High-Def DVDs: Is it time to get Blu-ray?

Ever since the high-def DVD format war began, we've advised would-be buyers to wait until a clear winner emerged. Now that Toshiba has pulled the plug on HD DVD, those of us who've been patiently waiting on the sidelines wonder whether it's now time to buy a Blu-ray player. Unfortunately, we still think the answer is no.

The biggest reason is cost. The cheapest Blu-ray players now sell for about $300, and most go for $350 to $500. By contrast, prices for HD DVD players sometimes slipped below $100. That means the cost for entering the high-def DVD world just tripled for consumers. Conventional wisdom suggests that with HD DVD out of the picture, Blu-ray manufacturers have less incentive to cut prices. That may not be true. Here's why we believe that Blu-ray prices could drop, maybe considerably, later this year.

For one thing, the day Toshiba pulled the plug on HD DVD, all the companies that had banded together to promote the Blu-ray format resumed their usual roles as fierce competitors vying for market share in a burgeoning business. Their message is no longer "Buy Blu-ray," but "Buy Panasonic," "Buy Samsung" and "Buy Sony." That type of competition fuels price cuts.

In addition, we expect to see the first wave of made-in-Taiwan models from new, lower-priced brands hit retail shelves in the U.S. this fall. To compete with established brands, these secondary and tertiary labels will have to price their models lower. That in turn could exert pricing pressure on major-brand models, particularly those targeting mass-market and discount retail channels.

Blu-ray sellers also have to contend with the satisfaction that many consumers have with the performance of upconverting standard-def players, which artificially bump up the resolution of standard DVDs to approximate high-def resolutions. Many consumers are satisfied with this level of performance, and if there continues to be a sizable price difference between standard and high-def players, they may simply decide that pseudo-HD is good enough and not pay a premium for better.

Another issue is the growing viability of online delivery of HD movies—from Amazon.com, Apple iTunes, Netflix and Vudu—and the widening assortment of HD content, including movies, being offered by cable, satellite and phone company TV service providers. If these nascent on-demand services gain acceptance, there could be only a narrow window of opportunity for a new disc-based business to become established.

If Blu-ray backers are serious about building a business, player prices will quickly have to get down to mass-market levels. The fact that mass retailers, particularly Wal-mart and Best Buy, are now actively engaged in the high-def business creates an additional incentive for manufacturers to develop products at prices these types of retailers—and their customers—are comfortable with.

Finally don't rule out the influence of the major Hollywood studios, which have seen sales of standard DVDs slowing while HD acceptance languished. Studios are anxious to see a strong consumer base for a next-generation player quickly established so sales of HD movies can ramp up quickly to compensate for the declining DVD business. That could spur the studios to offer a variety of incentives, ranging from promotional activity around software (free or discounted titles, pack-ins, etc.) to outright player subsidization (a much less likely scenario) to help defray the cost of buying a Blu-ray player. We also expect to see the price of high-def DVDs—now typically $5 to $10 more than their standard DVD counterparts—fall to comparable levels.

Price isn't the only reason to consider waiting a bit longer before buying a Blu-ray player. There's also the fact that Blu-ray technology is still evolving. For more about this, check out our post about why some early adopters are finding that their players may lack some compelling features.

—James K. Willcox