Blu-ray to Outsell DVD in 2012?

There are two ways to look at a report filed by the Entertainment Merchant Association: 1) Somebody is really excited and optimistic about Blu-ray, or 2) The fact that everyone already owns a DVD player means that it will still take 4 more years before consumers are buying into new technology at a rate that exceeds the replacement rate for set-top DVD players - presumably including existing and new game consoles which sport the embedded technology.

Either way you look at it, 2012 is not exactly a number that breathes life into the trudging road Blu-ray is undergoing to achieve market saturation. The report states that nearly 9 million high-definition discs were sold in 2007, adding up to just over $260 million in revenues. Of course, while this number seems big, it must be compared to 2007 sales numbers of traditional DVD players: $16 billion. That's a 1.6 percent marketshare, meaning people are currently 98.4 times more likely to buy a DVD over a Blu-ray disc.

Still, one would think DVDs can't last forever. While there were 12,177 DVDs released in 2007, down from a peak of 13,950 in 2005, this may have something to do with a stalling economy rather than any sort of indication that the DVD is beginning to lose its luster. In the 2012 number, sales of Blu-ray discs are predicted to exceed those of standard DVDs, generating sales of $9.5 billion.

Fundamentally, I see a flaw in this logic. For one, I believe disc sales will continue to drop after 2008 due to the introduction of more online and downloadable content choices and an increased shift to rental markets. This will be especially true of the economy continues to stall. In 2007, traditional rental stores, dominated by the Blockbuster brand, accounted for 73% of the rental business. Online subscription rentals (such as Netflix and Blockbuster's Total Access) were 25% of the market. Look for that  ratio to change, increasingly into online rental's favor.

We can't predict the future, but we do see some contradictory information that seems to count some of these latest predictions as being somewhat optimistic. In what may sound as a surprise to some of you we do agree in part with some recent predictions that tell of a swift shift of unit sales of Blu-ray systems exceeding set-top DVD players. The reason this is actually believable is because there are hard numbers showing the, in Japan, Blu-ray Recorders are the dominant DVR format and are gaining a solid foothold with consumers. Domestically, Blu-ray - a new format - is competing against the U.S. DVD market which has all but achieved full saturation. That essentially pits an exciting new technology against those who are simply replacing existing DVD players. With those odds it's not too difficult to imagine that, if the PS3 is lumped in with Blu-ray players, then the new format may outsell DVD set-tops within a short amount of time.