Research firm In-Stat has released a report that looks at the potential market for the two battling next-generation optical formats, Blu-ray and HD DVD.
The report starts off by analyzing a bill of materials for “blue laser players” and came up with a round figure of about US$400. This includes not only the hardware, but royalty licenses for the various codecs included in the players.
Bill Of Materials :
While the bill of materials does not present the full picture of what it costs a company to manufacture a product, it is a useful guideline for calculating the retail price. The first models of both Blu-ray and HD DVD players are being demonstrated now, with availability scheduled for the next couple of months. Blu-ray players are thought to cost more to manufacture than HD DVD ones, and this appears to be borne out by the current retail price of the cheapest HD DVD player (the Toshiba HD-A1 at US$499) compared to the least expensive Blu-ray device (Samsung’s BD-P1000 at US$999).
These high prices, combined with the slow adoption of HDTV sets, confusion over HDCP “standards,” and the VHS-versus-Beta battle over the two competing optical disc formats, are likely to make the market for both Blu-ray and HD DVD drives quite small for the next few years. The report puts things bluntly:
“The future of this market though is all about high definition DVD players based on ‘blue laser’ technology; however, the future may be farther off than we would like. These players will enter the market at premium prices, and as there has been no compromise between the HD DVD camp and the companies that sponsor Blu-ray technology, a format battle seems inevitable. There will be some casualties, companies and consumers alike,” said Chris Kissel, In-Stat analyst.
Analysis :
DVD player and recorder units will have a combined market of 176.6 million units sold worldwide in 2010, up from 140.8 million units in 2005. The forecast for 2006 predicts that Europe will be the strongest region for DVD players and recorders with a combined total of 38.4 million units sold.
The significant growth of the traditional DVD market is predicted as a result of very high manufacturing costs of blue-laser players: with the servo chipset, optical pick-up, H.264 decoder and royalties making up the majority of the cost, the initial estimates for the bill of materials for blue-laser disc players is over $400, according to In-Stat. Most of the costs are forecasted to decline considerably by 2010, except for royalties. The promise of the guaranteed premium royalty bounty is obviously at the heart the high definition DVD format wars.
Even though the high definition video discs are just around the corner, due to the high manufacturing costs of Blu-ray and HD DVD players and broad availability of conventional DVD devices and content, the market of traditional DVD will continue growing, according to research firm.
“The DVD player market benefits from versatility in form factors. DVD players can be seen in portable renditions, or integrated with VCRs, or in the back panel seats of SUVs. While DVD recorders have come down in price, there is still delineation in the pricing of DVD players and DVD recorders- each represents a different value proposition,†said Mr. Kassel.
Traditional single-layer DVDs allow consumers to watch movies in 720x480 (NTSC) or 720x576 (PAL) resolution with Dolby Digital audio. The blue-laser discs will provide consumers 1920x1080 resolution as well as Dolby Digital Plus audio along with some additional interactive features.
Future :
The high cost of next-gen optical players raises concerns not just for the early adopters, but for Sony’s PlayStation 3, which will incorporate a Blu-ray player. Sony has been curiously mum on revealing any pricing details for its PS3 hardware, which was recently delayed until Fall 2006.
A comment by a Sony Europe representative on French radio that seemed to indicate a launch price of 499 to 599 Euros (approximately US$610 to US$730) has been dismissed as a mistranslation by the company, but if Sony wants to compete with Microsoft’s Xbox 360 on price, it will have to take a serious loss on each unit, at least until component costs fall to more reasonable levels. Will the ability to play Blu-ray discs and store up to 50 GB of data on each game disc be worth it? That remains to be seen.