Blu-ray Enthusiasts Alone Can't Save the Format

Prices must drop fast to get beyond early adopters

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HDTV owners like Blu-ray best when it comes to putting something up on the big, expensive screen. That was the most notable message from a survey of HDTV owners released today by the Digital Entertainment Group.

Owners also think their hi-def sets are the bee's knees, and are willing to pay more for HD content, according to the numbers. But the main point was that Blu-ray will own the future, and the Los Angeles press conference today amounted to a cheering session for the format. The same association recently launched a $25 million promotional campaign for Blu-ray, in the face of growing reports from analysts that the format risks becoming a mere niche player.

Today's report pooh-poohed the many competitors to Blu-ray. It seemed particularly dismissive of what I think is the biggest threat, the new Internet delivery services that compete with the hi-def disks. Two thirds of Blu-ray owners who are familiar with downloading or streaming still prefer the HD disks, according to the group. HDTV owners in general, even if they don't own Blu-ray, agree at almost a 10-to-1 margin.

Defenders, meanwhile, also say that at $200, Blu-ray players are cheaper than DVD players were at this point in their adoption. And disk sales are ahead of where DVD was at this point.

I see nothing in any of the numbers to suggest Blu-ray has momentum. The adoption rates, and the survey as well, still represent early adopters. Hungry to fill their HD screens, enthusiasts are willing to spend money for the best. And there is no denying that Blu-ray offers the best in video and audio for HDTVs.

The question here, and not asked by the survey, is what it will take to get others to buy them. Is the step up to Blu-ray worth the steep premium that's asked today?

The entertainment group took comfort that a vast majority of respondents simply like having a physical disk, and cited that as a reason to buy Blu-ray. That only reinforces in my mind that we're talking about a minority made up of enthusiasts.

I own few DVDs, which is the same for most of my friends. I suspect it's a small portion of home viewers who amass a library of movies, though one studio executive noted they account for much of any format's sales. "We will see those heavy buyers stay in the physical world for a long, long time to come," said Craig Kornblau, president of Universal Studios Home Entertainment.

But owning disks will have less appeal this time around. Many people bought DVDs to be able to watch a good movie whenever they wanted. It was a crude and expensive form of video on demand. Now we can get good-quality, on-demand viewing across cable and the Internet.

Even among movie renters, DVD had clear advantages that Blu-ray doesn't. DVD was not only better quality than VHS, but offered new features and was vastly more convenient. Blu-ray offers better quality and has new features that DVDs don't, but is no more convenient. And DVD didn't face the challenge from digital delivery.

It's worth noting that the Digital Entertainment Group is an alliance between Hollywood and electronics makers such as Philips and Panasonic. It's an increasingly uneasy alliance. Studios would love to cut out the manufacturers, stores and other middlemen and sell directly to consumers over the Internet.

Maybe I read too much into body language, but the only time I remember a studio exec using the word "exciting" was in the prospects for downloads and streaming. "Frankly, we don't care how our product is consumed, all that we care is that it is consumed," said Steve Beeks, president of Lionsgate Entertainment. "When you add in the growth of digital delivery, which is really getting pretty exciting right now, we anticipate that the industry is going to return to healthy growth by the end of next year."

To survive, Blu-ray needs to grab market share while it can. The great unknown, and not asked in the group's survey, is what it will take to get Blu-ray to mass-market adoption.

I don't think $200 players will do it. I don't think $150 players will do it. They need to be under $100, and soon or the format flounders. Greedy electronics makers and merchants risk stifling the format at a time when it can't afford to stall.