Here’s the thing about the HD format war. . .

HD media (Blu-ray, HD DVD, HD VMD, etc.) probably won’t ever beat out DVD. Shocking, I know. It’s just not likely to happen due to the “requirements” of enjoying such HD films.

Now, before I start on to the “why”, let me say that I am not saying they will fail. HD media formats could very well succeed without taking over the entire market. It can reach critical mass, and it can become a huge money generator along-side of DVD. Now onto the “why”:

HDM has requirements to enjoy. These requirements are relayed throughout almost every retail chain across the market. In order to enjoy HDM you need an HDTV. Bam! HDM already has a cap on how many units it can sell.

Now, according to this study (LINK) as of November 20th, 2007, about 25% of U.S. homes have an HDTV in them. Given the usual research study groups it probably has a +/- 5% error range. So let’s say 20%-30% of U.S. Homes in the U.S. right now have HDTVs in them. This means that if HDM players were to sell like gangbusters right now, they could only take about 25% of the marketplace, leaving DVD with 75%.

So I know what you are already thinking. HDTVs are reaching mass adoption and eventually everybody will have an HDTV. Yes, you are correct. Eventually everybody will own an HDTV in the U.S., there is no doubt about it. As more and more CE companies stop selling/making SDTVs consumers will have no choice but to adopt HDTVs. However, despite this being true there are a couple of conditions that go along with it:

First, HDTVs will not be reaching complete penetration in the next 2 years (date when the BDA says Blu-ray will completely dominate the market, 3 years from last March) . Hell, I’d be surprised if HDTVs reached 40% penetration in 2 years. If you look at the timeline for HDTVs you can tell that the trend for buying HDTVs in not exponential like DVDs sales were. There won’t be a short period time where there is a mass adoption of HDTVs. It happened with DVDs because Chinese manufacturers came in and slashed prices on a format that had no competition, didn’t need an upgraded player to work, and offered features that were revolutionary (not evolutionary) to consumers. HDTVs are too expensive (even with Chinese manufacturers), and still too confusing with average consumers still believing that Plasmas are better than LCDs, which are better than DLPs. HDTVs will not grow exponentially, but rather gradually over the next 10 years. It has taken about 10 years to reach 25%, I think in another 10 years it might reach 90%-100%.

Second, the same people who have bought HDTVs in the last 10 years are not the same people who will be buying HDTVs for the next 10-15-20 years. A lot of these people will simply be getting HDTVs because they have to. They need a new TV, their old one broke, etc. These same people won’t be rushing out to spend an additional $100 on HDM equipment/movies (assuming that at this time HDM players and movies drop to DVD levels).

So now let’s throw back in the HDM equation. Currently, HDM (combined) is selling pretty well. There are charts that are showing that HDM (specifically Blu-ray) is beginning to show the same sales trends as DVD. Good news, right? If Blu-ray (or any other HDM format) is half as successful as DVD then it’ll be well worth all the effort. However, at the current moment it can’t be that successful. As soon as it hits the “wall” the sales trend will stop, and will then gradually gain momentum along with HDTVs, probably falling under the same percentage. For example, let’s say HDTVs reach 50% market penetration, you can probably expect HDM players to reach 40%-45% penetration.

Finally, you have to take into account that when HDM seriously starts to take hold of the market there will also be radical price slashing of DVDs and DVD players (yes they can drop even lower). As with all products that are going into retirement, you can be assured that studios and CE companies will want to hang onto any last profits with that format for as long as possible even if that means slashing prices. This, in of itself, could undo HDM from establishing a dominant hold over the home video market by itself. As an evolutionary product (not a revolutionary product) there will be that large percentage of people in the U.S. who honestly just won’t see the benefit in HDM and will wish to take advantage of the reduced DVD prices to expand their movie collections even farther.

This may seem like a doom & gloom post for HDM, but it’s not. Actually, given the conditions, I think that HDM is very lucky to be coming into the market now as opposed to later or earlier. If HDM had come out in the beginning of the decade there probably wouldn’t have been enough HDTVs to supplement it, and it would have died off like Laserdisc. In turn, had HDM launched later this year, or even over the next 2 years there is a chance that it might not have reached enough critical mass to combat digital downloads when they become feasible, which is going to happen eventually, don’t kid yourself if you think that it’s an impossibility. Bottom line, HDM will become probably become a success (in one form or another), but chances are the consumer isn’t just going to stand up one day and throw out their DVD collections. In the end, I hope you are comfortable with a 2 format system because given all that I just explained I can’t honestly see it happening any other way.

Thanks for reading.