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Top 12 Film Industry Stories of 2008:
#2: HD-DVD Loses, Why Hasn't Blu Ray Won?

By David Mumpower

January 15, 2009

Half a billion dollars *is* serious.

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The fallout from this turn of events has been as unexpected as all of the twists and turns of the format war itself. For the next six months after HD-DVD's abandonment, Blu Ray saw almost no bump in sales. Industry statistics tracking next-generation sales relative to DVD sales indicated that the dial was stuck for Blu Ray at 6% to 7%. For a period of 18 consecutive weeks, there was no fluctuation beyond those levels for Blu Ray. Oddly, even though HD-DVD had clearly lost, Blu Ray had not won as of yet.

The release of Iron Man, the second most popular release of 2008, aided Blu Ray sales immediately. As was discussed in a previous Film Industry Story, Iron Man became the fledgling technology's best selling software within two days of its release. A few weeks later, The Dark Knight further aided the forward momentum of Blu Ray. The biggest selling title of 2008 as well as the second most popular movie of all time (not adjusting for inflation) had the type of splashy graphics and sound that would justify a next-generation high definition system, giving consumers an excuse to splurge, even in a shaky national economic situation. Over 20% of The Dark Knight's first week disc sales were on Blu Ray, and it has already seen purchases of almost two million after only a month of availability. Putting this in perspective, Blu Ray sales relative to DVD have roughly doubled in the past quarter, bumping up to the 12-16% range on a weekly basis. The body of those sales comes from two titles, Iron Man and The Dark Knight. Their combined sales approximately match the entirety of Blu Ray sales for the first half of 2008.




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The above raises as many questions as were answered by Warner Bros.' switch to Blu Ray. Why wasn't a monopolistic format doing any better over the course of the year? Are the spectacular successes of Iron Man and The Dark Knight an indication that consumers are ready to flock to the new technology in 2009? Alternately, does this prove that only certain rare titles, in this case the two biggest releases of the year, justify the price mark-up that exists for Blu Ray as opposed to DVD?

When DVD first arrived, one of its primary advantages over videocassettes was that it was cheaper to manufacture, which is why the format exploded. Previously, there had been a waiting period for new movie releases on home video. First, there was a "priced to rent" phase and then there was a "priced to own" phase. The time frame in which DVD cost more due to the novelty of its technology was short lived. Discs wound up in the under-$20 range in a very short period of time. Blu Ray, on the other hand, is designed with an explicit understanding from the movie studios that there will be a steeper cost for the "luxury version" of a disc. Consumers are expected to swallow the expense of the creation of the research and development of this hardware through that luxury tax on manufacturer suggested retail price. Given the current economic climate, there is cause for concern about how willing people are to do so. Will they pay $10 more for the same product simply because there is a perception that Blu Ray is better than DVD?


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