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Blu-ray: Hollywood Retail’s Last Hope

Blu-ray's only hope might be its high quality – and a pairing with digital media


The age of the disc is ending. Time was, circular media represented the core of how information and entertainment were preserved. We listened as our music revolved on records, CDs and even cassettes with two spools centered in the plastic. We watched movies on DVD. We stored our documents on a computer’s hard disk drive, itself a circular plate that magnetically stored information.

The disc has been replaced; by MP3s and streaming music sold by Apple (NASDAQ:AAPL) and Pandora (NYSE:P); by streaming video from Netflix (NASDAQ:NFLX); by flash memory storage made by Fusion-io (NYSE:FIO). The last standing disc is the Blu-ray. Its life expectancy is a question that concerns more than a few companies.

The successor to the DVD celebrated its fifth birthday as a consumer product in June, and it remains the cutting-edge format for high-definition home video. The format was designed by Sony (NYSE:SNE) and Panasonic (NYSE:PC), among others, and the format is licensed by the Blu-ray Disc Associataion, a consortium led by entertainment device companies like those, as well as film studios like News Corp.‘s (NYSE:NWS) 20th Century Fox, Disney (NYSE:DIS) and Time Warner‘s (NYSE:TWX) Warner Bros.

These are just a handful of the publicly traded companies who see Blu-ray as the last great hope for entertainment retail. Executives don’t have any illusions that the high-definition disc is enough to keep consumers walking into Best Buy (NYSE:BBY) and walking out with a new movie or TV show. The thinking at this point is that Blu-ray discs will act as a retail presence and added-value proposition for consumers plunking down money for a digital copy of entertainment.

Tech Radar spoke with 20th Century Fox’s Danny Kaye, executive VP of global research & technology strategy, and Vincent Marcais, senior VP of marketing, on Thursday to discuss the company’s future plans with Blu-ray. Fox is committed to the format, hoping it works exactly as described above – a single product that consumers will buy that offers access to its content through any delivery method, whether on a high-definition Blu-ray player or as a digital download.

This strategy is supported by the UltraViolet system, a new digital rights and cloud storage system backed by companies like Fox, Comcast (NASDAQ:CMCSA), and even threats to the physical disc format like Netflix. Blu-ray discs purchased at retail will even, potentially, let users access a streaming version of the movie after the purchase is authenticated through UltraViolet.

Will it work? Will Blu-ray keep disc-based entertainment alive for just a little bit longer? The signs don’t look good. The NPD Group released a report on the market Jun. 8 and found disc-based movie sales had decreased more than 9% between March 2010 and March 2011. Although Blu-ray disc sales totaled 15% of total disc sales, an increase from 9% in 2009, just 15% of consumers use a Blu-ray player at all. Unless there is a monumental drop in price for the retail product, unlimited access to digital versions simply won’t be enough to entice consumers to buy Blu-rays.

The age of the disc is over. The sooner movie studios like Fox and Disney, as well as hardware manufactures like Sony and Panasonic, adjust to the digital distribution age, the better chance they’ll have at surviving.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.

Article printed from InvestorPlace Media,

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