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Report Predicts Drop in Next-Gen DVD Player Prices

Jennifer LeClaire, newsfactor.com Wed Dec 26, 12:05 PM ET

According to a new market report from Understanding & Solutions, both Blu-ray and HD DVD player prices should decline significantly in early 2008. ADVERTISEMENT

Consumers can purchase HD DVD players for less than $200 and Blu-ray player prices have dropped to below $300 at some online venues. This is just the beginning, according to Bill Foster, Understanding & Solutions' senior technology consultant. "Drive, chipset, and other system components are now benefiting from economies of scale," Foster said in a statement.

"In early 2008, we're going to see the bill of materials for a basic high-definition player, in either format, weighing in at less than $150," Foster said, "and that's going to impact the high street very soon, providing the consumer with a choice of low price players that allow consumer electronics companies a margin for profit."

Format Clarity in 2008

The research group predicted that if both formats continue to sell, HD DVD and Blu-ray players will retail below $100 by 2011.

"Crucially, Blu-ray benefits from stronger Hollywood Studio support and represents a greater proportion of high definition disc production volumes and disc sales," said Jeremy Wills, a consultant at Understanding & Solutions. "To date, Paramount's move to sole support of HD DVD has failed to turn the market, despite the HD DVD exclusivity of key titles Transformers and Shrek the Third."

Notably, Blu-ray still represented over 70 percent of HD movie sales in theU.S. during the week Transformers was released on HD DVD. As demand grows and manufacturing volumes build, Wills predicted, the market will see the costs of releasing on two different formats start to add up. Wills suggested that there might be surprises just around the corner, and that we could see a lot more clarity on these issues in 2008.

Consumer Confusion Persists

Despite all this action in the HD movie market, consumer confusion still persists. The importance of providing a coherent message through strong retailer support is essential, the report asserted, as many buyers still don't know what additional inputs are required in order to view HD content on an HD TV.

Still, consumer interest in new displays continues unabated. By the end of this year, 34 percent of U.S. homes will own an HD display, rising to 90 percent by 2011, according to Understanding & Solutions. In Europe, by contrast, the uptake is slower, with 20 percent ownership by the end of this year, rising to 66 percent by 2011.

Broadcasters continue to play their part in driving demand, with almost 100 HDchannels now available in the U.S. However, European operators in countries such asFrance and the UK still are playing catch-up, the report noted, hampered by a lack of HD content.

End to the Format Wars?

Richard Doherty, an analyst at the Envisioneering Group, said he doesn't expect heavy subsidies from Sony for Blu-ray because Sony is confident it will win the battle against Toshiba and the HD DVD format. In fact, he continued, the Blu-ray camp would probably define the heavy holiday HD DVD subsidies as a going-out-of-business sale.

"Toshiba has so much riding on HD DVD," he said. "Microsoft has a lot riding on HD DVD through the Xbox. And the studios have taken different positions on the format, some influenced by cash, others by determination and will."

He concluded by saying that he doesn't think anybody anticipates a 15-year battle between Blu-ray and HD DVD. "Formats do die," he said, "leaving people with partial collections and upset credit card balances."