Discount Retailers Attempt to Take a Big Bite Out of CE Sales

Discount retailers are arguably profiting more, in some sense, from the downturn in the economy as shoppers flock to those stores known to always offer great "deals". So it comes as no surprise that many discount shops are attempting, more so than ever, to take a big bite out of the consumer electronics market this holiday season.

This weekend, I was surprised at the number of Wal-Mart commercials that aired (during my favourite primetime programs!) centred around flat-panel TVs, home theatre, and even Blu-ray. I'm used to seeing plenty of TV marketing dollars from the mammoth retailer, but of all product segments, I wouldn't peg Wal-Mart to be spending so much to plug things like Blu-ray and flat-panels. Kid's toys, home decor items, clothing, DVDs and CDs, yes. But big-ticket CE items? I'm genuinely surprised that so much of the marketing budget went toward this category. The move is a clear indication of one of two things: Wal-Mart is making its mark known as a CE retailer; and/or the retailer is responding to the prospect that home theatre is going to take over as the main activity of choice during these sad, economic times. And of course it goes without saying that one should

Aside from that, pricing is also mind-boggling. Right now, a name-brand 42" 1080p LCD is $950, and an up-converting DVD player is $50. (Interestingly, no Blu-ray players are featured on the Wal-Mart Canada Website, although Blu-ray discs are in abundance). At Costco, a 42" plasma is $860, and a Blu-ray player is $270. At retailers like Tiger Direct, pricing is relatively the same. A colleague told me this morning of a friend who just bought a 46" TV (name brand) for $800 over the weekend! If you can spare the cash and are in the market, now is certainly the time to buy a new TV!

But from a retailer perspective, what happens when these pricing wars continue? The same thing that has been happening for the entire year, even before the recession came into play: other retailers are forced to lower their prices; if not to be in line with discount stores, at least to be close. Products are sold off at almost no margin just so smaller companies can sustain themselves and make it through the storm. And more focus is placed on "added value" services, like free delivery, after-sales service, installation, and product expertise (certainly not a bad thing).

Still, it's an incredible observation overall knowing that just a few years ago, a plasma or LCD could not be had for less than a few grand. To put this in perspective, I searched for some old news stories on our sister Website, http://www.marketnews.ca/, and cam across this 2002 announcement from LG Electronics about the company's brand new plasma displays: the cheapest was $8,500, and the most expensive 60" model was a whopping $26,000: the price of a new car! My, how things have changed...

[Photo: Screen shot at http://www.walmart.ca/]

Does Anyone Want to Own DVDs Anymore?

Lately, I've found myself staring irritatingly at the hundreds of CDs and DVDs that occupy numerous shelves in my living room. How can we get rid of all this clutter without investing in an uber-expensive media server? Sure, there are Media Center PCs that can store all this content, but that would mean having to sit down and rip one DVD after another, repeatedly, for hours on end. Even then, what happens if the system crashes? Sure, there's always back-up, and even a back-up for the back-up. But I wonder: are people really interested in owning all of this content, namely movies, or do we just want to enjoy it, then chuck it?

Case in point: popular U.S. video rental company Netflix has just announced that it will get out of the previously-viewed DVD sale market and focus on rentals and streaming video. Despite how much consumers might be upset at the change, it makes perfect sense. Why do I need to own a physical DVD movie? There are very few titles that are worth watching more than once, and often times when I have watched a movie for a second or third time, it's because it happened to have been broadcast on cable TV. If there's a particular movie that I want to watch at home on-the-fly, I'll grab it on-demand.

As I write this, I hear my former self yelling "hypocrit" at the top of her lungs. I used to be the one that argued passionately in favour of previously-viewed DVDs. Why would I pay $5 to rent a movie when I can just own it for a few bucks more? I would say to people. And there certainly are people who appreciate the full DVD experience, including the extra features and interviews, and love to admire the beautifully-created cover artwork. But now, looking at the hundreds of colourful cases unnecessarily taking up so much space at home, I don't quite feel the same way.

But before you're quick to call me out on predicting the end to a profitable after-theatre movie industry, that's not what I'm implying at all. Rather, the money will funnel itself through new channels. This could mean a cut of pay-per-view profits or specialty TV channels subscriptions, and probably the most lucrative option going forward: involvement in the streaming movie business. And hey, perhaps Blu-ray will take over as the only viable physical DVD format worthy of investing in and "collecting" because of its premium video and audio quality.

This, of course, is great news for cable/satellite TV providers and online distribution companies; not so good for DVD makers and distributors. But who knows: maybe in future, everyone will have a stab at the TV airwaves, and you'll be able to tap into services not from just one cable or satellite provider, but from a host of them, operating somewhat independently of one another. Sure, the idea might seem far-fetched to some; not to mention potentially confusing (and expensive!) for the customer. But if it means I can watch what I want, when I want, in high-definition quality, and take back a big portion of space in my living room that's now otherwise occupied, then I'm game.

Plotting Out a Year's Worth of Topics

Anyone who works for a magazine knows that this is the time when everyone puts their heads together to formulate a list of topics, features, and interviews that will appear in the following calendar year's issues. It's called an editorial calendar, and we're now in the final stages of putting together ours for both Marketnews and here's how! magazines. While the fast-paced nature of this business is always on our minds, you never really comprehend it fully until you sit down to perform such a task as this. It's difficult to try and slot applicable topics into various months of the year! How do you truly look to the future of consumer technology, where things can change literally from one minute to the next? It's almost impossible! Nevertheless, we do our best based on projections, expectations, and good ol' intuition.

There are seasons and holidays that dictate high selling times for particular products, for example. Back-to-school is logically during the July/August timeframe, while the holiday shopping season is November/December. Flat-panel sales often spike during the SuperBowl (February) and Black Friday (end of November after the U.S. Thanksgiving). Photo products do well during or just prior to the summer time, since people are either looking to buy digital cameras to take on their vacations, or printing photos like wildfire having just returned from a trip. As for the camera manufacturers; they typically save their major official product announcements for February/March (during the PMA trade show) and October, which is when they all hit like wildfire. Yes, there are enough new digital cameras coming to fruition to result in two major launch times per year! And Boxing Day? Ahh, every retailer of every gadget loves Boxing Day...that is if you're not working a 12-hour shift on the sales floor!

When it comes to highly-anticipated technologies for next year, we can attempt to predict when a few might hit it big. New cell phone carriers, for example, all anticipate having their services up and running by Q3. So it's safe to assume that a lot of attention will be placed on this space come that time; which is also when we can expect to see a flood of Google Android devices hit the market. CES, North America's largest technology trade show, takes place in early January, and naturally, every manufacturer will be making major announcements at that time. Ditto when it comes to the custom audio/video industry and CEDIA; the September-held trade show dedicated to that part of the technology space.

Then there are other "up-in-the-air" items that need to be considered. Will LED become a fierce competitor in the flat-panel arena next year? Can Blu-ray make it for the long-haul? Is Android going to take over the cellular world? Will WiMAX and NFC technology become commonplace? Can digital downloading overtake physical video media? We can speculate all we like, but the truth is that topics have to be reworked throughout the year to best accomodate what's happening. And let's face it: something always happens to shake things up.

In a way, this is a good thing. There is never a time where we have nothing to write about in the technology industry; and never a slowdown in product development. While TV manufacturing might slow down, cell phone manufacturing picks up. As cell phones slow down, PCs and digital content take off. There's always something. The other day, I saw a demonstration on TV of a head-worn device hooked up to a computer that could analyze brain waves and dictate letters of the alphabet that the person was thinking. Entire words would be spelled out on screen, letter by letter, until a full sentence was formulated. The point? It was being used by a man with ALS in order to help him communicate. Now that is truly amazing: there's so much more to technology than we could ever imagine.

What do you predict will be the big topics of '09?

Could Bond Put a Sour Taste in the Mouths of Blu-ray Owners?

Is James Bond giving Blu-ray a bad name? Reports are flooding the 'net that James Bond Blu-ray DVDs from a new collection are failing to play in many Blu-ray players, leading to customer frustration and anger. This isn't good news for a format that's only just begun to resonate with the average buyer.

According to various online forums, like Amazon and AVS Forum, the new DVDs, which include titles like Die Another Day, Live and Let Die, and From Russia With Love, reportedly begin to play but then cut out part way through; get stuck in the menu; or just lead to a black screen. This has been reported from owners of a variety of Blu-ray players from a number of manufacturers; although it appears from comments that the discs play just fine on a PlayStation 3 gaming console (which has a built-in Blu-ray player). I can't attest to the issues from personal experience since I haven't tried the DVDs myself. But given the high number of angry customers posting online, it appears that an issue does indeed disc with at least a few of the titles in a few players. However, many cite that a firmware upgrade will rectify the problem.

The Bond franchise is hugely popular, so there have likely been major sales of these titles. Will these issues turn people off of Blu-ray? While a firmware upgrade might eventually solve the playback issue, it doesn't solve the initial frustration of curling up on the couch with a bowl of popcorn only to watch a black screen. Luckily, I gather from sifting through the comments that some consumers are forgiving.

"My positive experience with so many other discs gives me optimistic confidence that the problem with these 6 discs will soon be a fading bad memory," says one commenter on Amazon.com. However, he's obviously an early-adopter and technophile, claiming to already own upwards of 100 Blu-ray discs.

Other buyers are unfortunately not so forgiving.

"The end result is a big fat black eye for Blu-ray," chimes in another buyer. "The Blu-ray Disc Association, the hardware manufacturers, and the content producers need to get their act together."

One techy reader on AVS Forum claims that these issues are the very reason he won't recommend Blu-ray to "ordinary people". "The worst part is just because these player's firmware can be upgraded, the studios think it's okay to break compatibility at will," he says. "It's not like they can't test these discs on the available players. There has to eventually come a point where they expect the mass market to be able to buy Blu-ray and they will have to freeze the feature set to what works on all players in the marketplace."

On a positive note, all those who did manage to get the discs playing cite impressive video quality and great sound.

Bottom line: it's clearly beneficial both visually and audibly to make use of the Blu-ray format, despite any one-off issues that might occur during these relatively early stages. Remember: HDMI didn't come out of the gate perfect either, but it has quickly become the de facto standard in home A/V connectivity.

TV DVDs Taking Over Movies?

I've visited a few retailers over the past little while and noticed something strange: DVD box sets for TV shows are placed front and centre of the store, with new release movies few and far in between. Why?

Are TV shows on DVD becoming more popular? Is this a way to make them more popular in the wake of things like on-demand movies that could be cutting into DVD sales? Or perhaps it's just a sales tactic since the holiday season is slowly creeping up on us? After all, DVD box sets are fairly popular among the gift-giving crowd.

Maybe it's also the result of a lot of successful TV shows coming out of the woodwork, like my favourite Dexter and other popular shows like Mad Men, The Office, and The Sopranos. Many of these are also broadcast on subscription-based networks, so it's likely that a lot of people wait until a series is released on DVD and then watch it that way instead of subscribing to the extra channels for a monthly fee. In fact, a friend of mine the other day told me of plans for a Lost party: he purchased the first two seasons on DVD, and a group of people were going to get together and watch it. It makes sense: you can watch an entire season in an 8-hour or so timeframe, and not have to even bother skipping through commercials because there are none!

Could TV on DVD be becoming yet another new way that people consume entertainment? After all, why wait a week to watch what's going to happen to the guy that Tony supposedly got whacked, or to find out what happens with Mike and Susan on Desperate Housewives? The one drawback to this, of course, is that you can't watch a season until it comes out on DVD, which is often long after the episodes have actually aired. If it's a really popular show, it would be tough to ignore all the media reports and water-cooler conversations that reveal what happens. But if you're able to wait it out, why not?

But back to my original observation. Maybe it's that there haven't been enough Blockbuster movies to warrant a huge new release section. While there have been a handful of popular movie titles as of late (Dark Knight immediately comes to mind), there have also been a lot of box office flops.

Either way, while I have never purchased a DVD box set of any kind for myself (I watch enough live TV as it is!) the rearrangement in store certainly engaged me, so I guess it's working to some degree. I found a few shows that I know won Emmys and considered picking them up to give them a try. Now all we need is Blu-ray TV show box sets, and we're in business!

CEDIA EXPO: Press Day Overview: Can Tru2Way, Internet Connectivity, Do Away with the Set-top Box?

Press day at CEDIA EXPO 2008, the day prior to the show’s official opening, proved fruitful for manufacturers on various fronts. For one, a good cross-section of industry journalists showed up to see the latest and greatest products. And second, the day was blessed with gorgeous weather in Denver, CO that made trudging from one hotel ballroom to another ballroom in an entirely different hotel, hour after hour, a not-so bad experience (we plead with you: please make all the press conferences in one venue next year!). But more important than the weather is the new products, and we got a sneak-peek at plenty of them, including the latest flat-panel TVs and Blu-ray players from the top manufacturers.

Traditionally, when we talk about connectivity with a TV, it’s in reference to a video source like a cable or set-top box. But as the Internet continues to play an important role as a conduit for good-quality video content, people are more often looking toward the PC as a source of entertainment. Flat-panel manufacturers are picking up on this growing trend, and coming out with innovative partnerships and designs to accommodate. In fact, connectivity is one of the key components of Panasonic’s “Viera message”, and the company’s latest plasmas certainly fall in line with it. A feature called Viera Cast allows a TV to essentially work as an IP device, connecting to the Internet via Ethernet, than porting content from partners, who range from YouTube to the Weather Channel and Bloomberg news. Sony is also continuing its focus in this area with new Bravia models, including the sexy new ultra-thin 9.9mm thin model, that utilize the company’s Internet Link technology. Sharp’s gorgeous new limited edition XS LCDs (I’ve never seen reds reproduced so sharply, excuse the pun!) incorporate Sharp’s ongoing Aquos Net feature that provides content as well as remote tech support. All companies plan to come out with new Blu-ray models that include BD Live as well for enjoying additional content from the ‘net while watching a compatible Blu-ray disc title.

Tru2Way

The most interesting new method of getting content to the TV, however, hails from a new initiative called Tru2Way, which is essentially a cable technology that will download applications to the TV itself, including channels, guide, pay-per-view specialty content, etc., where the content will continue to reside. The technology, if it takes off, will essentially replace the need for a set-top box altogether! Panasonic, one of the key companies involved with the technology, will have Tru2Way operating and on display at its booth, so I’ll definitely be checking it out. The company also says that it will announce Tru2Way products in the coming weeks that will be available in time for the holiday shopping season. It’s unlikely we’ll see them that soon in Canada, if at all, but stay tuned!

Auto Picture Control

Manufacturers are also showing a greater focus on automatic picture adjustment that can adjust an image, in sections, based on room conditions and factors like ambient light. Toshiba calls its variation on this idea AutoView, which includes an ambient light sensor and film content detection to not only improve the picture, but also to conserve energy at night time. Another significant new technology developed by the company is called SRT (Super Resolution Technology), and this works to improve picture by up-scaling essentially any video source that’s connected to it, whether that be a DVD, cable signal, or video game. Sony employs Advanced Contrast Enhancer Pro to help improve picture quality; and Sharp’s version, which adjusts the brightness of a screen according to ambient light, is called Optical Picture Control.

Going Green

An area in consumer electronics that is becoming of more and more importance is energy efficiency, and every manufacturer has officially jumped on that bandwagon. Panasonic claims that its new Blu-ray players consume 20% less power than previous-generation models; while Sony’s new models are 55% smaller, resulting in reduced packaging (not to mention shipping weight!) Sharp, a company that has been at the forefront of environmental friendliness, says its new LE series promises to be up to 30% more efficient than traditional LCDs using the new Picture Control function. The company’s new D85U and D65U models, available in 42”, 46”, and 52” sizes, are also RoHS and Energy Star 3.0 compliant, resulting in 20% less energy consumption. A dedicated power-saving mode also helps to conserve energy.

This merely scratches the surface of what’s at the show, but it sure starts things off on an enticing note: CEDIA EXPO officially begins today. Stay tuned to this Website for daily updates from the show floor, including information on new products, as well as an inside look into some of the courses being offered.

A Few Neat Product Highlights:

Panasonic: A new DECT multi-cell wireless phone that is home automation-capable. By simply depressing keys on the phone, customers can perform tasks like adjusting lighting or temperature in the home. The phone is also really rugged, able to withstand drops, and even water spills!

Toshiba: The new XV Cinema Series Regza LCDs are top-of-the-line, employing the aforementioned Auto View and SRT technologies, along with a new double-skin cabinet, whereby you can see through the top layer into a second layer of design.

Sony: The new BRAVIA KDL-52XBR7 LCD TV features ultra-fast 240Hz refresh rate that the company calls Motionflow (or “Mo-Flo” for short!) The new KLV-40ZX1M LCD is just 9.9mm thin, and also boasts Motionflow (but at 120 Hz). Frustrated customers will also be happy to know that Sony claims its new Blu-ray players, of which there are five, will employ a quick-start feature that makes an inserted video ready to go in six seconds. Sony also whet our appetites with the promise of a 400-disc Blu-ray changer to be available in 2009.

Sharp: The Aquos XS series LCDs produce gorgeous, sharp, and ultra-bright pictures, and will come in 52” and 65” sizes. Other features include 1080p technology (of course) RGB-LED backlighting, and integrated speakers developed jointly with Pioneer. The new D85U and D65U series models (the latter of which replaces the existing D64U series) are RoHS and Energy Star 3.0 compliant, and employ neat-looking angled edges for a slightly different look than what you might be used to.

[Photo: Chris Matto, Senior Brand Manager, Sharp Electronics of Canada Ltd. (left) poses with Daisuke (“Doug”) Koshima, CEO & Chairman of Sharp Electronics of America and the company’s new limited edition XS series LCD TVs. Two iterations will be available in 52” and 65” screen sizes, both featuring advanced technology like RGB-LED backlighting, 1” thin frames, and an audio system developed jointly with Pioneer.]

Retailers Blowing Out or Hiking Up Price of HD DVDs

Since the end of the format war which saw Blu-ray emerge victorious, consumers that own HD DVD players have been doing one of two things: returning their players to the store, or stocking up on HD DVD discs while they're still available. After all, "winning" format or not, HD DVD produces some darned good quality content! Over the past few months, however, I've noticed some subsequent changes in how retailers have been dealing with the remaining discs.

The first step was logically to drop the price of HD DVDs. One that might have sold for $30 was all of a sudden $18.99, then $12.99, and so forth. Granted, I didn't see any earth-shattering deals, but the prices were certainly coming down more significantly than they likely would have if HD DVD remained in the market. Lately, however, I've noticed that the prices have gone back up as supply slowly dwindles and the discs become more difficult to find.

Interestingly, I was prompted to observe this by a fellow shopper in a discount retail shop this past weekend. As we stood side-by-side looking through the last few HD DVDs in stock (selling for just $6!), he commented about how the prices were going back up elsewhere. Funny enough, this was only after he proudly advised me that "you can't play that in a regular DVD player, you know?" While I enjoyed a little internal chuckle, I was genuinely quite pleased to see an example of an "average" consumer that appeared to understand the difference between HD and SD discs and was eager to share his knowledge.

Regardless of what the current average price is, the fact remains that HD DVD discs are still more affordable now then they were 6 months ago. If you still own a player, now's primetime to stock up on the last available titles. For now, they'll provide better quality content than you'll get via standard DVD, and will certainly tide you over before investing in a fancy new Blu-ray. And who knows: once these discs are completely out of circulation, you might be able to flip those discs to an A/V collector of some sort for a pretty penny!

Blu-ray Set to Take Over in Europe

While sales of Blu-ray players remains relatively sluggish in North America, sales of the format are heating up in Western Europe. In fact, research company Futuresource Consulting reveals that sales of Blu-ray players are actually ahead of where sales were for the standard DVD format when it was at its same point of introduction into the market.

Futuresource anticipates that more than 10 million Blu-ray players will be in use by the end of 2008. By contrast, only 1.5 million DVD players were in homes by the end of the third year that this format hit the market. Going forward, the company sees Blu-ray performance out-doing DVD consistently, with almost double the growth in year 5; closing at just slightly higher in year 6 (45 million units shipping in 2011 vs. 37 million shipped for DVD in 2002).

Naturally, we have to take the Sony PlayStation 3 into consideration, which is purchased as a gaming system first and foremost, with the built-in Blu-ray player as merely a secondary feature (for the majority of consumers, at least).

"The timing of the PS3 launch has clearly provided a big boost to the initial uptake of BD," explains Jim Bottoms, MD Corporate Development at Futuresource. "With a number of hot titles now starting to emerge and console prices continuing to fall, we can expect to see continued strong uptake."

Bottoms also notes that the competitve nature of retailers trying to get as much market share in the category as they can is also helping sales. Not only are retailers exposing consumers more and more to the technology, but product pricing is also coming down, making Blu-ray a more affordable option to the every day customer.

This is impressive news for the Blu-ray camp. Hopefully, in time, we'll experience the same sort of growth in North America. Bottoms is confident that Blu-ray will eventually "mirror the trend we saw with DVD players replacing CD decks." We may be closer to that time than we think.

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!

Blockbuster Won't Give in; Bids for Circuit City

For years, it seemed like the writing was on the wall for movie rental outlets like Blockbuster. First, there was on-demand TV through cable services that essentially let you order a movie right from your couch. Then, there was nifty inventions like TiVo that made it really easy to record a movie at 4 a.m., then watch it whenever you felt like it. As if that weren't enough to put pressure on the traditional DVD rental business, out came Netflix, a company that let you order a movie online, and they'd deliver it right to your door!

Lately, however, it seems like Blockbuster is pulling out all the stops to ensure that the company isn't left in the dust as technology continues to move forward. We've already seen what happened to music retailers like Music World and Sam The Record Man that refused to change their business plans to keep up with the changing ways of music distribution. Blockbuster obviously wants no part in that when it comes to its business, and is making sure the company stays on the cusp of development.

The strangest move came today, when Blockbuster Inc. put in a bid to buy U.S. consumer electronics retailer Circuit City. Huh? You'd think that, if anything, it would be the other way around! But Blockbuster is offering more than US$1-billion for the mammoth CE retailer, stating that a combined company (worth approx. US$18-billion) would be "uniquely positioned to capitalize on the growing convergence of media content and electronic devices." Could we see Blockbuster stores now not only renting DVDs and video games, but also the devices needed to watch or play them? Or perhaps creating promotions whereby you receive a free movie rental with the purchase of a Blu-ray player from Circuit City? It might even be more than that.

Reports all over the 'net claim that Blockbuster is planning to launch its own set-top box that would allows users to stream movies to a connected TV, a la Apple TV. Content would reportedly come from Movielink's massive library, a company that Blockbuster purchased last year.

It looks like Blockbuster has finally bitten the bullet and realized that it needs to make bold moves in order to remain competitive, and not be eaten up by all the new players. In addition to its attempt to buy Circuit City and the rumoured set-top box device, Blockbuster has also been ramping up its Blu-ray DVD offerings to keep in line with consumer demands. It's even putting dedicated Blu-ray kiosks in store, demonstrating the quality of Blu-ray versus standard DVD.

Most people seem puzzled by Blockbuster's moves, but it's better than sitting back and watching other companies take over an area where you were once king. Kudos to Blockbuster for taking steps to improve, and for attempting to find interesting synergies that will add further value to its business. Sure, a consumer electronics retailer is very different from a DVD rental company, as many reports have pointed out. But maybe there's more synergy between the two than we realize. If, as I've argued many times, the content drives the hardware, it makes perfect sense for Blockbuster to grab a piece of the hardware pie to complement its diverse software offerings.

EXCLUSIVE!: Future Shop to Offer HD DVD Trade-ins

Future Shop has exclusively informed Marketnews (sister magazine to this blog) that the retailer will be offering an HD DVD player trade-in program, similar to Circuit City's recent announcement in the U.S., starting tomorrow (March 7). The program, which will run up until April 3, 2008, will afford customers who have previously purchased an HD DVD player from Future Shop with the opportunity to exchange it in-store for a $100 credit toward an HD DVD/Blu-ray combo player from either Samsung (the BD-UP5000) or LG (BH-200). This, however, excludes the HD DVD player for the Xbox 360 gaming console, which has been reduced to $50 as of late.

It's a pity that there isn't a promotion involving the return of an HD DVD player for credit toward a dedicated Blu-ray player, but you have to admit that the offer is still pretty darned compelling. Think about it: you can buy one of the players (LG's is currently selling for $430 and Samsung's for $800, which are realistically in and around the same price points as Blu-ray-only players anyway) and you're still able to play back all of the HD DVD discs you already have, as well as newly-acquired discs in the Blu-ray format. It's the best-of-both-worlds scenario for people who have taken the HD DVD plunge; and especially for those who have stocked up on tons and tons of HD DVD movies.

As for Blu-ray only players, Future Shop will be offering $50 off on all Blu-ray players (including the aforementioned combo models). Unfortunately, this excludes the Sony Playstation 3 gaming console, which has a Blu-ray player built in. When asked whether the retailer had any plans to offer a trade-in program for dedicated Blu-ray players, Ken Sorhus, Merchandise Manager for Home Audio, DVD & Blu-ray said that Future Shop will indeed investigate the possibility, but it has "no plans at the moment".

Will consumers see value in this existing promotion? Probably not all of them. But if the situation fits, it's certainly an incentive. Right now, if you want the high-def movie experience, Blu-ray is your only option. If you already have an HD DVD player, rather than let it collect dust, or position it next to a fancy new Blu-ray player you plan to buy anyway, why not just trade it in and use one device?

As for the returned players, what does Future Shop plan to do with them? The retailer has partnered up with The Boys and Girls Club of Canada, and will be donating the players for use in after-school and evening programs. Kudos on that philanthropic decision.

[Photo: Future Shop's Ram Manaktahla poses beside Samsung's BD-UP5000 combo Blu-ray/HD DVD player].

No More Xbox 360 HD DVD Players

As if we didn't expect this: Microsoft says it will no longer produce HD DVD players for the Xbox 360. However, according to Reuters, the company will continue to service the ones that have already been sold, honouring the warranty agreements.

Currently, the hard cover book-sized HD DVD player for the Xbox 360 sells for about $130, but that price is likely to come down very soon.

The fact that Blu-ray has won the high-definition DVD format war could very well affect the gaming market. Without the option of an add-on player, Sony's PlayStation 3 has a serious advantage over the Xbox 360. It's obvious that Microsoft sees this advantage, given that it recently dropped the price of the Xbox 360 console by $50 in order to better compete in the market. (It's worth noting that both consoles, as well as the Nintendo Wii, are selling very well).

But when I think about it, will HD movie watching really have that much of an effect on the sale of these consoles? Most people I know that watch Blu-ray movies using the PS3 didn't buy the PS3 for that purpose: it was just an added benefit. And a smart one at that. But I don't think the built-in Blu-ray player will be the deciding factor between an Xbox 360 or a PS3. The games and the overall gaming-related experience is what will make the difference. The Blu-ray functionality is just icing on the cake. With that said, it is some pretty tasty icing.

There is still no word on whether Microsoft plans to launch a Blu-ray player for the Xbox 360, but I wouldn't be surprised to see one surface in the future.

HD DVD: The Fat Lady has Sung

As reported here and then officially here on our sister Website, the fat lady has finally sung, so to speak, and we've reached an end to the high-definition DVD format war. Simply put, Toshiba will stop production of all HD DVD products next month.

What does this mean for those consumers who have already purchased an HD DVD player or recorder? Perhaps the tiny, $130 player for the Xbox 360 gaming console? Or even a notebook PC with an integrated HD DVD drive? You'll still be able to continue playing discs you already own and any ypu purchase between now and the day they're removed from store shelves. And Toshiba says it will continue to honour product support and service, which is reassuring for those who want to get some life out of their investment.

Although you might think purchasers are slamming doors in anger at buying what will soon be an obselete technology, that doesn't appear to be the case. Most people who purchased HD DVD were fully aware that the technology might not "win". And in fact, I know some who are just waiting for discs to start "blowing out" at retail so they can stock up on a collection at an affordable price. Of course this collection will likely be collecting dust 20 years from now, but hey, you can take a piece of history with you.

Of course, as I've mentioned time and time again, just because a clear "winner" has been named, it doesn't mean that consumers will be running out in flocks to grab a Blu-ray player. Sure, there are smart-minded, tech-savvy individuals that have been waiting for the war to be over before dropping a half a grand on a player and some movies. But there are still plenty of others that stare blankly at the Blu-ray section in a store scratching their head trying to figure out what this Blu stuff is all about. One retailer once told me that customers were buying HD DVDs and trying to play them back in a Blu-ray player thinking they were "all the same" (and vice versa); while another noted that many customers thought they could just plop a Blu-ray or HD DVD disc into a "regular" DVD player and it would instantly display better quality images. So don't be fooled: we still have a long way to go.

Research company DisplaySearch echoes this sentiment.

"...Even if all HD DVD products were removed from retail shelves today, the average consumer still will not be buying Blu-ray hardware and software in mass quantities for some time," says the company.

With that said, Toshiba will easily pick itself up and move on. As for those in the Blu-ray camp, congratulations on the victory. It's likely that we'll see plenty more Blu-ray and Blu-ray-compatible products coming down the pike in 2008.

Best Buy Next to Support Blu-ray - Canadian Update!

In the previous post, I discussed how U.S. Best Buy stores have decided to support the Blu-ray high-definition DVD format going forward, continuing to offer both Blu-ray and HD DVD products, but with an increased focus on Blu-ray. Well, this situation isn't the case in Canada.

Spokespersons from both Best Buy Canada and Future Shop tell me that Best Buy and Future Shop stores in Canada will not be following suit at this time, and will continue to support both the Blu-ray and HD DVD high-definition DVD formats.

"Future Shop will continue to carry both formats to meet the lifestyle needs of our customers," were the exact words of a Future Shop spokesperson.

This is surprisingly, since Best Buy Canada and Future Shop stores are owned by Minneapolis, MN-based Best Buy. But perhaps the landscape in Canada is different, and Canadian consumers haven't made a clear format preference. If you walk into any Best Buy (or Future Shop) store here, you'll see one side of Blu-ray discs, and one side of HD DVD. Players are also equally out in full force, with HD DVD players arguably more prominent, given the relatively cheaper pricing.

Judging from the U.S. announcement, we won't see such equality south of the border come March. I'm not sure how they plan to display Blu-ray more prominently: perhaps by having Blu-ray discs on a pedestal and HD DVDs in a bin? But with arguably more titles and players available in the Blu-ray format, it only seems logical that Blu-ray would be displayed more prominently regardless of whether a conscious choice was made to do so or not.

Stay tuned for more information as the format war continues.

Best Buy Next to Support Blu-ray

According to Reuters, Best Buy U.S. has announced its support for the Blu-ray disc format. Oddly, however, the mammoth retailers hasn't abandoned HD DVD altogether. Best Buy says it will still offer HD DVD discs and hardware for customers who prefer that format; but will more prominently feature Blu-ray products. The changeover will happen next month.

Whether HD DVD products will still be on shelves or not, Best Buy has clearly made its decision to back Blu-ray in an effort to put an end to the dragging high-definition DVD format war.

Will consumers view this as Blu-ray being deemed the winner? Or will they remain unconvinced, waiting until all retailers, manufacturers, and studios decide to stock and create hardware and software in only one format before taking the plunge? It looks like we're inching closer and closer to an answer.

On the Canadian front, due to the time difference, I was unable to receive clarification in time from Best Buy Canada (and Future Shop) on whether stores north of the border will follow suit with the decision to support Blu-ray. Stay tuned for a follow-up post!

Toshiba, PS3 Lead High-Def DVD Race

According to DisplaySearch, Toshiba led the pack in standalone high-definition format DVD players for the first three quarters of 2007, accounting for 64% more units than all of the Blu-ray manufacturers combined! The research company attributes this to aggressive pricing and promotions, and I'd have to agree: a $99 high-definition DVD player is indeed pretty aggressive! But really, what does this mean? Despite the favourable numbers, the HD DVD format is still dealing with the recent blow from Warner, which decided to exclusively join the Blu-ray camp.

Interestingly, though, DiplaySearch also reports that gaming console hardware, not standalone players, were the dominant shipped high-definition DVD product through most of 2007, accounting for 85% of all global shipments between Q1 and Q3 2007. What's more, revenue growth was more than three times that of standalone players between Q2 and Q3 of last year.

In the case of Blu-ray, it's safe to assume that the majority of PlayStation 3 purchasers bought the console to play games, with high-def movie watching as simply an added bonus (the PS3 has a built-in Blu-ray player. To achieve HD DVD playback on an Xbox 360, one requires a separately purchased player that connects to the console). Nevertheless, sales of the PS3 helped skyrocket Sony into the number-one spot worldwide for Blu-ray players, with the firm having achieved a whopping 97% share in the first three quarters of '07!

Overall, North America accounted for 80% of the worldwide market for high-def DVD hardware in Q3 2007. Worldwide, Sony, Toshiba, and Microsoft made up 98% of high-definition DVD hardware shipments, leaving all the others to fight for that remaining 2%.

Paul Erickson, Director of DVD and HD Market Research at DisplaySearch reinforced a point I've made in earlier blog posts: that the two competing formats (Blu-ray and HD DVD) not only have to compete against each other, but also against the "standard" DVD format, which many consumers are still quite content to enjoy.

"Due to consumer price sensitivity and satisfaction with regular DVD in North America," he said, "the substantial growth needed for next-generation DVD to grow beyond a niche market dominated by consoles will require time, persistence, and aggressive pricing. This is expected to be a dynamic that will persist regardless of whether the market consolidates around a single format, or continues onward with the status quo."

I couldn't have said it better myself. Let's focus on ways to make the players and, even more important, the software titles, more affordable; and added-value features more enticing...not just from one format versus the other, but in relation to the standard DVD experience.

Is an End to the High-Def DVD Format War in Sight?

Arguably one of the biggest announcements made at CES this year was Time-Warner and New Line Cinema's decision to back the Blu-ray high-definition DVD format exclusively. Does this spell an end to the high-def DVD format war? On the one hand, the HD DVD format has movie studio support only from Paramount and Universal, and many predict that it's only a matter of time before they jump ship as well. But on the other hand, HD DVD still has a few tricks up its sleeve.

For one, there's price. Historically, HD DVD players have been cheaper than Blu-ray. In fact, a press release I received this morning indicated that Toshiba dropped the price of its current models in the U.S. as of yesterday to US$149.99 for the HD-A3, US$199.99 for the 1080p HD-A30; and US$299.99 for the HD-A35.

Second is unique features, like twin discs that can be played back on HD DVD players and "regular" DVD players; Web-enabled network capabilities; and free movies offered with every HD DVD player purchase. Then, of course, there are other factors that come into play, like the popularity of Toshiba notebook PCs, some of which now incorporate HD DVD drives; and the growing Xbox 360 market, which offers a small HD DVD player as an optional accessory.

With that said, how many people will appreciate these features if they can't buy or watch the movies they want? When it comes down to it, content is the end goal of the game.

Nevertheless, even if the Blu-ray format emerges victorious, it still has another fight to win: the battle against the standard DVD format. The market might become convinced that Blu-ray is the way to go, but consumers would still need to be convinced that high-def in itself is worth the upgrade. This has been somewhat of a battle in the cable/satellite TV space, with so many consumers owning HDTVs, but not HDTV set-top boxes nor programming subscriptions. It's not a far cry to assume that a similar battle will continue with DVDs.

Whichever way the cookie crumbles, one thing is for sure: once one format remains, regardless of whether it's Blu-ray, HD DVD, or some sort of unified project, marketing will shift more toward getting consumers to upgrade period, rather than getting them to upgrade to one format over another. And really, shouldn't this have been the focus all along?

Samsung Bundles Blu-ray with HTiB

Samsung Canada says that, in March 2008, the company will offer a Blu-ray player bundled with a home theatre in-a-box (HTiB) system for an MSRP of $1,499.99. Samsung's latest BD-P1400 Blu-ray disc player currently sells for about $500 in Canada.

This offering will add fuel to the fire of a high-definition DVD format war that doesn’t seem to have an end in sight. Research company DisplaySearch says that we'll likely see a lot of bundles and add-ons in the consumer electronics sector in 2008, and it looks like the high-def DVD arena won't be a stranger to this trend. The HD DVD camp has already been offering bundled deals fore some time, with things like five bonus HD DVDs with the purchase of a Toshiba HD DVD player, and even with select notebook PCs that have an HD DVD drive. This new Blu-ray HTiB offer from Samsung will add another notch in the belt of the Blu-ray camp, and create even more competition on the value side of the fence.

When it comes to which format is actually "winning" the war, various reports state different figures. The latest information from the U.S. National Retail Federation claims that, during the first week of the holiday shopping season (Black Friday), HD DVD players led in unit sales, but Blu-ray led in revenue.

I’m not sure which business model will work: you can sell all the units you like, but if you’re losing money on each, what’s the point? Conversely, you can sell fewer, but more expensive units, which might create a healthy niche market, but could it lead to mass market adoption of your product?

Samsung’s move to bundle a Blu-ray player with an HTiB might just be the answer to the latter question. The 7.1-channel HT-BD2T system will include four tower speakers, three satellites, and a sub, and offer 1,100 watts of power, combined with Dolby Digital +, TrueHD, and DTS-HD. And, of course, a built-in Blu-ray player. A more affordable system, named the HT-AS720ST, will also be available for $599.99. Although it will not come with a Blu-ray player built-in, it will be promoted as being “fully compatible” with a standalone Blu-ray player. This system, available in late March 2008, will offer a 7.1-channel AV receiver with HDMI v1.3 switching, 5.1 speaker package, and a 150 watt sub.

For those who thought a clear winner (regardless of which side) would be in place by 2008, it looks like the battle might just be getting started.

Keeping Track of the High-Definition DVD Format War

Trying to keep track of the high-definition DVD format war is like trying to keep tabs on the invisible man: it's a constantly moving target, and I have no idea where each format is at any given time. Sales of hardware and software, market penetration, movie studio and retailer support, all of which will help determine a "winner", are all consistently shifting. Not to mention that, depending on the source, different numbers are reported everywhere.

Hardware sales in one country are higher for X format; but if you look at numbers from a specific region, Y format is actually doing better. Meanwhile, software sales for one format in a particular store are triple that of the other format; but sales in a much larger retail outlet are double, which equates to much more when you look at the bottom line. It's like high school math problems all over again!

With that said, I thought I'd add some fuel to the fire, and increase the complexity of this math problem. The latest numbers I've received (from the RetailBRIDGE) say that the North American HD DVD Promotional Group is reporting that 750,000+ HD DVD players were sold in the U.S. this past Black Friday weekend. This includes both standalone players (like the one that was selling in Wal-Mart stores for US$99!) as well as the add-on drive for the Microsoft Xbox 360 gaming console.

I haven't heard any comparable figures about Blu-ray player sales throughout the weekend, but I'm sure they're similar in some fashion. It will be interesting to see how HD DVD and Blu-ray software titles sold during the weekend, especially since the National Retail Federation claims that books, CDs, DVDs, videos, and video games accounted for 41.7% of purchases that weekend.

As for the format war itself, if this busy, holiday shopping season doesn't put an end to the fight come early 2008, I don't know what will. But I might just have to track down my old math teacher for some help in figuring out which format is actually in the lead.