Next Generation DVD: Capturing Greater Consumer Interest Will Be a Process

By Paul Erickson, Director of DVD and HD Market Research

Recently, our colleagues within NPD published a variety of interesting findings in a press release for their High Definition Video Report Series. Among them were the following:

Only 11% of current HDTV owners intended to buy a high definition player in the next six months.
73% were satisfied with DVD and did not see a need to replace.
62% were waiting for prices to fall.

Neither of the top two reasons why HDTV owners did not plan to buy a next generation DVD player were related to the format issue, indicating that the market has larger obstacles to overcome than merely Blu-ray versus HD DVD.

While surprising to some, the numbers merely help underscore long-standing value proposition issues that have followed the next generation DVD segment since its arrival at retail. Concurrently, sell-through of high definition disc players has grown, but is far from the volume desired by CE manufacturers given the current popularity of HD displays at retail.

The challenge for the industry will be to find what is needed for the consumer to care more about next generation DVD, sooner. With the format battle continuing to escalate, the immediate challenge is finding the mix of product, pricing, bundling, positioning and messaging that will successfully entice consumers already on the fence to pull the trigger on a high definition format this holiday season. Over the long term, however, it will require finding how to draw the interest of HDTV owners (along with those in the market to purchase an HDTV) as a whole, and motivating them to upgrade from their existing DVD player. Thus far, the appeals of HD playback and increased interactivity do not seem to be sufficient at current pricing in dislodging the majority of HDTV owners.

While pushing consumers harder on the technological and audiovisual superiority of next generation DVD may aid in this goal, it seems more likely that large-scale buy-in will be more effectively aided by substantial improvement in the less-sexy but more fundamental pieces of the value proposition for consumers: pricing and content availability. Accomplishing this task will require time and persistence, thus reinforcing the likelihood that the format war will extend well into 2009 before it is resolved.