HD hardware to sit idle until the end of the decade – analyst

High definition simply isn’t worth investing in until at least 2010 for most Europeans, according to analysts, citing a paucity of content, both broadcast and pre-recorded.

HD hardware to sit idle until the end of the decade - analyst

According to new research by British-based market consultancy Understanding and Solutions, there will be more than 115 million HD-ready TVs in European households by 2010, but just 15 percent of those homes will be receiving high-definition broadcasts in that period.

‘There is a great surge in consumer interest for flat panel and large screen HD-TVs,’ said Graeme Packman, analyst at Understanding and Solutions. ‘But the fact they are HD-ready is not the main reason people are buying them. They are more interested in the smart and elegant design, the fact that they fit better into a room, or on the wall. The fact it’s HD-ready is more of a nice-to-have notion, it kind of makes it future proof’.

The fact aesthetics is driving the market is odd in the world of consumer electronics. Typically, it is the early-adopter gadget-savvy types who make up the early demand for pricey gear.

But as more consumers buy HD-ready TVs, demand will increase for HD-ready broadcasts, ground that only select broadcasters are currently supplying, primarily with sports programming as BSkyB offers in the U.K. with English Premier League matches.

According to Packman, few broadcasters will be prepared to supply a meaningful array of high-def programming until well after 2010, most likely not until countries officially make the switch-over from analogue to digital, thus freeing up much-needed transmission bandwidth.

The early demand for high-def content will be primarily met, therefore, by Blu-Ray and HD DVD players. Understanding and Solution predicts the number of Blu-Ray and HD DVD discs sold this year will number a half-million, comprising just 0.1 percent of Western Europe’s home video market. That figure will jump to 215 million units by 2010, capturing nearly one-quarter of the home video market.

‘There is a lot of debate about the market potential for these hi-def players. We think there is a clear opportunity for these products because they will help fill that content gap,’ Packman said.

In other words, consumers will buy hi-def discs primarily because they will grow tired of watching inferior-quality broadcasts on their new flat screen TVs.

Packman predicts that while HD DVD will have the early lead, the market will ultimately be won by Blu-Ray, thanks primarily to the allure of the Blu-Ray-ready PlayStation 3.

‘By 2010, we see that Blu-Ray will dominate the market. PS3 is a dominant reason for this, plus the number of Hollywood studios that are supporting this format, and, importantly, high-def drives will be built into PCs. The PC manufacturers will force the market to accept a single format, as they did about 10 years ago with the DVD’.

In addition to consumer reluctance to enter yet another format war, price remains an early obstacle to the HD player market. Prices are expected to fall dramatically in the four years from as high as 1,600 euros today to a low of 200 euros (for the PS3) in 2010. Similarly, the price for HD-ready TVs will fall from 1,190 euros today to 445 euros in 2010.

The only area where there is expected to be little downward pricing pressure is for universal players that can read both HD DVD and Blu-Ray discs. The dual royalties required for such a machine will price the device out of the mainstream market, Packman said.

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