Blockbuster Tilts Scales in Favor of Blu-ray

The movie rental giant will continue to offer consumers the option of getting HD DVD movies through the mail through its Web-based rental program and would stock them in "a select number of stores," it noted.

Still, the move provides a huge boost for Blu-ray, one that could tilt the scales toward the format in what has otherwise been a close race to become the dominant format for next-generation home movie viewing.

A Test Run

The decision came after a test run during which Blockbuster offered both formats side-by-side. That experiment found that consumers rented Blu-ray format discs more than 70 percent of the time. The 250 stores used in that test will continue to stock both movie formats, Blockbuster said.

"We intend to meet the demands of our customers, and based on the trends we're seeing, we're expanding our Blu-ray inventory to ensure our stores reflect the right level of products," said Matthew Smith, the chain's senior vice president of merchandising.

Nevertheless, Blockbuster indicated it wasn't calling the race in favor of Blu-ray.

"While it is still too early to say which high-definition format will become the industry standard, we will continue to closely monitor customer rental patterns both at our stores and online, so we can adjust our inventory mix accordingly," Smith added.

Still Early

Even after the expansion, Blockbuster will still be carrying just 170 titles in Blu-ray format, a fraction of the thousands of movies it offers for rent and purchase in stores and online.

Still, given Blockbuster's reach, the move could encourage studios to produce more films -- both contemporary releases and movies from their archives -- in the Blu-ray format.

Other studios that have embraced the Blu-ray technology include Sony Pictures, MGM, Fox, Buena Vista, Lionsgate, Warner Bros. and Paramount.

"When customers are ready we can expand the Blu-ray offering into more stores and add HD DVD to more locations if that's what customers tell us they want," Smith added. "We'll continue to work with the movie studios to ensure we have the right assortment of products."

In addition to Blu-ray disc players being produced by a number of electronics makers, the DVDs can be played on the Sony PlayStation 3 gaming console.

Piling On

Blu-ray has scored a number of victories, with device makers and movie studios largely lining up behind the format, noted Forrester Research analyst James McQuivey. Taken in context with those earlier wins, the Blockbuster decision takes on added meaning.

"Consumers will see more movies in Blu-ray format," which in turn will impact buying decisions on DVD players.

The adoption of next-generation DVD is expected to accelerate as high-definition television reaches critical mass in the U.S. and other major markets.

The North American HD DVD Promotional Group has argued that consumers are actually adopting HD DVD at a much faster rate based on device sales figures. Some 150,000 HD players have been sold in the U.S., with the format capturing 60 percent of the market for stand-alone players, the trade group recently said. Those figures do not include embedded players such as the Blu-ray player in the PS3.

Sales of HD DVD movies will exceed US$600 million this year, 40 times the revenue from last year, the group noted.

In Blockbuster's test, which began in November of 2006, Blu-ray may have benefited from the fact that some of the most popular titles were available in that format, the trade group noted.

Market Share Battle

Meanwhile, what may truly determine the future of the market is cost, and both sides have shown a willingness to steeply discount players in order to help capture more market share. Earlier this month, Sony cut the price of its top player by $100 in a bid to get its devices closer in price to HD DVD models from Toshiba and others.

While some studios have hedged their bets by releasing films in both formats and some device makers have promised machines that will play discs in either format, IDC analyst Elizabeth Curtis said Sony appears to be gaining momentum.

"Blu-ray has the necessary studio support and a more compelling product lineup," Curtis told the E-Commerce Times.

Because it has interests in the entertainment arena, including a movie studio, Sony can also make the decision to sell players at a loss if they believe it will pay off in the form of DVD sales in the future.