Blu-ray Approaches Hardware Price Parity; Software Promotions Increase
December 18th, 2007By Paul Erickson, Director of DVD and HD Market Research
On December 7, DisplaySearch hosted its annual Black Friday results webinar, and there were several strong take-aways for the next generation DVD segment. First, given consumer conservatism towards buying next generation hardware due to perceived high prices and existing satisfaction with DVD, price continues to prove the most effective method of dislodging prospective buyers. Toshiba and HD DVD took the unit sales crown with 62% of units sold, and Toshiba was the top single vendor in both units and revenue. Due to higher price points, Blu-ray collectively generated greater overall revenue, accounting for 52% of total receipts. Toshiba’s victory was achieved despite consistently lower overall ad reach representation, and a Black-Friday-specific ad share that was its lowest in several weeks.
There were two important caveats to the results. One, the coverage was limited to NPD’s Leader Panel of High Definition Retailers, which includes a number of significant retailers, but omits Wal-Mart, responsible for roughly half of next generation DVD player sales. Second, the high unit growth from week to week for HD DVD for Black Friday week, hints at a preceding week where HD DVD players were outsold by Blu-ray. While this was true, the first few weeks of November had HD DVD clearly outselling Blu-ray by a margin of roughly 2-1 according to NPD, and once Wal-Mart’s contribution is accounted for, the overall margin is likely even larger. For Black Friday week, however, the gap was narrower.
There are two points that arise from this, one has already been discussed at length—HD DVD can maintain unit sales superiority seemingly at ease provided there is a high enough hardware price differential and the price nears $100. Second, and more relevant to the current few weeks before the end of the year, is that when pricing for HD DVD is above 200, and/or price differential with Blu-ray gets under $150 and closer to $100, standalone sales become a much closer race. Part of this is a product of much greater Blu-ray ad reach and frequency due to the substantially larger marketing spend available to the collective Blu-ray camp, but as this week brings the lowest Blu-ray player prices ever, the implication is clear: HD DVD must continue to push an aggressive price differential throughout the holiday season to avoid risking standalone sales superiority. Aggressively staying below $200 at entry level would seem a necessity.
For Blu-ray, the drive to finally whittle down the price differential between the two formats seems to be in full effect, with sub-$300 player offers now on both Sony and Samsung players a direct shot across the HD DVD camp’s bow. Thus far, there is no indication as to whether this is a short term promotion (a la $99 Toshiba HD-A2’s) or signs of a permanent price reduction. If sub-$300 pricing is maintained throughout the holiday, coupled with continued heavy bundling offers and software 2-for-1 and Buy-One-Get-One offers through the end of December, Blu-ray will succeed in making noticeable advances in growing both hardware and software sales. Meanwhile, to counter the effect of repeated software promotions from the Blu-ray camp, Buy-One-Get-One offers have finally debuted for HD DVD titles at Amazon and Best Buy. With Warner Bros. being heavily courted by both camps, December will prove an interesting month to watch as both formats race to turn in hardware and software sales performances that each hopes will definitively sway the studio to exclusivity.
Much of this blog post is excerpted from an article in last week’s issue of the DisplaySearch Weekly Next Generation DVD Flash Report, covering weekly events within the next generation DVD market and tracking pricing and promotions at major US retailers. For more information on this report, click here.
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