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Movie Studios Are Dreaming of a Blu Christmas

Friday, 3 Dec 2010 | 10:27 AM ET

All signs point to a colorful holiday, at least as far as movie viewing at home goes.

After years of being the format for early adopters, movie fanatics and gadget gurus, Blu-ray is finally poised to go mainstream this holiday season. The technology, which won out in the format war with HD-DVD in early 2008, has seen a major surge in sales this year.

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The Digital Entertainment Groupsaw Blu-ray set-top sales jump 104 percent in the first three quarters of this year from the same period a year ago.

The Los Angeles-based group, which advocates and promotes home entertainment products, estimates that there are now 21.1 million households in the United States with Blu-ray-enabled players. One factor has been the large base of HDTV sets, and the falling price of both the TVs and Blu-ray players.

“It is the fact that the format is maturing,” says Greg Tarr, executive editor for TWICE, the trade magazine for the consumer electronics industry. “Blu-ray has a lot of upside, and it will come close to, if not equal what DVD did when all is said and done.”

The arrival of 3D into the home entertainment market was expected to drive Blu-ray sales as it's the only pre-packaged format for viewing 3D content in the home, but 3D's arrival has only nudged Blu-Ray sales slightly.

“It likely hasn’t been a major driver at this point,” says Ross Rubin, director of industry analysis for the NPD Group, a market research company that tracks consumer and retail information to manufacturers and retailers. “There is a premium still for 3D Blu-ray and there is still a low install base for 3D TVs. A 3D Blu-ray doesn’t have much added value without the TV. However, this will change as consumers are in the market, and they may hedge their bet that they will purchase a 3D TV at some point and thus future-proof their purchase.”

Rubin adds that for early adopters Blu-ray players are already reaching the replacement cycle, where the first-generation players are being replaced by newer models. In some cases, consumers have not had much of a choice. Newer BD Live (Blu-ray Disc Live) technology has required an Internet connection, and that option that wasn’t available with the first players to be released.

The good news says Amy Jo Smith, executive director of The Digital Entertainment Group is that hardware prices have fallen considerably from all of the leading manufacturers, and Blu-ray is now a staple at the larger consumer retailers.

“I think it is hitting its stride,” say Smith. “People are realizing how much better movies on Blu-ray look over DVD, and the price point of Blu-ray is pretty attractive too.”

Smith adds that the sale of movies is still being driven by new releases, but the catalog titles are starting to gain momentum. “We’re seeing that both catalog and new releases are selling well. In the beginning new releases were what drove it first, but Blu-ray is really great with the catalog titles. The way that some classic titles look is really impressive. The studios have spent some time to remaster the films, to make them look and sound as good as possible and present them with incredible quality.”

It has been that improved quality that has helped drive sales, but also the fact that many Blu-ray discs — which have the potential to hold a far greater amount of content than DVD — have come loaded with plenty of bonus material.

Blu-ray player sales have further gotten a boost from the popularity of the other ways of delivering the movie experience to the home, notably through digital delivery thanks to the fact that the later generation players were Internet enabled. Thus the players aren’t necessarily being used just to play Blu-ray discs or even DVD.

Tarr says this year is the year of the 3D TV, but it is also the year that IP TV is becoming more popular as people are watching movies and TV shows streamed over the Internet.

He says that the set-top boxes, including Google TV and the Moxi box are presenting a challenge to the Blu-ray format, but adds that Blu-ray players have the added functionality to stream content as well.

"Many (Blu-ray) players allow people to watch Netflix and other services," he says.

Still, Tarr says that the streaming of video, whether through a Blu-ray player, set-top box or other device does offer a lot of different services without going to a rental store or the mall, but he adds only “if you don’t mind watching it in a substandard format.”

For that improved quality that DEG has hyped, the Blu-ray discs are still delivering what could be argued is the best picture and sound, and there is still the fact that 3D is making headway, which could drive Blu-ray sales up this holiday and certainly into 2011.

“The 3D momentum is picking up,” says Tarr. “The estimates are that it will be between three and five million next year.”

And a not-so-little film—the one that put 3D on the map at movie theaters—is also arriving this month on Blu-ray 3D. For now, it's available exclusively with the purchase of a Panasonic system.

“Avatar is certainly that single movie title that could be considered the killer app for 3D Blu-ray,” adds Tarr. “It is certainly going to spark more interest in 3D, and that means 3D Blu-ray.”

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