Retailers lie in wait for high-definition DVD boom
LAS VEGAS —High-definition DVD is expected to catch on with consumers, but it’s going to take a few more years. That was the conclusion of studio executives and analysts at the annual Home Media Expo in Las Vegas held July 16 to 18.
The new format that retailers hope will resurrect a stagnant DVD business got off to a slow start in 2006, caused in large part by a format war between the Blu-ray and HD-DVD formats. Russ Crupnick, an analyst for The NPD Group, summed up the situation at a July 17 seminar entitled, “The Future of Retail and Home Entertainment.” “Consumers are totally confused,” said Crupnick.
Adams Media Research president Tom Adams said high-definition DVD accounted for just 0.5% of total DVD sales in 2006, but that percentage is on the rise. He said that Blu-ray players—including the Blu-ray-enabled PlayStation 3 video game console—would be in 5 million homes by the end of the year.
“High-definition DVD is going to eventually take over the market, but it will be nowhere near as fast as the DVD takeover of VHS,” said Adams. He expects high-definition DVD to generate more than $10 billion in sales by 2012. Kagan Research has a more ambitious forecast, predicting high-definition DVD will account for 14% of sales by 2009 and 53.7% of the market ($14.98 billion) by 2012.
That growth should be helped by booming sales of high-definition LCD and plasma TVs. Warner Home Video worldwide senior vp Steve Nickerson said consumers are already preparing for the transition from standard to high-definition DVD. “It’s estimated that 36% of all U.S. households will have a high-definition TV by year’s end,” said Nickerson.
A drop in the price of players would also help, a move expected to begin this fall, especially now that Target stated that it will be carrying Sony’s Blu-ray players’priced at $499—in October. Target is expected to debut the Sony player at a lower price and Wal-Mart is likely to follow suit with sales of Toshiba’s HD-DVD player. At the “Retailer of the Year” award ceremonies on July 16, Target was honored as the Mass Retailer of the Year, with its senior buyer for video, Mike Thielman, accepting the award.
Mass retail generated nearly half of all DVD sales in 2006, according to a report commissioned by show sponsor, the Entertainment Merchants Association. Led by Wal-Mart, mass retailers accounted for 43% of DVD sales, followed by consumer electronics chains with a 16% share and online retailers with 12.5% of the market.
Overall, DVD sales were essentially flat in 2006 with $16.45 billion in sales, compared to $16.38 in 2005. The rental market dipped slightly to $8.45 billion from $8.54 billion in 2005. Sales are expected to be flat again in 2007.