Is DVD movie pricing holding Blu-ray back?

Blu-ray U.S. disc sales have tripled in the past year, according to The Digital Entertainment Group, but there's a slight problem--Blu-ray sales are still lower than where film studios would like them to be, and there's no indication that Blu-ray sales will top DVD sales anytime soon.

The studios blame Blu-ray's performance on the economy, and claim that if we were enjoying better economic times, the format's sales would be higher.

But there's one person, Bill Mechanic, a film producer and former Fox Filmed Entertainment chief, who believes there's more to this story.

"I think it's one part recession, but there are bigger factors," Mechanic told The Wrap in an interview. "That's a misreading of consumer behavior as well as a misreading of the economic environment. It's devalued the libraries."

"If you can buy 'Titanic' for $4.99," Mechanic continued, "[consumers will say] 'Well, wait a minute...'" when they consider buying another film on Blu-ray at a substantially higher price.

"There's no rhyme or reason of what I see in the market place in terms of pricing," Mechanic said.

He has a point. Even on Amazon.com, where Blu-ray movies are usually priced at their cheapest level, there's a major difference between DVD pricing and Blu-ray pricing. In fact, an older film like "Independence Day" is currently being offered on DVD for $14.99 and on Blu-ray for $25.99. A DVD of a new film, "The Dark Knight," is retailing for $14.99 on the site, while its Blu-ray counterpart is going for $23.99.

It sure looks like DVD pricing is holding Blu-ray back.

There's no debating that Blu-ray is a superior format to DVD. But as Mechanic told The Wrap, studios are expecting consumers to replace their DVD collections with Blu-ray, so they're dropping the prices on DVDs to get every last dime out of the format. All the while, they're doing their best to keep Blu-ray prices higher to capitalize on what they expect will be high consumer demand for the high-def format.

Maybe the plan is starting to backfire. Last week, Viacom released its quarterly earnings and reported that its home entertainment sales dropped 6 percent in the last quarter. Fox Filmed Entertainment DVD sales fell 15 percent last quarter, while Time Warner's Warner Bros. division reported a 24 percent decline in DVD sales over the same period.

Those aren't reassuring figures. They also underscore another issue: Blu-ray may not be the savior the film studios are looking for. So far, the market has grown and each week, more Blu-ray films are hitting store shelves. But at some point, the DVD pricing conundrum will need to be addressed. After all, why should I buy the same film on Blu-ray for $24.99 when I can get it on DVD for $14.99? Sure, it's only $10 and I'm getting a superior format, but is the difference so great that it would make me want to switch?

Based on my testing with an upconverting DVD player and PlayStation 3 on my 50-inch Panasonic plasma, I'm hard-pressed to pick Blu-ray at such a drastic price difference. Sure, I get better quality, but is it worth $10 to me? Maybe once. But that difference starts piling up quickly and an entire library of Blu-ray films would cost me hundreds more than if I bought them on DVD. That's an issue.

Even rentals are more expensive
But it doesn't just end with sales. Rentals are also more expensive. In fact, Redbox, the rental company that puts kiosks in stores around the country and allows customers to rent a film for $1 per day, announced last week that its current Blu-ray pricing model of $1 per day isn't working and it would be forced to raise the price of Blu-ray rentals. The company's executives wouldn't say how much more the company would charge for Blu-ray.

Worse, Netflix, which adds a $1 monthly charge to its subscription plans for those who want to add Blu-ray rentals, announced in its earnings call last month that its online streaming service is outpacing Blu-ray rentals. According to Reed Hastings, the company's CEO, Blu-ray subscriptions grew 40 percent since September to about 700,000, but in the same period, "millions" of subscribers have started using the company's streaming offering.

Is that a response to convenience or to price? One thing is certain: there is a pricing issue in the space. How much longer can Blu-ray be priced more than $10 higher than DVD before movie studios wake up and realize that the closer Blu-ray is priced to DVDs, the more value consumers will see in the format?

Maybe they've already woken up to that reality. Just last week, a report from Josh Dreuth at Blu-ray.com, explained that movie studios have quietly started dropping the prices of Blu-ray discs and some films can be purchased at a price that's within $5 of their DVD counterparts.

In fact, Blu-ray versions of "The 40-Year-Old Virgin" and "Iron Man" are currently on sale at Amazon for $14.99 and $18.99, respectively. The DVD version of "The 40-Year-Old Virgin" is priced at $9.99, while "Iron Man" on DVD is on sale for $17.99.

Unfortunately, those two films are more the exception than the norm. Based on my research, there are a select few films that are priced so closely to their DVD counterparts, but I should note that each day, more Blu-ray films are being reduced in price. In fact, Tuesday, I received a list of 55 Blu-ray films from Amazon that it just lowered prices on. Some are priced as low as $14.99.

About time
To me, it's all about value. Am I getting more value out of a respective Blu-ray film that I'm paying more for than its DVD alternative? At a $10 difference, the film better be a blockbuster hit with outstanding visuals. If it doesn't have both, I'll choose the DVD. But if the price difference is nominal and rentals are priced just $1 apart, I'll pick Blu-ray every time.

Maybe my rationalization is all wrong, but I do put a price on value and so far, Blu-ray pricing is outrageous. The film studios would be right to drop prices quickly and bring them down to a level that's more consistent with DVDs. I realize Blu-ray is a superior format, but let's face it--it's not so superior that we can justify spending $10 more per film just to have it. Especially with HD streaming looming.

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