Where are all the Blu-ray discs?

Call it a casualty of winning the war too soon. Now that Sony's Blu-ray technology has emerged the victor in the blinked-and-you-missed-it high-definition format war, the real struggle is just beginning. It looks as if there is no chance there will be enough Blu-ray discs to meet global demand this year, say analysts at Screen Digest.

Now that chief rival HD-DVD (backed by Toshiba and Microsoft) has been consigned to the scrap heap, global demand for Blu-ray discs is expected to jump three-fold in 2008 to a minimum of 43 million units, Screen Digest says. The problem is that production capacity can hardly match the surge. The top producer is Sony itself. Sony DADC's unit is investing in extended production line capacity to produce 38 million discs per month by October. This would meet just 60 to 70 per cent of global forecast demand, Screen Digest says.

Greater than expected demand is great for Sony's bottom line, but consumers will feel the pain. With production capacity being outstripped so far by demand, expect disc prices to remain at a premium.

Comments

[Chris]

I suspect that this was considered long ago...

If you win the market and you have a strangle hold on the market, the last thing you want to do is meet demand. Why produce ten items for for a small profit when you can produce 1 for a large profit!

[Cliff]

Because the overall profit on 10 is larger than one? It's called elasticity, it's taught in basic freshman economics.

[Nick]

That's actually not elasticity.

[Jim]

Actually, since it is essentially a monopolist, Sony maximizes its profits by producing less than what would be socially optimal and it charges a higher price. It produces where average cost equals marginal benefit rather than where marginal cost equals marginal benefit.

It may not be their wish to under-produce this much, but limited supply and higher prices are natural when a firm controls a large market share.

[Allen Fuller]

Also taught in basic economics is that when you have a monopoly or oligopoly, that point at which your maximum profit is made is not the optimum point for the consumer. Sony may not make the most money selling just 1, but the demand curve is such that while consumers might like to buy 10, Sony makes its highest profit making 5.

[pete]

There you go, throwing "logic" and understanding of basic workings of our economy into the mix. shame on you Cliff.

[Onome O]

By the guys, that in economics is called economics of scale. A large proportion of the cost here is fixed, so the difference in cost between producing 40/sec and 50/sec is insignificant.

[Dave]

The only thing I learned in freshmen economics is that economists only care about guns and butter.

[Bentley]

This is what happens when the wrong side wins a war. If HD DVD had been supported, prices across the board would have dropped. Sony has a truly lousy reputation for shafting the consumer and this just gives them the power to do or charge just about anything they want for the Blu-Ray disks. All consumers (worldwide) will suffer as a result. Personally, it'll be a cold day in h**l before I'll plunk down my cash for a Blu-Ray. Any company that would deliberately put a rootkit on your computer can't be trusted with anything.

[Neil]

What about the children? Did anyone stop to think about the children?

[Josh]

I almost wonder if HD is ever going take off at all. I'm right in the demographic that *should* be gung ho about Hi Def (mid-30's, no kids, into gadgets & technology, work in the high tech industry), and I know *two* people with HD televisions. I just get the feeling that SD TV is enough definition for 99% of the people out there, and the rest of us aren't going to adopt HD until it's the only choice out there.

[Doug]

HD DVD was a far better format than Blu AND it worked! Toshiba already had upgrading directly through the internet built into the machines for up to the minute downloads to help the machines work more efficintly. When Sony comes out with thei second gen Blu disc players they are not going to able to access the extras on the new discs from the old player. Sony "bought" their win in this fight for a lousy format that is not consumer friendly visually, out of pocket and quality. I am buying any Toshiba HD dvd players that I can find left JUST for their superior upgrading that I can not tell the difference between it and HD. Any one remember the BIG BLU RAY media stands blocking your way into a store where HD dvd was down in some corner? I wonder who paid for that with their blood money? I will NEVER buy a blu ray disc, it just feels way too dirty.

[conscriptor]

too bad Blu-ray technology will be obsolete in a couple of years. this market is fast going the way of audio - web-based data transmission.

[Kent]

I agree with Neil, we should be considering our children in this debate.

When we are all retired living in Yorkshire, Devonshire, or any of the other shires we Englishmen have to look forward to, what is really going to matter is how our children are taking care of the business world we rule over now.

Here! Here! Neil, let us all consider the children, lest we forget to consider ourselves.

[Chris]

Criticism of Sony aside, if you want a Blueray player buy a Playstation, which has a very good one. Sony subsidise them massively and make the money back through a license fee which puts a large premium on the games.

[Practical Joker]

Gotta say, I just got a PS3 and watched a recent BluRay movie on my 50" Panasonic plasma. I did not notice a substantial increase in sharpness versus a regular DVD that's been upscaled. I'll check out a few more, but I think for most people, there is not going to be a need to upgrade to Blu-ray (unlike the switch from VHS to DVD, which gave us random access and a smaller & lighter medium).

[Kent]

I for one wish practical jokers were not allowed to post.

They should be strung up by their toes in the Tower of London!

[In the Biz]

People buy HDTVs that are WAY too big for the room's they're in. This is why a lot of people complain that the picture isn't "any better" than a SDTV. You need to make sure the distance to size ratio is appropriate to the set your viewing. If you're too close, the image will not be optimal. Just because you CAN buy a 50" set, doesn't mean you should.

[Andy]

Great job people, we the consumer F'd ourselfs again. I still find it so hard to believe that the consumer couldn't see how HDDVD was a format that benifited the consumer, while BLURAY benifits the movie studios, sony, and the other fat cats. Maybe next time people will wake up and get informed.

[Joel Derr]

What about our childrens, childrens, children? Unless the end is closer than we think of course. Plain old DVD is looking quite good still on my 55" Mitsubishi DLP that is 6 years old now. The old pro-scan player is still spinning like new. No way am I jumping on this contrived "better" formula. Anyway, I got "Lawrence of Arabia" on Superbit disc and it's better than BLU and it's the only film I cared about being HD quality. Everything else is, well, everything else.

[James]

We all just got screwed by Sony.HD DVD was better.

[Albert]

There will be very little demand for hard goods five years from now. Storage capacity, as another article in today's Times indicates, will render bulky cd's and dvd's useless. Factor in on demand video from broadband and satellite providers and discmakers are doomed. Sony had better sell what they can now while a market for what will be piling up in waste dumps in 2013 still has any utility to the consumer.

[A Rosario]

If I'm Sony I rush production and 'Make hay while the Sun shines' Why? because 'racetrack' memory will make blu-ray as backward as floppy's are today...

[Mike]

HD and Blue Ray don't float my boat. I've seen both in action and could NOT see the benefit of upgrading from good old DVD format. My advice? Forget about upgrading to Blue Ray/HD. It'll soon be supplanted by other technologies.

[Graeme]

I don't think that will be the case. Sony should have learned their lesson with their Mini Disc technology. They need to market it well and make it available, my friends in South America never even heard of Mini Disc, they already know what Blu-Ray discs are. The fact that the cost of Mini Discs and their players were so high it killed that technology should have taught Sony a lesson too.

It is better for them not to meet demand if they are in a monopolistic position, as demand will drive up prices, creating better returns of scale. Once they have made large profits they can then defend their position against potential competition by reducing prices to create negative returns in order to see off the competition and prevent them from taking a hold in the market, by drawing in profits from other income (e.g. PS3) they can weather the storm and losses. Once the competition have gone bust or given up due to losses they return to their monopolistic market dominance and once again raise prices to create largest returns thanks to high demand and low supply. They should however find where profit is maximised, keeping the consumer relatively pleased (not looking for a rival technology) while not meeting enough demand in order to keep prices high. = Marketing and Strategy, freshman year.

Doesn't matter, Blu-Ray is much better than HD-DVD, holds much more information and allows for better quality movies and better menus (JAVA based). So Sun Microsoft must be rubbing their hands too!

Knowing the EU they will throw in their 2 Euros worth and fine Sony if it doesn't allow for competition or overcharges the consumer, just like they have done with the mobile phone companies. We can all relax.