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Bye-bye, Blu-ray: Video-on-demand and streaming options are gaining on you

Up-and-coming hi-def online compression formats put even greater pressure on optical media

May 2, 2014 03:14 PM ET

Computerworld - The Blu-ray optical disc format, once a bastion of hope for reviving the home entertainment industry, is struggling to survive under the assault of video-on-demand and downloads.

In a new financial forecast, Sony has warned of heavy losses primarily due to its exit from the PC business and because "demand for physical media [is] contracting faster than anticipated."

In two weeks, Sony will announce its financial results. The company expects to post a net loss.

The Blu-ray Disc format

A report released earlier this year by Generator Research showed revenue from DVD and Blu-ray sales will likely decrease by 38% over the next four years.

By comparison, online movie revenue is expected to grow 260% from $3.5 billion this year to $12.7 billion in 2018, the report states.

"Movie producers have little to fear from online distribution in the long term," Generator Research said. "It is the distribution part of the movie business that should be worried, because online distribution will replace a sizable portion of their current industry."

Paul Gray, director of TV Electronics & Europe TV Research at market research firm DisplaySearch, said consumers are now accustomed to the instant availability of online media, and "the idea of buying a physical copy seems quaint if you're under 25."

"Furthermore, e-tail has hollowed out the retail structure so that it's largely [just the] latest titles in supermarkets. I suspect they are almost a gift format now," Gray said.

About to put even more pressure on physical disc formats, Gray said, is the High Efficiency Video Coding (HEVC) video compression standard, which doubles the amount of data that can currently be streamed while keeping the "high-definition" format. HEVC can support 8K Ultra-High Definition content with resolutions up to 8192x4320.

The Blu-ray Disc format simply never hit the market levels of the DVD format, which dominated the home entertainment landscape in 2004 with $21.9 billion in sales representing a whopping 96% of home entertainment spending.

Since that peak, optical disc sales have plummeted by about 30%, according to the Digital Entertainment Group. Surprisingly, DVDs still have respectable sales figures, driven mainly by kiosk-style rental machines such as Redbox.

"Many consumers see DVD as good enough," Gray said. "It is rather like a less extreme version of the CD story, where the format was so good that there was little room for improvement (at least in terms of an economically viable category)."

Gartner analyst Paul O'Donovan said that while on-demand content now dominates the entertainment market, there will also always be a desire by some to have optical disc media in the home to share with friends and family.

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