Blu-ray's Victory Could be Short-Lived, Analysts Warn

Blu-ray Disc may have beaten out HD DVD as the high-definition optical disc format to replace DVDs, but it now faces a new test against Internet downloads, market researchers Gartner and iSuppli said.

The two high-definition disc formats had battled for the past few years until Toshiba last week handed victory to Blu-ray Disc by announcing an end to its support of HD DVD. The company's decision came after a major Hollywood film studio and several retailers, including Wal-Mart, said they would back Blu-ray Disc exclusively.

But the victory for Blu-ray Disc may be short-lived if consumers choose to download high definition content from the Internet, market researchers say.

"After years of a standards war, the major question for Sony Corp. and the Blu-ray camp is whether a physical format for high-definition still has any relevance to consumers in this era of Internet-delivered movies and video on demand," said David Carnevale, vice president of multimedia content and services at iSuppli, in a report.

Online movie download services from iTunes, Amazon and others have gained traction in recent years and increased their movie, TV and other video content offerings. The Internet gives consumers a choice of building a library of HD movies bought over the Internet instead of buying a Blu-ray Disc player and building a new library of movies-on-disc, said Carnevale.

"Physical media distribution could become a thing of the past," he said.

Blu-ray Disc could be further harmed unless prices come down quickly and more manufacturers start making players, according to Gartner. The market researcher said that most manufacturers will probably hold off on announcing new Blu-ray Disc equipment until the first quarter of 2009. In addition, consumers may also put off buying Blu-ray Disc players because DVD players that up-convert existing DVDs is already seen by some as a good alternative to making a big investment in high-definition discs.

"Most manufacturers are still trying to persuade consumers that high-definition optical discs are worth investing in, as many consumers and industry pundits see video-on-demand services and Internet downloads as viable alternatives," said Paul O'Donovan and Hiroyuki Shimizu in a report.