Blockbuster chooses Blu-ray only for expanded rental availablity

[Ruined]

The MS response:

Would be happy to comment . Let’s start with pointing out the specifics that are in front of us:

1. All the tools we had to bring HD DVD to our customers yesterday, we have today and tomorrow. BB has and will continue to offer HD DVD to its customers in the 250 stores and online. Nothing has changed in this. Nothing. Note that the great pains they took in their press sub-heading to confirm their commitment to HD DVD:
http://blockbuster.mediaroom.com/index.php?s=press_releases&item=727

“Company will continue to offer HD DVD titles online and in select number of stores“

They would not go out of their way to confirm their intention in such a clear way to support HD DVD if they did not believe in viability of HD DVD.

2. Yes, they are expanding their offering to other stores. One would think though, that the core stores that carry both formats, were picked because they were closer to where potential customers are (e.g. higher income, higher probability of owning HDTVs, larger metropolitan areas, etc.). As such, the fact that those stores continue to carry HD DVD is very substantial aspect of this story.

3. Please read BB’s own press release – they clearly state that they cannot and are not stating a “winner.†And that they are very open to changing their distribution strategy in the future. Given the fact that they already carry HD DVD in such a broad basis already, making adjustments to that plan comes easily.

4. Both formats right now are niche products. As such, expansion to large set of stores is not that significant in itself. The key to expanding the market is to make the players more affordable. I can have 1000 Ferrari showrooms, but that doesn’t mean people will go and buy them in droves . The key is to bring the cost of that Ferrari to the level of a Honda and then you have it available in all the stores. Until then, the cart is being put before the horse. But still, I applaud BB for wanting to make HD more mainstream. And as soon as they do, we will be ready with HD DVD .

Please note that I am not saying this is not a positive development for BDA. It is. They have had a long drought wrt to getting more companies on board while we have been making progress in reverse (e.g. Circuit City carrying HD DVDs). But as you can imagine, by now we are used to press releases from companies in support of their format. Yet, BD remains a niche product as does ours frankly. The cost of products is simply too high, and the value too limited to consumer in relation to it, leading to small sales (and rentals). As such, our focus remains as I stated: getting the cost down, and making it more affordable for people to own the sockets which will eventually drive rental business. We have that advantage on the replication, and better interactivity to differentiate our product from DVD, but the playback devices still have room to come down in price to gain wider adoption….

 

[-tkf-]

This is bad news for HD-DVD, but it's not that big of a deal in the grand scheme of optical media.

By that token Sony should fold up the PS3 games shop. This battle is far from over.

It´s more bad news for HD-DVD, i don´t recll a single "victory" since their perfect launch. And whats with the rolling eyes and comparing this format war to the Console war. HD-DVD has ONE, let me repeat that, ONE exclusive movie studio to support them, they can´t win only die slow.

 

[rbushner]

It´s more bad news for HD-DVD, i don´t recll a single "victory" since their perfect launch.

I do recall multiple victories for both sides, but that is not the topic of this thread though. Blockbuster has little relevance anymore. Perfect launch? Buggy players, sound mastering issues, what launch are you talking about?

And whats with the rolling eyes and comparing this format war to the Console war.

I guess you didn't know, the PS3 is the reason Blu-Ray is ahead.

HD-DVD has ONE, let me repeat that, ONE exclusive movie studio to support them, they can´t win only die slow.

That is incorrect. You could claim one major studio is exclusive. But that one exclusive studio is releasing alot more content than any other. And one major neutral studio is releasing more on HD-DVD than Blu-Ray.

 

[Ruined]

A bit more from MS:

Q:

Hi Amir,
I've yet to walk into my local store and see an HD-DVD disc priced lower than it's BD counterpart.
If they are truely cheaper to produce, then this means the studios are taking the opportunity to rake in a higher profit.

While I cannot fault them for this, it seems like perhaps they should forego the extra profit to try to secure a larger footprint with the public (so that people walk into a store and see that HD-DVD is truely cheaper.)

If the average person walks in and see's the HD-DVD version of something is $5 more expensive, they won't be thinking "oh, maybe it's a combo disc", they'll just think "same movie, and the one in the blue case is cheaper".

Thoughts? Any word of this "cheaper" thing ever becoming a reality?

Thanks in advance,
Stuart

A:

If you want to take this thinking further, you have to wonder why the discs are not even more expensive than they are (in both formats) since studios don’t make money on hardly any titles in HD!

So what we have is not a proper economic system yet so we can’t judge it that way. You have companies subsidizing production of discs and not passing on the true cost to their consumers. You have small market where companies are investing strategically instead of economically. You have consumers not being price sensitive, buying $80 HD DVD/BD packages, etc. pushing a documentary and HD DVD test disc ahead of Hollywood titles in Amazon DVD rankings.

But as we look at this market, I think we all care about the time the format becomes mainstream. At that moment, you have to think of big numbers. I think I heard Warner alone stamps out close to half a billion DVDs a year! On that day, competition will be fierce forcing lower retail prices and cost of production will be a key factor.

On top of that, you have to look at where the supply comes from. HD DVD is not cheaper to produce because its plastics cost less than the same plastic used in BD . It costs less because it is possible to deploy it in existing DVD lines and as a result, just about any DVD line purchased in the last two years or so can, and many are making HD DVDs. This volume availability will invariably lead to lower cost due to higher level of competition for the business. You know, the old supply and demand rule in economics .

In addition, a typical BD line is $1.5M to $3M. Someone has to go and buy this line and dedicate it to making BD discs. And that cost will be passed on to people. Companies will not subsidize this business forever and certainly not through their competitors (i.e. one replicator helping the other). This is different again from HD DVD where the same line is already bought and being amortized on the backs of DVD business. So every day, we get more HD DVD capacity online, without having to lift a finger, or write a check.

Net, net, when we step out of the niche/artificial environment we live in, the strength of HD DVD comes into play strongly and result in lower cost to consumers. And yes, higher profits for some companies if the consumer/competition allows it.

Finally, on combo pricing, that has not hurt the sales of the discs as compared to other HD offerings in the eyes of studios. In the grand scheme of few titles making money, it is hard to argue the point strongly to the studios when a disc sells as well as non-combos. But again, once the market expands and true economics set in, the studios will get a better picture of whether they should charge the premium. But one thing is for sure. Combo discs are an incredible technical accomplishment and solve key consumer adoption problems. If we ever have hope of making these formats mainstream, we have to deal with the other “format warâ€￾: that of DVD and HD. The combo is the true “universalâ€￾ format in that sense. So while like you, I am not happy that a premium is charged for it sometimes, I salivate at the thought of seeing DVDs being replaced one day with combo HD DVDs and consumers not even blinking. Connecting this with the BlockBuster discussion, combo HD DVDs can be shipped to them as DVDs and wind up in all of their stores, whether they make a conscious decision about carrying HD DVD or not. See how powerful of a card this is?

Oops, this became kind of long. Hopefully you didn’t expect a short answer.

 

[Geo]

Let's please not turn this into a general HD DVD vs Blu-ray thread. . . if someone wants an "economics of high-def next gen movie formats" threads, then make one.

 

[Random Digital]

Well at least this should make it a lot easier for those who have been waiting to see which format will win. If you go into your local Blockbuster and all they have is Blu-ray, it makes the choice pretty easy.

Besides the 70% sales lead quoted in the article. I bet bunch of people rented HD-DVDs and popped them into their standard ole DVD player and then complained to blockbuster when it did not work. Maybe this is just to save the headache

 

[Maintank]

Considering that a player is a player, and stand alone doesn't really mean much unless you're desperately trying to look like you're "still in the game", I think it's safe to say that 3 Million > Whatever Toshiba and the HD DVD camp have sold. Period.

Has Sony moved that many PS3s now? If they are outnumbering HD-DVD players 3+ million to ~150K and only outselling them 70-30 on movies. That doesnt bode well for the future when stand alone players surpass PS3 sales..

Well i can tell you the likely situation, Toshiba and Universal Studios will fight a hopeless fight to keep the format alive, backed by plenty of dollars from Microsoft, for example very cheap codec license fee? And the real losers is the supporters of HD-DVD. Universal Studios will release their titles on Blu-Ray when they have no choice.

But the battle is thankfully lost, anyone buying a HD-DVD player should know this, the outcome has been clear from the start, only HD-DVD´s almost flawless launch was a slight hope that it might stand a chance.
18-Jun-2007 14:59

I always enjoy watching people make bold predictions in a market so small 1 movie can sway the sales.

That is not the issue here. Of course HD-DVD players will be available for those who want them, for many years to come. The issue is whether HD-DVD will end up like Sony Betamaxn - Betamax players were still available long after VHS won, but you couldn't buy or rent pre-recorded films on the media. It was the loss of support by video rental companies that killed it off as a mainstream movie format.

The loss of Blockbuster is a major blow for HD-DVD, although the current market is slightly different due to the fact that HD-DVD owners can still rent movies on DVD from Blockbuster (unlike in the Betamax vs VHS era).

Considering the amount of players coming out in the next 6-8 months. This is just the initial battle. Blockbuster has quickly erroded their market over the past few years. Compare netflix and blockbuster. Too little too late for Blockbuster.

 

[Mintmaster]

Considering that a player is a player, and stand alone doesn't really mean much unless you're desperately trying to look like you're "still in the game", I think it's safe to say that 3 Million > Whatever Toshiba and the HD DVD camp have sold. Period.

Not "period".

3 million PS3's versus a few hundred thousand HD-DVD player should result in a lot more favorable disc sales than 60:40. Percentage wise, which do you think will grow faster? Do you seriously think Sony can sell another 3 million $500-$600 PS3's before Toshiba sells a half-million $200-$300 players?

I don't think so. 1M standalone players are much better than 5M consoles, and the standalone market is far bigger too boot.

 

[Geo]

Doesn't help on the content side tho. And on the content side, Blockbuster's announcement is going to have some impact. Blu-ray-only studio heads are wearing slightly bigger smiles today and looking forward to the next board member asking them why they aren't supporting HD DVD. HD DVD-only studio chiefs are scowling a bit more today. Dual format studios are questioning if they really need to do HD DVD movies at all.

 

[RobertR1]

When circuit city started to support HD DVD, I dont' remember a big uproar

Really, this is a positive for the BR camp but it's certainly no war ender as some fanatics would have you believing.


BB CFO:
"When customers are ready we can expand the Blu-ray offering into more stores and add HD DVD to more locations if that's what customers tell us they want. HD DVD titles will still be available in the 250 stores (only 3% of its retail operations) that had been carrying it and HD DVD along with Blu-ray titles will still be available for rental at blockbuster.com for our Blockbuster Total Access and Blockbuster By Mail online subscribers. Our policy online is that we will continue to offer both Blu-ray and HD DVD as they are released."

 

[-tkf-]

That is incorrect. You could claim one major studio is exclusive. But that one exclusive studio is releasing alot more content than any other. And one major neutral studio is releasing more on HD-DVD than Blu-Ray.

Why claim it whent it´s the truth as well you can buy more Blu-Ray titles today and the difference will continue to rise in Blu-Rays favor.

 

[-tkf-]

When circuit city started to support HD DVD, I dont' remember a big uproar

Maybe because BB has something like75% of the rental market?

 

[SPM]

Not "period".

3 million PS3's versus a few hundred thousand HD-DVD player should result in a lot more favorable disc sales than 60:40. Percentage wise, which do you think will grow faster? Do you seriously think Sony can sell another 3 million $500-$600 PS3's before Toshiba sells a half-million $200-$300 players?

I don't think so. 1M standalone players are much better than 5M consoles, and the standalone market is far bigger too boot.

You are missing the main point here. What is the use of an HD-DVD player if you can't get the movies you want to play on it?

Also Bluray will grow faster because PS3 utilisation is low at the moment. As HD content and HD TVs become more common, PS3 utilisation as HD players will increase, whereas dedicated HD players are already fully utilised as HD players. On top of that, I believe the main reason there have been few dedicated Bluray players sold, and what is sold is so expensive is due to the PS3 monopolising Bluray player parts. Prices will drop to similar levels as HD-DVD once Bluray production ramps up to levels where supply meets demand and dedicated Bluray player manufacturers decide they are ready to hard sell Bluray players. Also Toshiba will not continue to subsidise HD-DVD players for ever, since few others license HD-DVD technology from them, so they cannot pay the subsidies from other people's licenses. In the long run, the subsidy advantage on HD-DVD players (and probably the PS3) will dissapear, and dedicated Bluray players will be competitive with both HD-DVD players and the PS3.

 

[-tkf-]

I don't think so. 1M standalone players are much better than 5M consoles, and the standalone market is far bigger too boot.

Ehmm what?

Didn´t you pay attention? 70% of the rentals is Blu-Ray, sales is 70%, exclusive content is.. 70%?

And you know what, in europe this isn´t a format war, there is Blu-Ray and that is it, i haven´t seen a single HD-DVD yet

 

[Arwin]

Ehmm what?

Didn´t you pay attention? 70% of the rentals is Blu-Ray, sales is 70%, exclusive content is.. 70%?

And you know what, in europe this isn´t a format war, there is Blu-Ray and that is it, i haven´t seen a single HD-DVD yet

Well to be fair, that isn't entirely true. I have seen HD-DVD's in two shops now. In one major chain it was dwarfed by BluRay, but in another major chain it was fairly equally matched.

 

[Silent_Buddha]

But the battle is thankfully lost, anyone buying a HD-DVD player should know this, the outcome has been clear from the start, only HD-DVD´s almost flawless launch was a slight hope that it might stand a chance.

Amazing. Neither format has won diddly squat at this point in time.

Neither format is even as popular or ubiquitous as Laser Disc back in the day, and where is that now?

As multiple people keep saying, until HD-DVD or Blu-Ray can compete toe to toe with DVD, they have no chance of "winning."

DVD wasn't able to make significant inroads until it was able to compete with VHS. And in the case of HD-DVD and Blu-Ray, the improvement over DVD isn't nearly as noticable to your typical consumer as the improvement of DVD was over VHS. No Rewinding was a major reason some people I know got a DVD player. These are the types of people that will determine who win's this "format war."

Regards,
SB

 

[SPM]

Amazing. Neither format has won diddly squat at this point in time.

Neither format is even as popular or ubiquitous as Laser Disc back in the day, and where is that now?

As multiple people keep saying, until HD-DVD or Blu-Ray can compete toe to toe with DVD, they have no chance of "winning."

SB

Winning against whom? We aren't talking about Bluray winning against and ousting DVD completely, we are talking Bluray winning against and ousting HD-DVD to become the sole remaining HD standard for mass movie media. While the former is some considerable time off, the latter is entirely possible in the near term.

 

[Silent_Buddha]

Until one or the other can supplant or at least compete with DVD the other format won't be out of the "war" as volume is so low that noone is making much/if any profit off of it.

Even if Blu-Ray were outselling HD-DVD 10-1 right now, it still couldn't be considered a winner. Well I suppose it could be considered a winner in a niche market.

However, as each is advertising itself as the next gen Movie distribution medium, they both need to be able to sell in signifcant volumes to be considered a winner.

As is, they could end up being considered a winner of the this "format war" yet end up losers as the next gen Media distribution medium.

Neither has gained a significant enough foothold that yet another format couldn't come in and completely wipe the floor with them for example. Just as DVD zoomed right past Laser Disc.

Another analogy is the digital recordable music "format war" a few years back between Mini-Disc and DAT. Which one won? Neither, they both lost at least in this country although Mini-Disc went one to have a fairly long lived life in Japan and a few other countries.

Unless HD-DVD or Blu-Ray can compete with DVD neither format is going to "win." at least in any sense that actually matters.

Regards,
SB

 

[DJ12]

They don't need to compete with DVD, when there is enough market penetration for either format, movie studios will stop releasing films on DVD or at least release on a HD format first and DVD several weeks/months later.

They want the switch to happen.

 

[-tkf-]

Until one or the other can supplant or at least compete with DVD the other format won't be out of the "war" as volume is so low that noone is making much/if any profit off of it.

Neither has gained a significant enough foothold that yet another format couldn't come in and completely wipe the floor with them for example. Just as DVD zoomed right past Laser Disc.

Another analogy is the digital recordable music "format war" a few years back between Mini-Disc and DAT. Which one won? Neither, they both lost at least in this country although Mini-Disc went one to have a fairly long lived life in Japan and a few other countries.

Unless HD-DVD or Blu-Ray can compete with DVD neither format is going to "win." at least in any sense that actually matters.

Regards,
SB

Minidisc won a format war that then was turned obselete by MP3 and "free music". I had one at the time as it was the only choice for a good quality portable player, when i got an iPOD the Minidisc stayed in the drawer.

Laserdiscs was never global and the costs was staggering not to mention it was a bastard format in some regards. I still cherish my original Starwars Discs and the PCM sound was way better than the AC-3 i got from my DVD´s. Comparing Laserdiscs vs DVD´s to anything is.. a bit weird

Blu-Ray and HD-DVD is aimed at being the NEXT HD format, there was a D-VHS format that can be compared to the Laserdisc situation (but it´s weird to so), but it wasn´t really that supported since the days was numbered from the start.

If Blu-Ray is outselling HD-DVD 70/30 it´s still telling the Studioes, the buyers, the hardware makers what the consumer wants. HD-DVD got such a good start that i was starting to think the Blu-Ray would screw it up, lucky for me and us it didn´t happen. The format with 40% more storage is in a winning position and only Blu-Ray dropping the ball or Microsoft throwing even more money after HD-DVD can change that.