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PC Habits Fuel Blu-ray Woes

There's a report from iSuppli noting that a minority of PCs ship with Blu-ray drives. And that may go a long way to explain a Catch 22 that is keeping the newer DVD format from really taking off, even though it beat out the competing HD DVD format to become the high def video storage medium of choice.

Compared to the adoption of regular DVD media, Blu-ray is running far behind.

Remember that the video and computer industries were forced into a single DVD format. Even at that, with the DVD video format appearing in the mid-1990s, it took six or seven years for U.S. market penetration to hit 40 percent. Given that consumer Blu-ray devices appeared in 2003, it looks like it could take a long spell of low prices for people to warm to the format. Getting Blu-ray movie title prices down to DVD levels across the board probably wouldn't hurt.
What iSuppli has done is look at Blu-ray adoption on PCs. This is critical because high PC use alone could help increase economies of scale and help broadly drop prices to a point that vendors could say to consumers, "You can buy it for about the same price as a regular DVD, only get a lot more from it -- all while still being able to play normal DVDs, so you lose nothing." That's the way to drive adoption.

On the PC front, the pick-up has been very slow. Here's the graph from iSuppli:

This year, only 3.6 percent of PCs have BDs; by 2013, the research firm expects that the number will increase to 16.3 percent. There are two reasons for the slow pick-up. One is that BD drives are more expensive than regular DVD drives, and PC vendors work with slim margins, meaning even a few dollars (or, sometimes, a dime) can make a big difference to them. The other reason offered by iSuppli is "the lack of a library of movies that justifies the need for consumers to move to a different drive in their PCs."

But I think there's one additional reason. PCs began to take up CD drives in a big way when it was clear that you'd have to start backing up a truckload of floppies to install applications that were ballooning in size. Eventually CDs gave way to DVDs because some of the bigger packages -- in popularity, as well as in bulk -- needed more storage than a single CD could provide. Given that DVDs don't cost any more in production volume, it made sense to push for software delivery on a single disk. In each case, the millions of computers that incorporated drives greatly boosted market acceptance and improved the economics of the vendors.

But we seem to have hit a temporary halt in the growth pattern of software. The switch to DVD provided a geometric expansion of storage size, but programs seem to be expanding linearly, if not hitting a temporary lull. Plus, if the software is bigger, you can also put part on a CD or DVD and then have someone download the remaining parts from the web. As a result, consumers aren't demanding BD drives because they don't need them to install the software they want.

It may be that if the drive companies really want to see an expansion of this market, they'll have to start subsidizing them, ala Sony's push of the Playstation 3.

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