Blu-ray Disc has emerged as the winner in the long struggle to succeed the standard DVD format and, as a result, the coming fourth quarter presents new sales opportunities for supermarkets.
Retailers might be able to end the year on a promising note by satisfying the desires of those consumers eager to enjoy the latest and most sophisticated presentation of movies, SN found in interviews with supermarket executives, video analysts and suppliers. At the same time, it's a chance to test and evaluate Blu-ray prospects in the hottest-selling season for video.
Not surprisingly, some retailers are more optimistic and aggressive than others, based on their commitment to the new format.
“We are already seeing an uptick in our rental business since the format war was decided,” said Chris Smith, director of video/general merchandise for K-VA-T Food Stores, Abingdon, Va. “Our customers are very appreciative that we are now carrying the product and giving them the option for rental.”
K-VA-T, operator of 65 video departments in its Food City supermarkets, began offering sell-through Blu-ray titles one year ago and moved into rentals in January.
As for fourth-quarter plans, Food City will stay on its current steady path. Smith may bring in some sell-through catalog titles on Blu-ray Disc. He said several studios will be pushing catalog in the fourth quarter as part of a campaign to encourage consumers to rebuild their older favorite collections in the new format.
“We are going to reassess it after the fourth quarter going into 2009 for what changes we need to make, or for increases in copy depth on the rental side in Blu-ray,” Smith said. “We want to see what has happened in our area and in the industry as far as the hardware being sold by other retailers.”
Smith and other executives predict an increase in Blu-ray business once the price of players comes down. Some are looking for that to happen in the fourth quarter.
“We do believe that the current price of Blu-ray players has an impact on Blu-ray movie sales,” said Chuck Porter, director of video and entertainment for Giant Eagle, Pittsburgh. “As exposure to Blu-ray increases and price becomes less of a barrier for consumers, we anticipate that popularity of the players and titles will also increase.”
Basic Blu-ray players now cost around $300. Russ Crupnick, vice president and senior industry analyst at the NPD Group, Port Washington, N.Y., sees a significant drop in price occurring over the next 12 to 18 months. “Only the big name companies manufacture them now,” he said. “Once some of the players from China enter the market, that's when they will become more affordable.”
Mark Fisher, vice president of membership and strategic initiatives for the Entertainment Merchants Association, Encino, Calif., thinks the price of players will drop by about $50 right after Thanksgiving. “And that will be the tipping point — around $250 — where grocers will be more willing to stock players. There were 38 million high-definition TV sets sold in the last two years and Blu-ray is the only way to maximize what high definition has to offer.”
While Crupnick doesn't think supermarkets with larger general merchandise sections will be ready to stock Blu-ray players any time soon, he pointed out that Blu-ray Discs can be played on PlayStation 3 consoles. There are about 6 million of these gaming units in the U.S.
Considering Blu-ray offers more robust sound and a more vivid picture, certain genres of film are more suitable for the format than others, according to executives.
“Both action and science fiction titles have the best opportunity to succeed in the Blu-ray format, as customers believe that these movies match up well with the advantages of Blu-ray technology,” said Porter of Giant Eagle.
Action or sci-fi titles on Blu-ray also do the best at Food City, according to Smith, who reported limited success with some early animated titles from Disney. “Comedy and drama would come in last, unless it's a drama that has a lot of action,” he said.
Crupnick said any genre where there are intense visuals or audio — sights and sounds that are out of the norm compared to most kinds of movies — would be most successful on Blu-ray.
“People often forget about music,” added Fisher, formerly a video executive with Stop & Shop Supermarket Co., Quincy, Mass. “Where sound is of prime importance, such as in a concert, Blu-ray would be ideal. Music titles such as this would be good for supermarkets because they would have mass-market appeal.”
A good example is Martin Scorsese's “Shine a Light” concert film featuring the Rolling Stones (from Paramount Home Entertainment, Hollywood, Calif.). Executives point out other recent titles that benefit from hi-def visual and audio, such as the “Pirates of the Caribbean” and “Narnia” movie series from Walt Disney Home Entertainment, Burbank, Calif., and “Vantage Point” from Sony Pictures Home Entertainment, Culver City, Calif.
Giant Eagle does not offer Blu-ray titles for rent, but has entered the arena with a sell-through program. Shoppers can find Blu-ray titles in two areas of video departments. “The first is in the dedicated Blu-ray section,” said Porter. “The second is where we feature new releases, as the Blu-ray versions of the new releases are placed alongside the standard DVD version. Our current focus remains on DVD sales. As the popularity of Blu-ray increases, so will our marketing and merchandising of the offering.”
That's likely the strategy for most supermarkets offering sell-through, whether they operate video departments or not. For the time being, for instance, Price Chopper has no plans to bring in Blu-ray titles, according to Mona Golub, spokeswoman for the chain.
After Blu-ray succeeds for new release rental and sell-through, the next phase is likely to be stocking of catalog classics, perhaps boxed sets like the “Terminator” trilogy. Warner Home Video, Burbank, Calif., is releasing “The Matrix Trilogy” on Blu-ray Disc on Oct. 14. It previously released the trilogy in the now-defunct HD-DVD format in May 2007, but it is no longer available.
Smith said Food City has not stocked many Blu-ray catalog titles, but “it is something we're looking at possibly doing for the fourth quarter.”
The focus for K-VA-T remains on new releases. In fact, on its website, the retailer operates a micro-site dedicated largely to new titles (www.foodcity.myvideostore.com). There is even a hot link to learn more about Blu-ray Disc players and technology at blu-raydisc.com.
“Blu-ray is certainly an exciting new format that will be a heavy growth area for supermarkets in the coming years,” said Bill Bryant, vice president, sales, Ingram Entertainment, LaVergne, Tenn. “However, the standard DVD format will remain the dominant entertainment format in supermarkets for the foreseeable future. For this reason, the best strategy is to test Blu-ray merchandising while keeping the main focus on the standard DVD format.”
At retail, the DVD market was worth a total of $24.1 billion for sell-through and rental in 2007, according to numbers from Adams Media Research, Carmel, Calif., presented in the Annual Report of the Entertainment Merchants Association. Adams predicted that high-definition software like Blu-ray will grow to almost $10 billion by 2012, mostly adding to the total home entertainment market.
Studios are projecting between $750 million and $1 billion in Blu-ray sales this year.
“The next decade will be huge for Blu-ray,” Crupnick said.
“I see Blu-ray as a real business that will be prominent in the years to come,” Fisher added.
