-definition channels you want. In most cases, the provider should have some sort of HD add-on pack that includes most, if not all, of the available high-def channels. If you want to watch a high-definition DVD, you must buy a Blu-ray disc and play it back in a Blu-ray player. If you buy a standard DVD movie, it will not become high-definition if you play it back in your Blu-ray player; although it will be upscaled to a better quality image.

That's it, and you're off to enjoying HD content in all its glory!

Half of U.S. Consumers Now Have Digital TVs

If you have cable or satellite TV and watch any U.S. channels, you've likely seen those commercials urging customers to switch their old analog TVs to digital. The approx. one-minute commercial explains that that the Federal Communications Commission will stop all analog broadcasts by February 2009, and that as of that date, analog TVs will no longer work. Last week, the Consumer Electronics Association (CEA) noted that Americans are well on their way to this transition, with more than half of the population having made the switch to digital. The fact that mammoth retailer Best Buy stopped offering analog TVs in the U.S. in October 2007 might also have helped make the transition easier.

It's important to note that the 50% penetration of digital TVs shouldn't be confused with high-definition TV, for which penetration is likely lower. I'm not sure of the exact U.S. figures, to date but the Consumer Electronics Marketers of Canada (CEMC) projected in August 2007 that, by the end of the year, almost 48% of Canadian consumers would own an HD-capable TV.

However, as many studies and reports have noted over the past year or so, even consumers who own an HDTV-capable TV don't necessarily view high-definition programming, nor have the necessary cable or satellite TV equipment to make this possible.

With the increasingly attractive prices of flat-panel TVs today, it would make sense for customers to use those extra bucks saved on the TV itself to invest in a high-definition set-top box and channel package. If you're going to upgrade, go big, right? It looks like many U.S. consumers agree, as the CEA estimates that 79% of all digital TVs shipped in 2008 (in the U.S.)will boast high-definition resolution.

Hopefully as customers begin asking questions about digital TV, they'll also receive answers on how to fully enjoy the high-definition experience. If you aren't sure how to go about getting digital TV, take a peek at this "uninformed customer's guide" from a previous blog entry.

It's also worth noting that, the CRTC in Canada has not made a similar mandate for the transition to digital TV, and a spokesperson for Best Buy Canada told me back in October that the retailer would continue to sell analog products "as long as there is a demand for them".

Even my 60+ year-old parents have upgraded to flat-panel; and with third-tier digital TVs available at sub-$500 price points these days, it's likely that anyone upgrading at this point will opt for digital anyway.

Marc Cuban Has it Out with DIRECTV

HDNet.com Chairman and President Marc Cuban isn't just busy dancing with the stars. He's also duking it out with DIRECTV over how much the satellite providers' customers should pay for the HDNet channels. Currently, Cuban's two HD channels are included in DIRECTV's "basic" $9.99/month HD subscription package, but DIRECTV wants to move them to the higher-tier HD "extra" package that would cost another $4.99 per month. According to SkyREPORT, HDNet has filed suit, claiming that DIRECTV is "trying to destroy it" by forcing customers to pay more for the HDNet channels.

It sounds a bit childish (not to mention superhero-ish) to claim that a company is "trying to destroy you", but I can see HDNet's point in that customers might be reluctant to now pay for a service that they were already recieving. On the other hand, being classified as having premium offerings says a lot for the content you offer, right? If HDNet fans truly are fans, they'll pay the extra $5/mth which, in addition to HDNet and HDNet Movies, will also include MGM HD, Smithsonian HD, and MHD.

This leads to an even bigger issue: should HD content be classified into different packages, or should all high-definition channels be offered to subscribers for one fee? Of course you don't want to pay a premium for channels you are never going to watch, but why should one person's interests cost more money than another's? Canadian HD providers have adopted the same tiered approach to HD content, with things like special sports channel add-ons, or additional high-definition movie channels. The bottom line is that if you want it, you'll pay for it.

Back to the issue in the U.S.: HDNet feels that DIRECTV's decision represents a "gross violation of contractual obligation"; while DIRECTV deems the lawsuit unnecessary, with no evidence to support it. Let the drama ensue...

On a related note, Leichtman Research Group reports that only 32% of consumers actually know there's a difference between HDTV and digital TV, and that, of almost 28 million U.S. households with HDTVs, only half actually subscribe to HD service. That being said, I don't think the issue should be about splitting up content: it should be about promoting the very existence of HD content so that the other 50% of consumers can get on board!

The Uninformed Person's Guide to Getting HDTV (Apparently, We Still Need This!)

A Canadian industry member recently told me that retailers are experiencing an increase in the returns of HDTVs. This reportedly isn't because flat-panel displays aren't up to snuff, or content isn't available: in fact, HDTVs are looking the best they ever have, and there's more HD content available than ever! The problem is that apparently, the average consumer still doesn't understand how to get HD content. Are you for real? I had to ask. Unfortunately, he was. Consumers, he said, are disappointed with the image quality when they plug in their units, and frustrated when they find out they aren't instantly getting HD.

That said, let's go through the basic "idiot's guide to getting HDTV". Step 1: Buy a high-def flat-panel TV. It will be labeled 720p, 1080i, or 1080p; or it should just say high-def on the spec card in the store. To make your life easy, just ask an available salesperson to help you. You're one step closer. If you plug this TV into your regular cable or satellite box, you'll get, you guessed it, regular cable or satellite. A high-def image will not magically appear. I know, it sounds like a fantastic idea - why not? We'll get to that point at some time in the future, I'm sure. For now, HD is a step up from standard TV, so logically, it will require additional equipment to obtain.

Step 2: call your cable/satellite service provider and ask for a high-definition set-top box. Most will have more than one choice, one of which is likely a PVR (Personal Video Recorder) that will let you record TV content right onto its hard drive, which you can then view any time you like. I'd highly recommend one of these if you're a heavy TV watcher; or often not home or available when your favourite shows are on. But that's besides the point. Once you know which HD box you want, order it. Then replace your old, standard definition box with this one (usually, the provider will send a technician to swap them out for you).

Step 3: As much as you'd like, having the box and the TV still doesn't instantly get you high-def: you need to subscribe to access it. Call your service provider, or visit its Website, and find a channel package that includes that provider's available high-definition channels. Basic cable won't cut it. Remember, even when you order high-def, only certain networks and certain programming are currently available in HD. For instance, Rogers Cable has about 36 available HD channels. Bell ExpressVu has more than 50. Some providers might give you a few of these for free upon purchase/rental of an HD set-top box. But in the end, you'll need to subscribe to an upgraded channel package to get all the ones you want permanently added to your daily listings.

Once these three steps have been followed, you're all set. Now you can get HDTV. All of the HD channels should be lumped together in your on-screen guide, and "HD" should be somewhere in the name so you know which ones they are. If you're not sure, check online or in the brochure you likely received with purchase/rental, and you should be able to find everything you need to know.

The whole process sounds more difficult than it really is. It's a simple concept that can be likened to buying a cup of coffee. You can buy the cup and pour the java in, but that doesn't make it a latte. If you want a latte, you have to order a latte. Starbucks, Second Cup, or wherever you go will mix up the glorious concoction for you, and charge you accordingly. But you can't order a coffee and expect a latte; despite the fact that all the basic ingredients are there.

It's unfortunate to know that salespeople still need to explain this. But if you want to ensure there are no product returns, I'd suggest explaining these three steps to your customer before he walks out the door with his fancy new TV. If it turns out he's an informed customer, laugh it off and tell him this story. If he's an uninformed one, you may have just saved yourself (and him!) a lot of time and money.

HDTV Needs Quality and Quantity

From the desk of Lee Distad's Professional Opinion:

According to a survey conducted by Nielsen, consumers who have bought a high definition television are happy as clams with the picture quality of their sets, but not nearly as pleased with the availability of programming that’s actually in HD.

HDTV Customers Are Happy with Picture Quality, Less Enthusiastic About Programming Options, Nielsen Finds
New York, October 3, 2007 -High definition (HD) television owners are much more satisfied with the picture quality of HD television than they are with the amount or selection of HD programming, The Nielsen Company reported today.
According to Nielsen Media Research’s 2007 High Definition Survey, 85 percent of HD owners gave a 4 or 5 rating (with 5 meaning “excellent” and 1 meaning “poor”) for picture quality but only 39 percent provided the same rating for programming selection.

The issue of quality and quantity of HD programming is something that I’ve been following from the beginning. Back in the dawn of HD (~1998-99 or so, my memory gets hazy in my old age) I used to quip that HD was format without content. It’s validated to find that my opinion has become mainstream.

Before I come across as too mean-spirited, let me say that we’ve got a pretty good assortment of programming now, but I do expect it to get better with time. Consumers who have just jumped into an HD purchase are dissatisfied with the amount of content because they expect everything to be in HD, all day, every day. By contrast, long time industry watchers like me can remember when Bell had one HD channel; so from our longer perspective, the amount of content feels like a bounty.

That said, I do side with the sentiments of the people who want more. The fact is, the networks typically are only really HD during prime time, and the rest of the time is plain standard definition. So if you want to see your dramas and sitcoms in HD when you want to see them, you really ought to buy an HD receiver with a built-in PVR.

What gives me the most HD joy is sports and educational programming. Hockey on CBC-HD is fantastic, not to mention football. One of the best sales demonstrations I ever had wasn’t in the showroom, but two years ago at a buddy’s house. I did his projector and 100-inch screen a year or two prior, and he invited all his family and friends over for Grey Cup, the first time that it was broadcast in HD. His extended family is in the oil business, and after that party, they kept me busy for nearly a year creating their systems.

If you’re someone who hasn’t yet dived into HDTV, take in a few nature or educational shows in HD. You’re sure to end up closer to taking the plunge. Over the past few years, PBS has been a huge force in creating entertaining HD content. Now with Discovery HD, National Geographic HD, and so on, it’s almost as good as actually being there. Not to mention cooking shows. My god, cooking shows in HD, especially mid afternoon between lunch and dinner, are practically pornography!

To conclude, while overall I would say that I am pretty happy with how much HD I have access to, like the average consumer, I would certainly like to see more!

http://businessopinions.blogspot.com/ (For more of Lee Distad's Professional Opinions)

Update: Wal-Mart Steps Up CE Presence

We've been told by spokesperson Christi Gallagher at Wal-Mart Canada that the announcement mentioned below is specific to U.S. Wal-Mart stores. However, Wal-Mart Canada has been remodeling its existing stores and opening new Super Centres over the past year, all of which employ a new format for the electronics department. In the case of new stores, this represents about 7,000 sq. ft. of space dedicated to consumer electronics: about double what was previously offered! All stores also feature a new, more open-concept design that allows customers to walk freely through the aisles instead of entering a dedicated CE area.

Gallagher says the changes were made based on research conducted with its Super Centre stores. Not surprisingly, she says iPods and HDTVs are two of Wal-Mart's "hottest selling items right now". The retailer has even added a Connection Centre kiosk in new stores that features things like mobile phones, satellite radio receivers, and GPS devices. Although Wal-Mart Canada hasn't taken on the Skype products like its counterpart in the U.S., the retail giant has been offering Vonage VoIP service since January of this year.

In a way, this is also good news for other CE retailers: if the biggest retailer in the world is ramping up its technology offerings, this means that interest in CE products is as healthy as ever.

Wal-Mart Steps Up CE Presence

According to several reports, U.S. retail giant Wal-Mart is stepping up its consumer electronics offerings, adding more flat-panel TVs from brands like Philips, Sony, and Samsung; and bringing on VoIP products from Skype, including calling cards. I was unable to confirm just yet if the additional SKUs will be available north of the border as well (stay tuned). Either way, this is big news for fellow CE giants, not to mention independents, both of which have been finding it hard to compete with Wal-Mart’s massive price cuts.

Let’s put things in perspective: right now at Future Shop, a brand-name 32-inch widescreen, high-definition LCD can be purchased for just shy of about $1,200. A no-name model is available for $700. A year ago, the same product would have been about double that!

Last month, Wal-Mart Canada added the Prive brand of LCD TVs to its roster: budget-conscious consumers can grab a 32-inch model for a measly $470. The CEO of Prive’s parent company, SOYO, commented at that time that the company was “happy” to be part of Wal-Mart’s “aggressive plan to build its consumer electronics division.” Aggressive is an understatement.

At this rate, we’re bound to see a “buy one, get one free” sale on HDTVs by Christmas. The mere thought deserves a chuckle, but this is a serious issue. A breaking point is going to be reached at some point in the near future. It’s already begun to happen: Circuit City announced a massive restructuring plan in February, closing a whole whack of stores in both the U.S. and Canada. And the retailer wasn’t shy about the reason, citing “intensified gross margin pressures” experienced with flat-panels TVs in the third quarter.

Of course it can be argued that customers won’t get the same level of product knowledge and customer service through Wal-Mart than they would a specialized, independent retailer; or even a CE-targeted big-box one. But it appears that Wal-Mart is ramping up its staff product knowledge as well: reports online claim that U.S. employees have been put through extensive product and customer service training within the consumer electronics department.

Wal-Mart obviously means business in this area. How will this bode for traditional CE retailers, not to mention the rapidly dropping prices of product like HDTVs? We’d love to hear your comments.