The impact of PS3 in winning the HD Format War

[Geo]

What happens when HDTV becomes the standard TV, and the majority of PS3 owners have one? That 72% who aren't buying BD movies now will start buying them.

Over what time frame? We bought our first HDTV 5 years ago now. . . and penetration is still at 14% in the US. The mandate to switch to digital broadcasting in 2009 is still a ways off, and even then there is a great deal of effort being put in to *not* require people to buy a new TV (the cheap set-top boxes that are required to be available at a subsidized price).

If we're seriously talking about PS3's impact on B-r sales in 2010 or so. . . .I doubt it is a decisive factor by that point in ending the war with a B-r victory. PS3 absolutely helps keep B-r alive and gives it an edge that HD DVD does not have, but it can't produce a victory on its own (altho note to be fair to B-r movie sales, Nielsen says they won "Black Friday" week by 73/27, which is quite impressive).

January is going to look very interesting when all those Christmas presents currently in closets or under trees get opened and HD movie buying happens. Probably most HD movie buying going on right now is for people who already had players before Christmas shopping season opened.

 

[Geo]

It is silly to think PS3 owners won't go out and buy HDTVs when everyone else starts buying them. It is also silly to imagine that HDTVs won't drop in price, or that they won't replace SDTVs at some stage soon. Just go to any electrical retail store and look at how much space is taken up by HDTVs compared to SDTVs.

If the ONLY TVs offered for sale starting TODAY were HDTV, how long do you think it would take to get to 50% penetration of the installed base? My guess is that's still a 3-5 year process.

 

[ShaidarHaran]

Add one to the list of those who've purchased a PS3 (80GB Motorstorm bundle) for Blu ray playback. In fact, that's what I purchased mine for primarily, along with a Philips 42" Full HD TV

This is what happens when it snows in Minnesota. I go out and buy stuff to get me through the weekend

Really there aren't many games on the PS3 currently that have me terribly interested, I'm more of a PC gamer anyway. I am very much looking forward to Gran Turismo 5 though. Right now about the only games that interest me are Motorstorm, Heavenly Sword, and Assassin's Creed. Also some older PS1/PS2 titles (earlier FF games, Chrono Trigger, Chrono Cross, God of War 1 & 2) so I got the 80GB model specifically for backwards compatibility.

 

[SPM]

If the ONLY TVs offered for sale starting TODAY were HDTV, how long do you think it would take to get to 50% penetration of the installed base? My guess is that's still a 3-5 year process.

That is the point I am trying to make. HD sales are controlled by HDTV ownership, not by player ownership. Current HD player price isn't the only issue, and probably not even the main issue. Standalone HD player sales aren't going to go through the roof for a year or two at least, but PS3s are selling anyway in the meanwhile. Until then the PS3 will dominate as does now as the major HD player on the market. In one to two years, the price of BD standalone players will drop to match the price of HD-DVD players, and a significant proportion of the large number of PS3 owners who don't have HDTVs will get one. That's going to boost BD media sales.

 

[Geo]

But the topic is "The impact of PS3 winning the HD Format War", and the forces you are pointing at, it seems to me, are too late to have that result.

 

[Mintmaster]

SPM, you have some major comprehension problems.

It is very disappointing for current sales, but even with those disappointing figures, BD is beating HD-DVD 2 to 1, and the only way for usage by those people who have a PS3 and don't use it for movies, is up.

The percentage of PS3 owners with HDTVs will grow as HDTVs become the standard TV in use. The number of HD player owners with HDTVs will stay the same (at approximately 100%). Logic dictates that that will boost BD sales.

2 to 1 IS the disappointing figure. How can you then say, "even for those disappointing figures, BD is beating HD-DVD 2 to 1"?

It doesn't matter if the usage goes up. The standalone factor is far more important, as I previously described above and will describe again below.

You are saying that PS3 owners are poorer than the average TV owner?

Ugh. Read again. PS3 owners without an HDTV are poorer than HDTV owners without an HD player. I could not have been more clear. Let's say you and Geo are right about 72% of PS3 owners not having an HDTV in the US.

Then:
-In group A we have 2.2M households with a PS3 but no HDTV
-In group B we have 14.5M households with an HDTV but no PS3 or HD standalone
-B, in all likelihood, has more disposable income than A
-People in B only have to buy a ~$100-$400 standalone to start buying HD discs.
-People in A have to buy a $500-$2000+ HDTV to start buying HD discs.

You get it now? A is 6 times the size of B, spends more on electronics per capita, and needs to spend a quarter as much to start being ready to buy HD discs.

I assumed 114M households (this 1996 report estimated 111M for 2007, but was off by 2.5M in http://www.census.gov/prod/2001pubs/c2kbr01-8.pdf), 14% have HDTV, and of those 1.5M have BR, HD-DVD, and/or PS3. We know 200,000 have BR, 750,000 have HD-DVD, and 850,000 have PS3 under the assumption, and there's some overlap. I know this result isn't 2:1, but remember that a big chunk of HD-DVD owners are new.

Think carefully about what you are saying. If you already have a PS3, then the cost of buying an HD player is zip, whereas the cost of buying an HD player will perhaps be $150.

I have thought about what I am saying, but you have clearly not. The PS3 owners you're talking about have to spend a lot more than "zip", they have to buy a whole damn TV! HDTV owners - who outnumber PS3 owners by a huge factor and are already proven spenders on passive visual entertainment - only have to buy a relatively cheap player.

The only people spending "zip" are PS3 owners that already have an HDTV, yet your whole argument in this thread is based on the untapped market of PS3 owners without an HDTV!

 

[SPM]

I have thought about what I am saying, but you have clearly not. The PS3 owners you're talking about have to spend a lot more than "zip", they have to buy a whole damn TV! HDTV owners - who outnumber PS3 owners by a huge factor and are already proven spenders on passive visual entertainment - only have to buy a relatively cheap player.

The only people spending "zip" are PS3 owners that already have an HDTV, yet your whole argument in this thread is based on the untapped market of PS3 owners without an HDTV!

Some extremely convoluted logic, and probably wishful thinking here. Why are you comparing those who have a PS3 and no HDTV with those who have an HDTV and no PS3. The two are not mutually exclusive, and there is no reason to suppose that if you have a PS3, you don't have an HDTV. In fact if you do own a PS3, you are more likely than the average person to have an HDTV.

Out of those people who have HDTVs, some will have PS3s. Those people will buy BD media, because it costs them zip for a player.

Those who have no HDTV and have a PS3, won't buy HD media, but when they do eventually get an HDTV as they will, they will buy BD media for the same reason because it costs them zip for a player.

The much smaller numbers who have a HD-DVD player and an HDTV will buy HD-DVD media (in half to one third of the numbers of BD media as we have seen currently).

Out of those who are able to buy an HDTV and have no HD player, you have been assuming that they will automatically all buy an HD-DVD player because at the moment it costs $100 - $150 less than a BD player with Toshiba's subsidies in place. Well actually they won't. The reasons for this are:

First, if you spend $1000 on an HDTV, you aren't going to quibble over a player that saves you about $100-$150 if it plays less media than the more expensive one. In addition, video rental is far more important than disc sales for most people (video technophiles apart). BD has the advantage in both of these.

Second you are assuming that the cost of BD player will always be higher than HD-DVD players. It won't. The manufacturing costs are similar. The current costs are down to subsidies by Toshiba and Sony for the Toshiba HD-DVD player and the PS3. No matter what what some HD-DVD fanatics claim, the manufacturing costs aren't very different for BD and HD-DVD players. As I said before, the subsidies for HD players won't remain when the volume ramps up, because HD players are open platforms like PCs since the hardware cost cannot be a loss leader for media, since media cannot be tied to play only on the subsidizers player. The PS3 can remain as a loss leader for games software sales since PS3 games will only play on the PS3, so subsidies for the PS3 can be recovered by charging a cut on games.

Toshiba can try subsidizing their hardware and recovering the money through increased royalties for HD-DVD players, but this will mean that no other manufacturer will license their technology. They can try recovering the money on increased license charges on HD-DVD media, but this will mean the studios will switch to BD media. Who knows, maybe this is what they are doing now since all other major CE manufacturers have opted for BD and more studios have opted for BD, and BD media seems to be cheaper on the market.

Subsidies on HD players are OK when you are selling in small quantities, but when HD player sales volumes increase, subsidies will need to be cut. In the long term BD players will be same price as HD-DVD (and probably lower than HD-DVD players due to greater market competition due to more manufacturers).

You are thinking too much in games console mentality. Standalone BD players aren't games consoles - they aren't purchased in isolation, and they can't be marketed in the same way especially with regard to subsidies because media is not tied to a particular manufacturer.

One other thing I forgot to mention. You are assuming that all HDTV owners will want to buy movies on HD media. That may well have been the case in the past because of the lack of HD broadcasts. However in future that won't be the case. Many won't have any intention of buying more than the occasional HD media disc, and perhaps renting a few HD disks. They are not going to pay out $200 to buy a player just for that, but those HDTV owners who have PS3 players will go out and buy those occasional BD disks because all they will have to pay for is the cost of the disk.

 

[Geo]

http://www.1up.com/do/newsStory?cId=3161833

Here's a report from this summer that shows fairly well why it takes 10 PS3 owners to equal 1 standalone owner re HD movie sales. It found 80% of PS3 owners don't use the B-r drive to play movies.

 

[Sxotty]

Some extremely convoluted logic, and probably wishful thinking here. Why are you comparing those who have a PS3 and no HDTV with those who have an HDTV and no PS3. The two are not mutually exclusive, and there is no reason to suppose that if you have a PS3, you don't have an HDTV. In fact if you do own a PS3, you are more likely than the average person to have an HDTV.

You need to work on your reading. He did not say that. He made a very good post with actual sources wherein he explained his assumptions carefully. You ought to try it.

 

[SPM]

http://www.1up.com/do/newsStory?cId=3161833
Here's a report from this summer that shows fairly well why it takes 10 PS3 owners to equal 1 standalone owner re HD movie sales. It found 80% of PS3 owners don't use the B-r drive to play movies.

Agreed, but just think about what you are saying. Those 20% of PS3 users are buying 2 to 3 times as many HD media disks as all the HD-DVD standalone players. Presumably the 72% of PS3 owners who don't own an HDTV aren't buying HD media disks, which means that out of the 28% of PS3 owners who do own an HDTV, 71% buy HD movies. As I said before, what happens when HDTV ownership grows among PS3 users in line with the general public? There is a huge potential for growth in BD sales there as HDTV ownership grows. What is more, those people don't have to pay any more for a BD player, so they are very much more likely to buy or rent HD media disks than Mr. Joe Average HDTV owner who doesn't have a media player.

 

[SPM]

You need to work on your reading. He did not say that. He made a very good post with actual sources wherein he explained his assumptions carefully. You ought to try it.

I am using logic and common sense to interpret sources and statistics. The problem with the HD-DVD vs BD debate is that there far more PR and disinformation in the various sources than fact. Many things that have been reported by various sources as fact have in fact turned out to be false. I remember reading about how BD was dead on arrival because it got to market well before BD, then how HD-DVD had already won the format war last year, etc. but despite this we find HD-DVD media sales still lagging BD media sales between 2 and 3 to 1. This is natural consequence of the bitter fight for format supremacy between BD and HD-DVD proponents. I don't therefore take everthing I read as God's own truth and I try to weigh up and analyse what is being said to se if it makes sense rather than simply regurgitating what I read. You should perhaps try that sometime.

 

[Mintmaster]

You need to work on your reading. He did not say that. He made a very good post with actual sources wherein he explained his assumptions carefully. You ought to try it.

Thank you.

Some extremely convoluted logic, and probably wishful thinking here. Why are you comparing those who have a PS3 and no HDTV with those who have an HDTV and no PS3. The two are not mutually exclusive, and there is no reason to suppose that if you have a PS3, you don't have an HDTV. In fact if you do own a PS3, you are more likely than the average person to have an HDTV.

The two are not mutually exclusive?!?

Group A has no HDTV but has a PS3. Group B has at least one HDTV but no HD player (no BR, no HD-DVD, no PS3). How can any household belong to both groups? Do you even know what "mutually exclusive" means?

Need I remind you of your own damn argument?

What happens when HDTV becomes the standard TV, and the majority of PS3 owners have one? That 72% who aren't buying BD movies now will start buying them.
...
The percentage of PS3 owners with HDTVs will grow as HDTVs become the standard TV in use. The number of HD player owners with HDTVs will stay the same (at approximately 100%). Logic dictates that that will boost BD sales.

You are saying PS3 owners who don't own an HDTV will become BD buyers when they get one. Group A, by definition, encompasses all of these people.

The point I'm making is that new HD disc buyers coming from group B will absolutely dwarf those coming from your group A, probably by more than an order of magnitude. Therefore this "hidden potential" that you're talking about is irrelevent to the outcome of the format war.

Second you are assuming that the cost of BD player will always be higher than HD-DVD players.

Since when? I never assumed such a thing. I'm arguing that PS3 will matter less and less and HD standalones will determine the outcome. Standalones include BR players, which will eventually drop in price enough that few will buy a PS3 primarily for movies. 14.5M people in group B (which is growing rapidly) are the target market for HD standalones, and that's where the format war will be fought.

 

[SPM]

Thank you.

The two are not mutually exclusive?!?

Group A has no HDTV but has a PS3. Group B has at least one HDTV but no HD player (no BR, no HD-DVD, no PS3). How can any household belong to both groups? Do you even know what "mutually exclusive" means?

Need I remind you of your own damn argument?

Actually I do know perfectly well what mutually exclusive means. By "the two" I meant PS3 owners and HDTV owners, not group A and group B. There are PS3 owners with HDTVs which do not fit into group A or B. In excluding PS3 owners with HDTVs, your argument is assuming that PS3 owners and HDTVs are mutually exclusine. Actually 20% of PS3 users now own HDTVs, and the proportion who do own HDTVs will grow as HDTV ownership grows.

You are saying PS3 owners who don't own an HDTV will become BD buyers when they get one. Group A, by definition, encompasses all of these people.

I am most certainly saying that PS3 owners who don't now own an HDTV will become BD media buyers or renters when they buy an HDTV. You have been claiming that the attach ratio is poor for the PS3 (because only 20% use the PS3 for HD media playing now) , but statistically 71% of that 80% pool of PS3 owners who don't have an HDTV are going to buy BD movies when they eventually get an HDTV. That means there is a significant growth potential for BD media sales over HD still to occur on top of the 2:1 advantage BD now has. A 2:1 advantage only 20% of PS3 users able to use it for HD movies is much better for BD than a 2:1 advantage with every PS3 user able to it for BD movies as some people seem to think. We are talking about movie players here, not consoles - subsidies on hardware and whether attach ratios are good or bad don't work the same way.

The point I'm making is that new HD disc buyers coming from group B will absolutely dwarf those coming from your group A, probably by more than an order of magnitude. Therefore this "hidden potential" that you're talking about is irrelevent to the outcome of the format war.

In the very long term probably, but it is the shorter term which will determine which format will win, or whether both formats can survive. The PS3 numbers will make a huge difference to that. Also, there are going to be a lot of people who buy HDTVs and not bother to buy a HD movie player (until maybe the price drops to DVD player levels). Buying HD media as a means of regular entertainment is expensive (compared to HD TV broadcasts which pretty well everyone with an HDTV will subscribe to) and even when HD player prices drop, most people (apart from a tiny group of hardcore video enthusiasts) will only buy or rent movies occasionally. Under these circumstances, impulse buying or renting of movies will be very important, and this, especially in the early stages will favour BD because PS3 owners who bought the PS3 for playing games can and will buy HD movies on impulse without paying for a player as well, while many others without a standalone player will not be willing to buy a standalone player just because they see a nice movie they would like to rent.

Since when? I never assumed such a thing. I'm arguing that PS3 will matter less and less and HD standalones will determine the outcome. Standalones include BR players, which will eventually drop in price enough that few will buy a PS3 primarily for movies. 14.5M people in group B (which is growing rapidly) are the target market for HD standalones, and that's where the format war will be fought.

Most of those who argue that HD-DVD will win or survive do so because it is cheaper now. I don't think this argument will be valid when manufacturers get serious as sales of HD players pick up.

Certainly HD standalones will eventually outsell PS3 by a large margin. However the format war will be won or lost before then. Also you are forgetting that only part of the 14.5M with an HDTV but no player will get an HD player (at least until HD players are as cheap as DVD players). Most will be happy to just watch HD TV broadcasts or cable and use an HD PVR.

 

[Geo]

In the short term, HD DVD seems to have sold about 330k machines in November. This would require 3.3M PS3 sales to keep pace. Tho this also assumes NO B-r standalones were sold in November which isn't likely. Even if you assume that B-r standalones sold 100k in November, which is probably generous, then PS3 would have had to sell 2.3M units to keep pace. Which still didn't happen.

It's a puzzlement to me why you think the switchover of the installed based to HDTVs is going to happen in short enough time frame to make a significant difference in deciding the format war, when current penetration in the US is 14% after 9 years of the HDTV era (the first 1080i broadcast was in 1998). What do you expect it to be after the Superbowl (Christmas and the Superbowl being the big selling season for HDTVs)? 16%? By the same time in early 2009? 20%? Surely not more than 25%?

 

[Mintmaster]

In excluding PS3 owners with HDTVs, your argument is assuming that PS3 owners and HDTVs are mutually exclusine.

Not once did I exclude PS3 owners with HDTVs in any of my posts. I even gave numbered them at 850,000 in a post above. The point that YOU are making is that PS3 owners without HDTVs is a growth opportunity. Hence they are the topic of discussion.

Actually 20% of PS3 users now own HDTVs, and the proportion who do own HDTVs will grow as HDTV ownership grows.

And the other 80% will have little impact, as I have shown again and again. All you do is bring handwaving strawman arguments. Who the hell cares if standalone player owners are 100% saturated? That's not where the growth is!

In the very long term probably, but it is the shorter term which will determine which format will win, or whether both formats can survive.

Riiiiight.

So your theory is that in the short term, we're going to see all the following:
- An explosion in the percent of PS3 owners with an HDTV
- A huge slowdown in HDTV purchases from the 100 million homes without HDTV
- A halt in price drops for HD standalones (including BR players)
- A halt in demand for HD players

Why does your theory mandate that? Because you need all these factors to stop disc sales to standalone owners from completely overwhelming disc sales to the relatively tiny group that you are talking about.

Also, there are going to be a lot of people who buy HDTVs and not bother to buy a HD movie player (until maybe the price drops to DVD player levels)
...
Also you are forgetting that only part of the 14.5M with an HDTV but no player will get an HD player (at least until HD players are as cheap as DVD players). Most will be happy to just watch HD TV broadcasts or cable and use an HD PVR.

HD players will cost under $100 for holiday 2009 (probably BR as well). HDTV owners are not going to buy cheap DVD players, which continue to sell at a rate of 20M per year.

You're arguing complete nonsense here. You think $100 will be a big hurdle to HDTV owners, but $500+ is not a hurdle to PS3 owners. You think most of group B (who are HDTV owners) won't bother with HD movies, yet group A, which doesn't even value high definition enough to buy an HDTV yet, will become HD movie buyers once they do get a set.

Forget it. I've made my point, and everyone except you can understand it. Keep arguing with yourself if you want to.

 

[quest55720]

You're arguing complete nonsense here. You think $100 will be a big hurdle to HDTV owners, but $500+ is not a hurdle to PS3 owners. You think most of group B (who are HDTV owners) won't bother with HD movies, yet group A, which doesn't even value high definition enough to buy an HDTV yet, will become HD movie buyers once they do get a set.

It is really 100 x how many DVD players in the house + portable units. The only way a new media makes sense to a person is if they can replace all current players with new ones. Or else you have to buy media 2 times one for new format one for old which is just insane. While I love the PQ of a good HD source most people don't. The average person is not going to see the difference to justify the cost. This is not the same type of upgrade from vhs to dvd. IMO this war is not to replace dvd but to become the next laserdisc. The winner will be the format of choice of videophiles not the format of the general public.

 

[Geo]

We have three DVD players and a B-r player in this house. CE-wise, that is, not counting computers. We have. . .oh. . . several hundred movies and TV series on DVD, and about 20 on Blu-ray. In the next two weeks I expect the delivery of five TV series seasons (various series) on DVD and five Blu-ray movies (Harry Potter collection).

So I'm not necessarily seeing the need you point at. It's a matter of temporary (in)convienance. And, really, not a whole lot of that even as of course the Blu-ray player is on the biggest/nicest TV in the house (not the only HDTV, just the biggest/nicest) and that's where at this point in its lifespan both my wife and I would make a point of watching HD movies. Now, if the B-r player couldn't play DVD that *would* be a real problem, but that's not the situation. . .in fact, it makes 480p DVDs look better than any of our older DVD players.

 

[quest55720]

If I spend almost 2x as much on a movie I want to be able to play it on any TV in the house. I don't want to be forced to watch that new movie on only 1 tv in the house. I watch many movies in the bedroom also. Just an example on sundays I watch football on the main tv of the house. The rest of the family might watch a movie or play games ect. If the brand new movie I just bought only plays on the main tv then someone is not going to be happy. I also have a dvr on every tv to avoid the same head aces.

When I move to a new format if possible I buy a new movie on that format. When blu ray players get 199 I will purchase them to be format neutral. I hope some time next year to buy all new movies in HD. The only DVDs I will buy will be TV shows that are not offered on hd media.

 

[ShaidarHaran]

If I spend almost 2x as much on a movie I want to be able to play it on any TV in the house. I don't want to be forced to watch that new movie on only 1 tv in the house.

That's a rather unrealistic expectation to have. Sure it would be nice, but B-r/HD DVD players don't grow on trees

 

[Mintmaster]

It is really 100 x how many DVD players in the house + portable units. The only way a new media makes sense to a person is if they can replace all current players with new ones. Or else you have to buy media 2 times one for new format one for old which is just insane.

Okay, but that affects everyone in the format war, including PS3 owners with HDTV.

You make a decent point though. Existing laptops and portable DVD players, including those in many cars nowadays, is another reason to dissuade people from getting a title that's not backwards compatible.

That's why the combo disks look pretty appealing, particularly the triple layer ones that wouldn't compromise image quality.