Can somebody explain to me the logic behind why attach-rates of movies to players matter (both short term and long term)?

I'm not sure why a studio would care about attach rates, since it would seem to me that if they are selling twice as many blu-ray movies (even though they have 10 times the players), that the studios wouldn't really care. So short-term, getting more movie sales is a good thing.

Seems that a studio would rather get 20% of 3 million than 80% of 100k.

Does anybody out there believe that if HD-DVD wins the format-war that studios will sell 4 times as many movies than if blu-ray were to win the format war?

Seems to me that regardless of which format wins, once a winner is found, that number of movies sold into either format will remain pretty much the same. So long term it seems pretty clear that regardless of which format wins, the total number of movies sold to the winning-format will be roughly the same.

Seems the only reason HD-DVD has such a high attach rate is because their installed base is made up of mostly movie-collectors/enthusiasts. Blu-ray on the other hand has a much broader audience due to their installed base being 10 times as big and 90% of the installed players being used as movie players as a secondary purpose.

I suppose the best comparison would be to compare stand-alone HD-DVD attach-rates to stand-alone blu-ray attach rates. Though that number is probably not possible to calculate, I would imagine that we would see similar attach-rates among those two demographics. Does anybody think this would not be the case?

So given that analysis, I just don't see how one can conclude that attach-rates are a meaningful statistic (especially when the numbers typically quoted are lumping in PS3 owners who don't even know they have a blu-ray player).

"Attach rates matter?"

...yes... they do.

Hypothetical numbers aside, the reality is that with far fewer "players" in homes, HD DVD is more than half of Bluray's sales.

Considering Bluray has something like 10 times the "players" in the market, this shows why the "attach rate" is so important.

In other words, HD DVD could sell another 300,000 players, and the BD camp would have to sell another 3 million PS3s to compensate.

They don't, and they do.

For the purposes of actual sales, they don't.

If you have (made-up figures) the following:

On one side, a million PS3 owners. 10 percent of them buy 300 on BD
On the other side, 200,000 standalone HD DVD owners. 50 percent of them buy 300 on HD DVD.

The end result is the same: 100,000 copies of 300 sold (yeah, list price is different, revenue yada yada... beside the point).

For sustainability, they do.

Yes, you have now 100,000 PS3 owners who also bought 300. But, will they continue to buy titles in the future? Or will they devote their budget to purchasing games? On the other hand, a standalone player owner can only buy HDM movies for his player (of course, he can also buy DVDs, or rent HDM movies, or do nothing).

Attach rates don't matter, at least in this scenario where the both products will have exactly the same demographic spread upon full adoption. IMO the only case in where attach rates would matter if sales of software were the same, or at least close.

Well the HD DVD people tend to think that if one buys a Blu-Ray player (to watch movies) be it the PS3 or whatever else he is going to buy less movies then if one would have bought a HD DVD player false logic at its best.

Its simple , if the numbers stay as they are bluray players will have to continue to keep a 10 to 1 advantage in players in order to continue selling at 2:1 software . This doesn't take into account the other demographs that the ps3 might fall into. We only know what the amount of ps3 owners using it for movies is at $500 and $600. Will that number shrink or grow as the price drops ? IF it shrinks then its an ever increasing amount of bluray players needed to beat hd dvd sales and at some point they simply wont be able to sell enough.

Now that studio support is almost split evenly (with new releases at least) it will be interesting to see if the 2:1 advantage lowers or not.

Yes, they matter because it shows the consumer interest in the software.

2 million Blu-Ray players (PS3 + Stand alone) with ~1 movie sold per player?
400,000 HD DVD players (stand alone + add-on) with ~4 movies sold per player?

Clearly those who own a HD DVD player how a higher interest in purchasing movies.

Attach rates don't matter, at least in this scenario where the both products will have exactly the same demographic spread upon full adoption. IMO the only case in where attach rates would matter if sales of software were the same, or at least close.

What attach rates are showing now is that many PS3 owners have purchased a movie or two. This was predicted by many, including Sony, as a "testing the waters" phase among PS3 owners. I think it has created an artificial view of the market.

Attach rates are an indication of the future.
Sales ratios are an reflection of the "here and now".

When you have a high amount of volume sales with a low attach rate, it's an indication that sales are going to decline or not gain any momentum when compared to something else with a higher attach rate.

If you trend it out, and the player adoption increases at the same rate for both, it's inevitable for HD-DVD to surpass BluRay disc in sales. 2:1 will become 1.9:1.. then 1.81... then 1.5:1.. until eventually.... 0.9:1.

That's why attach rates are important. They show if a product will CONTINUE to sell, even if it's currently selling like hotcakes now. This is why any new product goes through a sales burst and then falls down to a normal level.

Because companies can look at that and ask themselves "will the PS3 continue to sell 4 or 5 units for every HD DVD player sold?"

IMO the answer is an astounding no, because despite the number of PS3s in the field, the initial surge is over and PS3 sales will level off or decline over the lifetime of the system (with periodic jumps coinciding with price reductions/sales), while SA player sales should increase steadily (in theory).

For example purposes, assuming a steady 1:4 attach rate for the PS3, all Toshiba has to do is start selling 1 SA player for every 3.5 PS3s (if they aren't already), and that gap of software sales will close up. With HD DVD player sales surging, this will start happening soon. And then it will be selling 1 SA for every 3 PS3s, and then 1 SA for every 2.5 PS3s, and then 1 SA for every 2 PS3s...etc.

So companies should be looking 1, 2, 5, 10 years down the line, not just at what things are doing today. That's why (again, IMO), relying on the PS3 was a huge mistake.

Cost of the player could also directly factor into initial attach rate. After purchasing a $500 player, how much money do you have left to spend on movies? You have $300 less than if you'd purchased a $200 player quite obviously.

Long term it is likely indeed that a a clear winner would have similar sales after say 5-10 years. No one wants to have to wait for money though. Money is good. Fast money is better. Money that they get today could be placed toward more profitable projects than sitting on their hands waiting for the end of a format war. Interest doesn't accumulate on goods that don't sell.

The PS3 really makes a lot of these numbers games hard to play. The PS3 is a gaming console, and there are a good number of people who see it only as that. And the PS3 is also the best bang for your buck Blu-ray player, and some people see it only as that. And of course everyone inbetween.

So if you want to could how many blu-ray players have been sold vs HD-DVD players, well then you have to try to estimate how many people bought the PS3 to play blu-ray movies as opposed to the guy who has a 19" tube TV and just wanted it for games.

Likewise if you want to judge attach rate you can't just say 1 million ps3's sold but only 500,000 blu-ray movies sold = .5 movies/player. You'd have to figure out who bought the PS3 with the intention of playing blu-ray movies and then figure out how many titles they have purchased on average.

If the X-Box addon was for HD-DVD what the PS3 is for Blu-Ray you might be able to do some apples to apples comparisons, but as it is now IMHO alot of these numbers thrown around really don't mean Jack.

IMO . . . .

AttachRates are but one method of gauging the success of a format. There are others:

1. Sales
2. Revenue
3. Profit

IMO - #3 is the most important to a studio (or any other business for that matter) How much money does the sale of the product add to the bottom line?

This is one of the reasons for the use of the Combo. We know they are making much more profit on the sale of a Combo then they do on the sale of a BD or HD DVD only release. Same goes for the Twin though it has not been widely used.

Though we see the Nielsen numbers on a weekly basis - we never see the Rental Revenue that the studios get. The ratio of sales to rentals in DVD Land is 2 to 1. We can either use this for HDM or assume it is higher because of the high cost of the discs (they are still higher than DVD prices). And then again we can assume lower as the EA market has more income than the markets below it.

So are attach rates important? Yes. Are they the most important indicator? No. That goes to the sale of players - THE most important "number" because new blood is desperately needed for a new format(s) to get out of the niche status and move onto some kind of mass adoption.

We already know from LD that 3 million players does not make a successful adoption of a format. But it does make a successful niche status format.

Assumptions:

1. PS3 won't sell more than it is selling now (will always cost ~$500)
2. PS3 owners won't actively buy (collect) SW, ever
3. PS3 owners - who don't own an HDTV - won't acquire one, ever
4. That reg guys will ever buy SW at $30+ price tag :)

...

Attach rates are something that I typically see used to describe video game consoles. In that case, the economics are very clear and attach rate is very important. Console makers (except Nintendo) have typically always subsidized the hardware of their early production runs, and made up for these losses with profits on accessories and the licensing fees that software publishers pay them to write/certify games for their environment. In that case, attach rates matter in two ways:

1. Higher attach rates per console means you need to sell less consoles to move a certain volume of software, and that you have a potentially larger software market since the hardware market won't have to grow as much to support it. This mainly acts to draw more publishers into producing software since their potential sales are higher.

2. Higher attach rates per console means more of the loss to the manufacturer is offset and the console maker can then afford to lower the hardware price further and drive more sales.

In the HDM market, the link between attach rates and economics isn't quite as clear. Right now Toshiba and Sony are presumably subsidizing player sales the most (A2 and PS3, the former rumored the latter pretty much known) and also presumably have the most to gain in licensing fees/royalties for the discs being produced. This is much like the game console/subsidize-the-razor-sell-the-blades model that the video game world has used for the last 10 years at least.

What isn't clear is what benefits the partners derive from this. The Onkyos, LGs, Denons, and Samsungs of the world definitely seem to be out for a profit based on their pricing. Panasonic and Phillips, being core members of the BDA, may be sharing in the per-disc royalties and able to price lower? It's unclear what effect attach rates will have on CE companies that don't benefit from per-unit software incremental revenue. In their case I'd say brand awareness and overall market size is more likely to play a role, which is in BD's favor right now due to the PS3 getting the name out there.

So my overall theory is that attach rates matter the most to Sony and Toshiba, since they have the most to gain for maintaining the rate, and that they will matter more to software makers than to hardware in determining which side to back.

I've read a lot about this and one question I have is where do rentals fit in this discussion? Apparently I am the rare consumer who bought a PS3 for both games and movies equally. I have purchased around 7 BD movies so far this year (which is 6 more than SD-DVDs for all of last year). But I rent on average about 2.5 BD movies from Netflix a week. I realize the studios would rather I buy than rent, but I've never seen numbers on rentals. I also don't know the economic model for rentals and how much the studios make on each. I would guess that your average PS3 owner would be a more likely renter at this point. Now if we ever get to the point where the DVD (either HD format) is released same day and date as the theatrical release, I would gladly pay $20 - $40 for that disc and give up the whole sticky floor, $5 popcorn experience for all but the most epic of movie experiences.

If you have:

1) Group A--1,000,000 people, each bought Format 1 HDM player and is interested enough to buy 5 movies each person, and

2) Group B--2,000,000 people, 1,000,000 of which bought a standalone Format 2 HDM player and is interested enough to buy 5 movies per person, and the other 1,000,000 of which bought a games console which happens to play Format 2, so they bought 1 movie each out of curiosity,

then

Group A has a higher attach rate. ([1Mx5]/[1M] = 5:1)
Group B has more sales. ([1Mx5+1Mx1]/[2M] = 3:1)

The assumption, going by attach rates, is that if Format 1 wins the war, than the 5:1 indicates they will buy more movies, as opposed to Format 2 winning the war, and having a 3:1 attach rate.

But this is misleading, since Group A's 1 million people only bought their players to watch movies. Format 1 largely does not sell to anyone who isn't already interested in HDM movies, and therefore the few who DO buy a Format 1 player are the enthusiasts who will buy a lot per person. Group B's 2 million people has half their group buying a games console, and the other half being the enthusiasts which are comparable to Group A. Group B's attach rate is diluted by the non-enthusiasts who just wanted to play games, and bought little or no HDM movies.

Without more data on how many PS3 owners bought their consoles with what intentions, and how many movies they bought, etc, there is no way to tell which format would have a higher attach rate if HD DVD also came standard on a $600 xBox 360, or if the PS3 was $300 without a Blu-Ray player. Counting the PS3 isn't fair to Blu-Ray. Not counting the PS3 isn't fair to HD DVD.

Without a lot more data, we can't truly know if HD DVD would truly sell more if it won than what Blu-Ray would sell if it won. If HD DVD won, the entire process of dilution of the attach rate would happen as non-enthusiasts become part of the picture. With Blu-Ray, PS3 gamer non-enthusiasts are already diluting the attach rate, and if Blu-Ray won, then the remaining part of the dilution process (of the attach rate) would happen.

Not sure if my wording is confusing...

The main reason attach rates will become increasingly important over the next 6 to 12 months is the way the sales of players in each format will scale.

At the price point of Blu Ray players, it is increasingly unlikely they will continue to sell PS3 and standaone players in the millions. The market of people willing to spend $450 or more is close to saturated.

At the price point of HD DVD players, it is increasingly likely they will sell standalone players in the millions as the format increases in popularity and players drop in price. The market of people willing to spend $100 to $200 on an HD player is still largly untapped...

Basically, if you are an HD DVD fan, attach rate is important because it helps you sleep better at night since it numbs the pain of losing 2:1 in disk sales all year. Apparently losing 2:1 in disk sales all year long is not an important statistic for HD DVD fans....

Isn't it funny how Toshiba wants to count all of the PS3's out there to determine that they have the superior attach rate but then only count standalone players to state they have sold more hardware???

Basically, if you are an HD DVD fan, attach rate is important because it helps you sleep better at night since it numbs the pain of losing 2:1 in disk sales all year. Apparently losing 2:1 in disk sales all year long is not an important statistic for HD DVD fans....

Isn't it funny how Toshiba wants to count all of the PS3's out there to determine that they have the superior attach rate but then only count standalone players to state they have sold more hardware???

You mean like the BD claiming 63% of the market share - based on dollars spent?:rolleyes:

Well it does prove that BD players are more expensive than HD DVD players - I will give them that.:D

What a surprise! Hddvd boys say it matters and bluray boys say it doesn't matter.
As a matter of fact, it doesn't matter to me that it matters, but if it does matter, then i couldn't care less.

I'd agree that as a sales statistic attach rates matter, I'd just argue that you can't really get reliable figures for that in the current state of affairs. It's just not possible to try to figure out on average how many discs are purchased by someone who owns a blu-ray player. Not with so many people buying PS3s who don't even have an HDTV and so many buying it only for gaming use. And there are many who don't even know it can play hi-def movies. I think it's fair to say that anyone buying a standalone HD-DVD player or the Xbox drive are doing so for the sole purpose of playing HD-DVD movies. That's not the case with the PS3 and given the % of blu-ray players that it represents it hopelessly fudges the numbers.

Basically, if you are an HD DVD fan, attach rate is important because it helps you sleep better at night since it numbs the pain of losing 2:1 in disk sales all year. Apparently losing 2:1 in disk sales all year long is not an important statistic for HD DVD fans....

It used to be their battle cry when they were ahead of Blu-Ray ;)

Isn't it funny how Toshiba wants to count all of the PS3's out there to determine that they have the superior attach rate but then only count standalone players to state they have sold more hardware???

What ever suit best for "their" propaganda.

I'm just astounded at how many new BD posters there are in this thread :p

Anyone who makes a case that it doesn't matter is being a bit cloistered. Heck, even Grubert admits it matters.

Basically, if you are an HD DVD fan, attach rate is important because it helps you sleep better at night since it numbs the pain of losing 2:1 in disk sales all year. Apparently losing 2:1 in disk sales all year long is not an important statistic for HD DVD fans....

How about presenting an actual, logical argument instead of just getting pissy?

2:1 in disc sales means nothing when you only sell 4 million discs. That's all that has been sold to date across both formats. 4 million.

Do you honestly think that major studios care about their particular fraction of only 4 million titles? Even a moderate hit DVD will sell more than that on the Tuesday it gets released. This is very early on in the process, so studios will look at lots of factors, not just current sales to early adopters and gamers.


What studios DO care about is projected growth. And one of the measurements of that is... (wait for it)... attach rates. What those attach rates are currently showing is that lots of people are buying PS3s (about 1.5 million of them) and then -- on average -- buying a movie or two and then stopping. By and large, people aren't using their PS3s as movie devices. That is NOT what a studio wants to see. 1.5 million PS3 owners buying games is a nightmare for Disney or Fox.

Contrast that with HD DVD players, which are ONLY used for movies, and are consequently showing higher attach rates with people going out and buying 4-5 movies for their player.


All of this goes into the calculations about next steps in high def media. Studios don't just look at a single figure (2:1) and say "Hey, blu-ray's selling better. Done!" Even just going a level or two deeper into those stats changes the story dramatically.

One format is selling more twice as much software, but with SIX times the number of machines out there. The other format is selling less software, but with impressive attach rates per machine... and those machines are about to get a lot cheaper around the holidays. When the studios start projecting that stuff out a year or two down the road, it isn't as simple as your 2:1 figure.

You mean like the BD claiming 63% of the market share - based on dollars spent?:rolleyes:

Well it does prove that BD players are more expensive than HD DVD players - I will give them that.:D

you mean like how the HD DVD supporters said the Matrix boxset did almost as good as POTC1/2 during release week because the revenue generated from the 14K SKU's sold was the about the same as the revenue from the sales of POTC1/2 which sold nearly 46K copies combined???

Or how about when blu ray only had a 15% advantage over HD DVD in sales of '300' when it was released even though blu ray outsold HD DVD by 143K to 68K???

I give you HD DVD supporters the award for most creative math...

Attach Rates don't matter - and Toshiba will also agree to this once they push out 10 million laptops with HDDVD. Otherwise they will have to change the creative math game some more.

I.e:
A)we count Laptops as players - yay - more than BD (possibly not counting ps3 still?)
B)we don't count Laptops in terms of attachrates. yay - more than BD (because we clearly count ps3 here, right?)

How about presenting an actual, logical argument instead of just getting pissy?

2:1 in disc sales means nothing when you only sell 4 million discs. That's all that has been sold to date across both formats. 4 million.



you mean selling over 2M blu ray disks versus 1.4M HD DVD disks is not important to the studios? That each title released on both formats always sell better on blu ray than on HD DVD?

I am 'pissy' because HD DVD fans only want to take the attach rate by itself as the most important statistic. As someone mentioned earlier, revenue and sales volume are just as important, but HD DVD fans never mention those numbers because they have favored blu ray all year long....

How about presenting an actual, logical argument instead of just getting pissy?

2:1 in disc sales means nothing when you only sell 4 million discs. That's all that has been sold to date across both formats. 4 million.

Do you honestly think that major studios care about their particular fraction of only 4 million titles? Even a moderate hit DVD will sell more than that on the Tuesday it gets released. This is very early on in the process, so studios will look at lots of factors, not just current sales to early adopters and gamers.


What studios DO care about is projected growth. And one of the measurements of that is... (wait for it)... attach rates. What those attach rates are currently showing is that lots of people are buying PS3s (about 1.5 million of them) and then -- on average -- buying a movie or two and then stopping. By and large, people aren't using their PS3s as movie devices. That is NOT what a studio wants to see. 1.5 million PS3 owners buying games is a nightmare for Disney or Fox.

Contrast that with HD DVD players, which are ONLY used for movies, and are consequently showing higher attach rates with people going out and buying 4-5 movies for their player.


All of this goes into the calculations about next steps in high def media. Studios don't just look at a single figure (2:1) and say "Hey, blu-ray's selling better. Done!" Even just going a level or two deeper into those stats changes the story dramatically.

One format is selling more twice as much software, but with SIX times the number of machines out there. The other format is selling less software, but with impressive attach rates per machine... and those machines are about to get a lot cheaper around the holidays. When the studios start projecting that stuff out a year or two down the road, it isn't as simple as your 2:1 figure.

I would rather think the logical train of thought would be that a format that sells 1.5x today at 4 million discs is likely to retain the advantage and sell BD = 150mill instead of HDDVD = 100mill, once the volumes ramp up.

I would rather think the logical train of thought would be that a format that sells 1.5x today at 4 million discs is likely to retain the advantage and sell BD = 150mill instead of HDDVD = 100mill, once the volumes ramp up.

But how are you going to do this with $499 priced players? As opposed to $199 or less HD DVD players.

BD is still stuck in the EA market - the smallest CE market there is, while HD DVD is at the market below . . .which happens to be a much larger market as far as potential buyers and is headed for the mass adoption market where the price is $99 or less.

So far the first HDM related PR from CEDIA is the LG DF player - at $999

I'm just astounded at how many new BD posters there are in this thread :p

Anyone who makes a case that it doesn't matter is being a bit cloistered. Heck, even Grubert admits it matters.

It does matter to a degree, but it is not the crucial statistic that will identify who is winning the format war as many HD DVD supporters make it out to be.

If you want to base future projections on it, fine. But to say it is an indicator that HD DVD is winning the format war is ludicrous...

I would rather think the logical train of thought would be that a format that sells 1.5x today at 4 million discs is likely to retain the advantage and sell BD = 150mill instead of HDDVD = 100mill, once the volumes ramp up.

That would be logical if you were looking at this sales figures in a vacuum. But when you start looking at other factors -- such as upcoming $199 (and lower) players and the impact that it will have on the marketplace -- another possiblitiy emerges.

Your logical train of thought assumes that there will always be a 6x advantage in hardware. If outside forces (hardware prices) alter that landscape, your 2:1 ratio tightens up pretty quickly...

If the hardware ratios never change, you're right... studios will side with the most sales. But I'm betting that most projections don't show the hardware maintaining its current ratios.

Is it always normal for fangirls to trump in around here when it's obvious that a logical non-format bashing conversation is being had?

I have a PS3 and a Toshiba A2. I bought the PS3 for games, but have purchased a few blu-ray movies for it, POTC series mainly, but I bought the HD-DVD player for movies and normally if I am going to buy a movie I buy it for my player not my gaming console, (if the movie is supported by the player).

That's all that is being said here. If someone buys a player they normally buy more movies for it than someone who buys a gaming console with a secondary movie playing capability. That same thing goes for someone that buys a blu-ray player. They will buy more movies than most others with a PS3.

Attach rates people not format bashing. Good God.

That would be logical if you were looking at this sales figures in a vacuum. But when you start looking at other factors -- such as upcoming $199 (and lower) players and the impact that it will have on the marketplace -- another possiblitiy emerges.

Your logical train of thought assumes that there will always be a 6x advantage in hardware. If outside forces (hardware prices) alter that landscape, your 2:1 ratio tightens up pretty quickly...

If the hardware ratios never change, you're right... studios will side with the most sales. But I'm betting that most projections don't show the hardware maintaining its current ratios.

there is another part of the vacuum you are neglecting...

even though Transformers will be huge for HD DVD, Blu ray disk sales will still dominate the Christmas shopping season...

the blockbuster blu ray exclusives (SM3, SOTC, FF2, DH4, Ratitouille, Simpons will all do exteremely well) will still outsell the HD DVD blockbuster exclusives Transformers, Bourne3, Shrek3, Evan, Knocked Up) by a landslide. Neutral titles will certainly be in blu ray's favor (Harry Potter) and the Fox catalog titles will help sell a large number of disks as well.

I wouldn't be surprised to see the 2:1 lead increase by the end of the year and into Jan.

I'd agree that as a sales statistic attach rates matter, I'd just argue that you can't really get reliable figures for that in the current state of affairs. It's just not possible to try to figure out on average how many discs are purchased by someone who owns a blu-ray player. Not with so many people buying PS3s who don't even have an HDTV and so many buying it only for gaming use. And there are many who don't even know it can play hi-def movies. I think it's fair to say that anyone buying a standalone HD-DVD player or the Xbox drive are doing so for the sole purpose of playing HD-DVD movies. That's not the case with the PS3 and given the % of blu-ray players that it represents it hopelessly fudges the numbers.

I agree, as a projection indicator, you have to break down the player categories in order to make a useful prediction. As is, selective attach rate ratios are useful only as a marketing device.

A new HDM player category is about to emerge, the integrated drive for both BRD and HD DVD, by this time next year they will number in the millions. What do you make of attach rates then?

I have a PS3 and a Toshiba A2. I bought the PS3 for games, but have purchased a few blu-ray movies for it, POTC series mainly, but I bought the HD-DVD player for movies and normally if I am going to buy a movie I buy it for my player not my gaming console, (if the movie is supported by the player).

That's all that is being said here. If someone buys a player they normally buy more movies for it than someone who buys a gaming console with a secondary movie playing capability. That same thing goes for someone that buys a blu-ray player. They will buy more movies than most others with a PS3.

so what do 1/2 of the HD DVD owners who use the add on to their XBOX 360 buy? movies or games??? :D

there is another part of the vacuum you are neglecting...

even though Transformers will be huge for HD DVD, Blu ray disk sales will still dominate the Christmas shopping season...

the blockbuster blu ray exclusives (SM3, SOTC, FF2, DH4, Ratitouille, Simpons will all do exteremely well) will still outsell the HD DVD blockbuster exclusives Transformers, Bourne3, Shrek3, Evan, Knocked Up) by a landslide. Neutral titles will certainly be in blu ray's favor (Harry Potter) and the Fox catalog titles will help sell a large number of disks as well.

I wouldn't be surprised to see the 2:1 lead increase by the end of the year and into Jan.

I'm talking about long-term projections and you're still talking about the next 3 months.

I don't think it would shock anyone to see the 2:1 ratio maintain over Q4. I'm talking about what happens in 2008 (after people get sub-$200 HD DVD players during the Q4 2007 holiday) and beyond.


Also, I'm not sure where you're getting your info that BD exclusives will outsell HD exclusives by a "landslide". Crystal ball? And how much is a landslide, exactly?

And we both know that catalog titles (by Fox or any other studio) are mostly a non-factor so far.

I'm not sure what much of this has to do with attach rates, but there you go...

so what do 1/2 of the HD DVD owners who use the add on to their XBOX 360 buy? movies or games??? :D

Since the player is purchased seperately from the gaming console? :rolleyes:

Refer to my last post.....

Anyone who thinks attach rates don't matter is wrong, but not as wrong as people who think that attach rates are more important than absolute sales.

Look, if BD was leading 2:1 and attach rates were the same for both formats, it would look a LOT darker on the horizon for HD DVD. Instead, there is reasonable hope that if they can move more hardware they can catch BD sales this year, so obviously attach rates matter.

On the other hand, if BD's lead gets up towards 3:1 week over week (or more) then the attach rate arguement is not going to hold many peoples attention (Paramount exec 1: "We only sold 25% of our projected HDM movies", Exec 2: "Yeah, but they were all viewed by really interested viewiers!").

I think regardless of attach rate, HD DVD has to catch BD sales in Q4 or they lose sometime next year. I think that's why they just dropped a chunk o' change on Paramount, because otherwise they had no hope of catching BD in sales, even with low-priced players. Now...we'll see.

Anyone who thinks attach rates don't matter is wrong, but not as wrong as people who think that attach rates are more important than absolute sales.

Look, if BD was leading 2:1 and attach rates were the same for both formats, it would look a LOT darker on the horizon for HD DVD. Instead, there is reasonable hope that if they can move more hardware they can catch BD sales this year, so obviously attach rates matter.

On the other hand, if BD's lead gets up towards 3:1 week over week (or more) then the attach rate arguement is not going to hold many peoples attention (Paramount exec 1: "We only sold 25% of our projected HDM movies", Exec 2: "Yeah, but they were all viewed by really interested viewiers!").

I think regardless of attach rate, HD DVD has to catch BD sales in Q4 or they lose sometime next year. I think that's why they just dropped a chunk o' change on Paramount, because otherwise they had no hope of catching BD in sales, even with low-priced players. Now...we'll see.
Agree 100%. See my previous post in this thread which got ignored for some reason.

Basically, if you are an HD DVD fan, attach rate is important because it helps you sleep better at night since it numbs the pain of losing 2:1 in disk sales all year. Apparently losing 2:1 in disk sales all year long is not an important statistic for HD DVD fans....

Isn't it funny how Toshiba wants to count all of the PS3's out there to determine that they have the superior attach rate but then only count standalone players to state they have sold more hardware???

What helps me sleep at night is knowing that the "far superior in every which way" product has not been able to move from the "2:1" in a year. That means that they really have no hope.

Now if Jan = 2:1 --> Dec = 4:1.... I'd be thinking HD-DVD is dead.

The fact they can only maintain a ratio shows that HD-DVD isn't going ANYWHERE.

What attach rates are showing now is that many PS3 owners have purchased a movie or two. This was predicted by many, including Sony, as a "testing the waters" phase among PS3 owners. I think it has created an artificial view of the market.

Attach rates are an indication of the future.
Sales ratios are an reflection of the "here and now".

When you have a high amount of volume sales with a low attach rate, it's an indication that sales are going to decline or not gain any momentum when compared to something else with a higher attach rate.

If you trend it out, and the player adoption increases at the same rate for both, it's inevitable for HD-DVD to surpass BluRay disc in sales. 2:1 will become 1.9:1.. then 1.81... then 1.5:1.. until eventually.... 0.9:1.

That's why attach rates are important. They show if a product will CONTINUE to sell, even if it's currently selling like hotcakes now. This is why any new product goes through a sales burst and then falls down to a normal level.

I could have quoted countless posts to make this argument, but does anybody believe that HD-DVD attach rates for the first 200k buyers will hold up for the next million buyers? The HD-DVD attach rates are high because early adopters are enthusiasts, many of them buy dozens upon dozens of movies. This isn't a trend that you can extrapolate into the broader consumer market.

As player prices decrease, the consumers who buy them will become less and less invested. The cheaper players will likely be used primarily as replacements for standard DVD players and may not result in any HD-DVD sales at all.

Nobody addressed the issue of attach-rates for stand-alone HD-DVD versus stand-alone Blu-ray. We all know the typical PS3 user is going to buy less movies than early-adopter movie-enthusiasts...they may even buy less movies than a broader consumer market (but probably not by much). But among stand-alone players, I would think the attach-rates would probably be very similar.

It's also worth noting that many enthusiasts who want blu-ray buy the PS3 as their dedicated movie player of choice, simply because it's the best value and most future proof of all the BD-player options right now. I would imagine that around 100k of the PS3's out there were purchased primarily as movie-players and those owners probably have a much higher attach-rate than the PS3 as a whole...that is, they follow an attach-rate similar to stand-alone players.

It seems the logic I keep hearing is that blu-ray will have to sell 10 times the hardware as HD-DVD to keep up the software sales ratio. That logic makes a couple of huge (and I think erroneous) assumptions. 1) it assumes that attach rates for HD-DVD will remain steady as the broader consumer market gets involved, and 2) it assumes that blu-ray stand-alone players will continue to lag hd-dvd stand-alone players by 2:1.

While I would agree that you would probably have to sell at least 4 PS3's for every HD-DVD player sold to maintain the software sales ratio in the short term, I think blu-ray stand-alone players will achieve sales parity with HD-DVD and have similar attach-rates. In the long-term, when J6P goes hi-def movie, their attach-ratio probably won't be a whole lot better than the PS3's.

I could have quoted countless posts to make this argument, but does anybody believe that HD-DVD attach rates for the first 200k buyers will hold up for the next million buyers? The HD-DVD attach rates are high because early adopters are enthusiasts, many of them buy dozens upon dozens of movies. This isn't a trend that you can extrapolate into the broader consumer market.

As player prices decrease, the consumers who buy them will become less and less invested. The cheaper players will likely be used primarily as replacements for standard DVD players and may not result in any HD-DVD sales at all.

Nobody addressed the issue of attach-rates for stand-alone HD-DVD versus stand-alone Blu-ray. We all know the typical PS3 user is going to buy less movies than early-adopter movie-enthusiasts...they may even buy less movies than a broader consumer market (but probably not by much). But among stand-alone players, I would think the attach-rates would probably be very similar.

It's also worth noting that many enthusiasts who want blu-ray buy the PS3 as their dedicated movie player of choice, simply because it's the best value and most future proof of all the BD-player options right now. I would imagine that around 100k of the PS3's out there were purchased primarily as movie-players and those owners probably have a much higher attach-rate than the PS3 as a whole...that is, they follow an attach-rate similar to stand-alone players.

It seems the logic I keep hearing is that blu-ray will have to sell 10 times the hardware as HD-DVD to keep up the software sales ratio. That logic makes a couple of huge (and I think erroneous) assumptions. 1) it assumes that attach rates for HD-DVD will remain steady as the broader consumer market gets involved, and 2) it assumes that blu-ray stand-alone players will continue to lag hd-dvd stand-alone players by 2:1.

While I would agree that you would probably have to sell at least 4 PS3's for every HD-DVD player sold to maintain the software sales ratio in the short term, I think blu-ray stand-alone players will achieve sales parity with HD-DVD and have similar attach-rates. In the long-term, when J6P goes hi-def movie, their attach-ratio probably won't be a whole lot better than the PS3's.
Another post I agree with 100%. The highlight being that people are comparing early adopters (enthusiasts) to a throng of gamers with enthusiasts mixed in. Attach rates matter, but the way they are represented here is simply misleading.

That would be logical if you were looking at this sales figures in a vacuum. But when you start looking at other factors -- such as upcoming $199 (and lower) players and the impact that it will have on the marketplace -- another possiblitiy emerges.

Your logical train of thought assumes that there will always be a 6x advantage in hardware. If outside forces (hardware prices) alter that landscape, your 2:1 ratio tightens up pretty quickly...

If the hardware ratios never change, you're right... studios will side with the most sales. But I'm betting that most projections don't show the hardware maintaining its current ratios.

I'm betting hardware ratios will actually FAVOUR BD in the future. We're already at closed to $199 for hd dvd players, and the increased hardware sales haven't done anything to close the software sales gap. BD is easily sustaining the hardware lead even with $499 standalones and $499 PS3s. Both PS3 and BD standalones have far more room to cut prices than hd dvd players.

I agree, as a projection indicator, you have to break down the player categories in order to make a useful prediction. As is, selective attach rate ratios are useful only as a marketing device.

A new HDM player category is about to emerge, the integrated drive for both BRD and HD DVD, by this time next year they will number in the millions. What do you make of attach rates then?


My assertion is that HD DVD stand-alone buyers have the same movie-buying habits as blu-ray stand-alone buyers (attach rate wise). People who buy blu-ray players to play games or stick them on their computers for data storage should not be lumped in with the stand-alone players in any of the statistics.

Now, if you want to try to equate the two demographics, you might say something like: "Every 8 PS3's sold is roughly equivalent to 1 stand-alone player sold in terms of impact on software sales (which is what the movie studios care about". Once you have that ratio determined, you can then make projections as to what to expect in the future.

I would agree that if stand-alone blu-ray players don't keep pace with stand-alone HD DVD players, that long term blu-ray is going to lose this war. One thing to note though, is that while it may take 8 PS3's to equate to a single stand-alone player sale right now, that ratio will continue to drop as more casual buyers get into the HDM market, particularly as stand-alone player prices drop.

Studios should not look at the large installed base of blu-ray players (including PS3) and conclude that blu-ray has a 10:1 advantage. They need to figure out the PS3 to stand-alone ratio and adjust the numbers as needed. As it turns out, the market-place does this math for us automagically...it's called total software sales.

200k HD-DVD players = 1 million movies (5:1 attach rate)
100k blu-ray players + 1.5m PS3 = 2 million movies

Assuming stand-alone attach rates are the same

blu-ray stand-alone = 500k movies (5:1 attach rate)
PS3 = 1.5m movies (1:1 attach rate)

You could therefore conclude that right now it takes 5 PS3's to equal 1 stand-alone player.

Of course, as others have noted, the PS3 attach-rate is probably artificially high even at 1:1 since 100k of those PS3's were probably bought for use as a largely dedicated movie-player. Though, going forward, I would expect the PS3 to continue to be a top-choice for people wanting a blu-ray movie player, which should keep the ratio at about 5:1.

Over the next 18 months I would expect PS3 to outsell HD-DVD stand-alones by5:1 (average over the period), after that I would expect the stand-alones to rapidly change that equation, possibly outselling the PS3 month to month.

This means blu-ray stand-alones need to be on par with HD DVD stand alones or long-term HD DVD will surpass it. I fully expect that to happen. That said, it still doesn't make attach-rates a meaningful statistics.

All attach-rates tell us right now is that many PS3's owners don't use their PS3 for movies....and that is a pretty meaningless piece of knowledge IMO (and not really much of a surprise either).

Attach rate matters but not in this case. The thing that nobody takes into account is that there are a lot (I would say most) of people using next gen console on SDTV. I know most of us here probably have ours hooked up to a HDTV but I would say that's more the exception than the rule. Just like most american household still watch SDTV. This will change soon though. With prediction of 42" HDTV dropping to $700 by X'mas or right after. A lof of people is goingto pick up HDTV and start taking advantage of their PS3's Blu-ray player.

Personal point. I know of about 10 families with PS3. Only 3 have HDTV now (and this is silicon valley, the geek headquarter) and they all have started buying Blu-ray movies. 4 more are planning on getting a HDTV this year while the other 3 will probably hold out till SDTV goes off the air. Basically, the reason for the low attach rate for PS3 owners are that most of them don't have a HDTV yet. Once they do, Blu-ray sales will pull further ahead of HD-DVD with the large PS3 installed base.

Since the player is purchased seperately from the gaming console? :rolleyes:

Refer to my last post.....

that doesn't answer my question...

the person bought an XBOX for gaming and then bought an add on for movies, so he has a console that he bought for gaming and an addon for watching movies...so does this person mainly buy movies or games?

The bottomline is that attach rates do not matter as much as sales. Period.

The bottomline is that attach rates do not matter as much as sales. Period.

And a $150 million bribe trumps sales I guess:rolleyes:

that doesn't answer my question...

the person bought an XBOX for gaming and then bought an add on for movies, so he has a console that he bought for gaming and an addon for watching movies...so does this person mainly buy movies or games?

if a person buys the add on, it shows that they have a specific interest in hi def media. simply buying a ps3 does not indicate that. they may be buying it only for games, only for movies in the case of some here, or both. Short of knocking on all of their doors and asking, we'll never know. If we are to believe that poll that went around here a few weeks ago, the majority of ps3 owners don't even know it has blu ray capability.

that doesn't answer my question...

the person bought an XBOX for gaming and then bought an add on for movies, so he has a console that he bought for gaming and an addon for watching movies...so does this person mainly buy movies or games?

He/She buys movies for their player and games for their gaming console just as I said in my previous post. If they bought both the console and player seperately obviously they are buying software for each. When the player comes with the gaming console, who is to say what they bought it for.

The complication in the attach rates is when the player is included with the gaming console so you can't determine who bought it for games, who bought it for movies, or who bought it for both. All I was stating is that people who bought a player and a gaming console will normally buy movies for their player and games for their gaming console. In the case of the PS3 not everyone who buys it wants it as a movie player, some want it just for games, others want it for both, where with the XBOX add-on you only buy it to play movies.

Not saying anything bad about either format just delving into the viciousness of the attach rates.

The bottomline is that attach rates do not matter as much as sales. Period.

Wow, this just went circular. No, that isn't the bottom line and there's no period about it.

Right now, studios are betting on potential and growth, not current "sales". In 5 years, the "bottomline" would be sales period. But today, sales don't mean as much as the crowd spouting "2:1" at every opportunity seem to think they do.

Again, if sales were king, all studios would immediately abandon HD media and focus on standard def. "Sales" right now are low, low, low. A studio doesn't really care if sales are pathetic or 2xPathetic... they just want to see growth potential for the future.

Attach rates do not matter if...

There is still a huge amount of untapped PS3 buyers that are waiting for the $499 supply of 60GB ps3s to run out so that they can buy a $599 80GB version, thus maintaining a huge player advantage. ;)

The people that were buying the PS3 primarily as a blu-ray player would already have done so, I believe. So that leaves the stand alone player buyers. To date, they haven't been biting on what's available whether it's because they are still over-priced, or they are waiting out the profile mess. Either way, I just don't see how the BDA is going to maintain their hardware sales advantage. And if they can't do that, then attach rate becomes a very, very big issue.

So far, it seems the best answer the BDA has for this problem, is to issue press releases saying attach rates don't matter and obviously the other guy must be cheating. Whaaa.... I'm taking my PS3 and going home!!! :D

Because companies can look at that and ask themselves "will the PS3 continue to sell 4 or 5 units for every HD DVD player sold?"

IMO the answer is an astounding no, because despite the number of PS3s in the field, the initial surge is over and PS3 sales will level off or decline over the lifetime of the system (with periodic jumps coinciding with price reductions/sales), while SA player sales should increase steadily (in theory).

For example purposes, assuming a steady 1:4 attach rate for the PS3, all Toshiba has to do is start selling 1 SA player for every 3.5 PS3s (if they aren't already), and that gap of software sales will close up. With HD DVD player sales surging, this will start happening soon. And then it will be selling 1 SA for every 3 PS3s, and then 1 SA for every 2.5 PS3s, and then 1 SA for every 2 PS3s...etc.

So companies should be looking 1, 2, 5, 10 years down the line, not just at what things are doing today. That's why (again, IMO), relying on the PS3 was a huge mistake.

+1

I don't understand why this is such a hard concept. It is all about trying to make a forward looking business projection.

Right now I am certain that the analysis the studios and CE manufacturers are making is forward looking. This is because the HDM market is so incredibly small. All of the HDM efforts at this point are an investment with the intention of making a significant return later when the market is large enough to matter.

Reviewing last weeks VideoScan #s is a backward looking indicator, certainly the trending of week to week sales statistics over time is interesting when put into a broader context. However the reason attach rates are so important as a forward looking indicator is that understanding them helps model the impact on media sales based on projected future sales of standalones and PS3s. Right now you can see that the large influx of PS3s drove media sales; however PS3 sales have tapered off and HD DVD SAs are outselling BD SAs, therefore the media sales ratios are more or less holding steady.

If Sony sells 10m PS3s this Christmas a 1:1 attach rate is outstanding, if Sony sells 1m PS3s this Christmas then 1:1 will look abysmal.

Similarly if Toshiba sells 1m SA this Christmas a 4:1 attach rate will look great, if they sell 100K they are in trouble.

Long term HMD sales will be driven by the sales of 10s of millions of SA players, however over the next 1-2 years while HDM sales are low during this early adopter phase the PS3 with it's low attach rate will still have a significant impact of the HDM sales ratios.

The question is "Is the PS3 a major factor in the long term success of HDM sales?" Toshiba, MS, Paramount, and others say no; Sony, et-al say yes.

If poll numbers are to be believed, I seem recall seeing a poll that said that 60% of PS3 owners didn't even know they had a blu-ray player. We can safely assume that those guys are buying 0 movies.

I think it is safe to assume that somebody who buys a stand-alone blu-ray player is going to have the exact same attach-rate as somebody who buys a stand-alone HD DVD player...I have yet to hear anybody question this assertion.

Assuming 200k HD DVD players and 100k SA blu-ray players, and given software sales numbers, you can do a little number crunching and if you take the PS3 owners who don't even know they have a blu-ray player out of the equation, you actually end up with an attach-rate of about 3:1 among people who know they have a blu-ray player (both PS3 and SA combined).

Just among PS3 owners who know they have blu-ray player, you get an attach-rate of about 2.5:1. At the point in time that HD-DVD reaches a total installed base of 700k units (which is what I estimate the blu-ray SA + PS3 knowledgable number to be at right now), I will be very surprised if their attach-ratio is still up at 4:1. The problem is that the attach-ratio will go down as player-prices drop and as a less enthusiastic demographic starts getting into the game.

The blu-ray camp has such a large installed based of players (counting the PS3 people who know they have a blu-ray player), that they have already started to experience this decline. HD DVD will experience the same decline as J6P starts to buy $199 HD DVD players as replacements for their recently broken DVD player...only to not buy very many movies for it.

HD DVD proponents need to be honest about what these attach rate numbers really mean and what has caused them to be what they are. Their basic argument is that HD DVD will fundamentally sell more movies per player, but that doesn't make sense as it largely assumes that blu-ray owners simply don't like movies as much....which is nonsense in a broader consumer market.

The main problem HD DVD faces is that stand-alone blu-ray hardware is probably going to match HD DVD hardware sales, so it is going to be difficult for HD DVD to make up for the PS3 bonus-effect. Movie sales into the PS3 market are really just icing on the cake if blu-ray SA manages to match HD DVD sales.

60% of PS3 owner didn't even know they had a Blu-ray player because they are probably using it on a SDTV. When they eventually pickup a HDTV, They will start using it as a movie player.

Here's my take on attach rates. This has little to do with any specific format. Collectors (all levels of income) buy lots of movies. So their attach rates are high. People with lots of disposable income also buy lots of movies, but less than your average collector. Attach rate is lower for them but still high. Then, of course, is moderate income j6p, your average consumer. They spend orders of magnitude less than collectors so their attach rates are much lower. But for each collector there are say 1000x as many j6p. So j6p is in the end is more important. It means much more if you can get j6p to buy more by offering frequent discounts and deals then you can boost the attach rate than trying just to go after the collector crowd. Now I would argue that collectors will almost certainly buy into both formats since they want access to all the studios. AVS has lots of collectors on this board. But j6p does not want to buy 2 machines and can't afford a dual format player so it boils down to strength of library and software pricing. Software pricing is more important than hardware pricing at this juncture given that entry level player prices are converging. Provide the widest software base to entice consumers to take notice of your format. Offer lots of sales and discount pricing on diverse range of titles and watch your attach rate rise. Whoever comes up with the best software strategy wins in the end.

And a $150 million bribe trumps sales I guess
The most true thing you've ever said.

But how are you going to do this with $499 priced players? As opposed to $199 or less HD DVD players.

BD is still stuck in the EA market - the smallest CE market there is, while HD DVD is at the market below . . .which happens to be a much larger market as far as potential buyers and is headed for the mass adoption market where the price is $99 or less.

So far the first HDM related PR from CEDIA is the LG DF player - at $999

Attach rate still doesn't matter. However HDDVD may win because they pump enough standalones and laptops out at low enough prices to sell enough discs to win the war. Again. Attach rates have been pure marketing spin from the get go. Once Toshiba doesn't need to talk about it, they won't.

Yes, attach rates matter now (and you can expect declining rates as more hardware sells - diminishing marginal utitlity.) For Sony attach rates are a double edged sword. If people are truly buying the PS3 as a Blu-Ray player (which i personally see no reason other than price, but still too expensive) then Sony has to worry about game attach rates being trashed and a losses for their PS3 division (with the console marketing scheme). i fully believe Sony see more revenue with the PS3 for game lincensing than they would with movie sales. Sorry for using the videogame market here. It is a lot different to say something like the XBOX 360 is beating the PS3 in attach rate then it is to say with HDM (US). Attach rates matter more for HD DVD/Blu-Ray now due to the scale of the market/projections. Right now attach rates show with Blu-Ray that the estimate of players is too high. Blu-ray attach rates are not as bad as they look, but HD DVD should be right on the mark. People who play video games do buy movies, but why assume they will buy them for a gaming console (especially if they have a choice)?

Are PS3s viable to use as "Blu-Ray players"? Short answer yes and no. Short-term maybe, long/mid term they are irrelevant (stand-in for future SAL sales). The point here is that the PS3 is a videgame console that just happens to have blu-ray playing capability built in. Long term, if/when prices for standalones drop to more consumer friendly levels, it makes sense to assume that people will replace the PS3 as a main blu-ray machine with stand alone players. The same line of reasoning could be applied to the XBX360 add-on (though it is more of a dedicated player). i never put much stock in the 2:1 number (at this point in the game they wouldn't be that hard to fix - if the BDA was actually paying for these movies rather than the consumers. ie buy one get one free sales, retailer bundling, free movie coupons, etc).

Now on to the debate of whether or not software moves hardware (and vice versa). Sony seems to think that having studio support will drive players sales. i've always questioned that attitude. Assume a $400 player price, you would have to essentially rent 200 movies at $2.00 a piece to be worth it (or the equivalent for watching owned movies.) So, a couple of movies are not likely to totally impact your choice of format (it is probably when you get into the 20+ range that it makes a difference.) With the video game market a $60.00 game should have more impact as it is a larger percentage of the console price (i understand the video game market a little better.) However, looking more long term with HD DVD i see that installed base increases are more likely to increase software availability (so with HD DVD, hardware drives software - total values and potential availability). In other words for HD DVD, software sales at this point are less important than stand-alone hardware sales.

Attach rates matter in this market mainly due to the ps3 if we were only comparing standalone devices it would be considered to most likely be the same for HD AND BD

The studios are forward looking and also looking at another series of factors
Inertia and the cost to the consumer to achieve the installed base

If we say the PS3 does have a 1/4 attach rate as the standalone players in either format, the it is not just the lower attach rate but also the higher cost. The analysis would look at 4 times say 500 dollars or 2000 dollars in end user sales to achieve the same sales level as say 300 dollars. So Sony would have to do almost 7 times the end user ps3 sales dollars to generate an equal amount of bd software sales.

This was always the downside of the PS3 strategy. Sony believed that the PS3 would be a run away winner as a GAMES console, following the same pattern as the PS2 and that it would achieve a massive installed base BEFORE the economics of building a HD DVD player came down dramatically, ie TOSHIBA would still be dealing with building and shipping PC based solutions at probably close to the PS3 cost. By being late, and not having the PS3 be the run away success, Sony and BD is now faced with the option of bringing on a very low cost bd player, BUT to do this Sony has to balance the support of the other ce manufactures and if they are willing to "invest" in supporting selling bd players below cost, or Sony bringing on its own low cost alternative, making it un economical for the ce partners. It is one thing to offer promotional support to studios via tie in deals packaging deals underwriting production, it is another to underwrite partners hard ware production costs.

In addition even though Sony is a massive company with extensive resources, these resources are allocated to different divisions based on a budgeting process so at the Corporate level telling divisions that are making plan and money that they need to underwrite a reduction in their budgets to support a division that has been struggling is difficult to sustain for more than a few quarters. At the end of the day Howard is responsible for the success of the WHOLE company not just bd WINNING, so for example it would be extremely unlikely that for instance Sony would say cut the price of the PS3 to say 200 dollars. Sure this would completely change the equations, but the cost penalty would be unreasonable.

TOSHIBA strategy of NOT getting any other ce manufactures actively involved early on might in the long term prove a wise decision. It is now at a point where other ce companies can enter the market with products that are either profitable or have reasonable marketing support levels that the ce companies are willing to go along with.

At the end of the day, I think it will be seen that the real problem was the inability to get the level of buzz, games studios and gamers support and the "I have to have this" winning support for the PS3 that really was the problem , and that is why Ken got pushed out.

For the trojan horse to work it needs to be highly almost blindingly desirable, and while PS3 has sold in reasonable quantities, it simply was not the run away winner that Ken had predicted.

Attach rates matter in this market mainly due to the ps3 if we were only comparing standalone devices it would be considered to most likely be the same for HD AND BD

The studios are forward looking and also looking at another series of factors
Inertia and the cost to the consumer to achieve the installed base

If we say the PS3 does have a 1/4 attach rate as the standalone players in either format, the it is not just the lower attach rate but also the higher cost. The analysis would look at 4 times say 500 dollars or 2000 dollars in end user sales to achieve the same sales level as say 300 dollars. So Sony would have to do almost 7 times the end user ps3 sales dollars to generate an equal amount of bd software sales.

This was always the downside of the PS3 strategy. Sony believed that the PS3 would be a run away winner as a GAMES console, following the same pattern as the PS2 and that it would achieve a massive installed base BEFORE the economics of building a HD DVD player came down dramatically, ie TOSHIBA would still be dealing with building and shipping PC based solutions at probably close to the PS3 cost. By being late, and not having the PS3 be the run away success, Sony and BD is now faced with the option of bringing on a very low cost bd player, BUT to do this Sony has to balance the support of the other ce manufactures and if they are willing to "invest" in supporting selling bd players below cost, or Sony bringing on its own low cost alternative, making it un economical for the ce partners. It is one thing to offer promotional support to studios via tie in deals packaging deals underwriting production, it is another to underwrite partners hard ware production costs.

In addition even though Sony is a massive company with extensive resources, these resources are allocated to different divisions based on a budgeting process so at the Corporate level telling divisions that are making plan and money that they need to underwrite a reduction in their budgets to support a division that has been struggling is difficult to sustain for more than a few quarters. At the end of the day Howard is responsible for the success of the WHOLE company not just bd WINNING, so for example it would be extremely unlikely that for instance Sony would say cut the price of the PS3 to say 200 dollars. Sure this would completely change the equations, but the cost penalty would be unreasonable.

TOSHIBA strategy of NOT getting any other ce manufactures actively involved early on might in the long term prove a wise decision. It is now at a point where other ce companies can enter the market with products that are either profitable or have reasonable marketing support levels that the ce companies are willing to go along with.

At the end of the day, I think it will be seen that the real problem was the inability to get the level of buzz, games studios and gamers support and the "I have to have this" winning support for the PS3 that really was the problem , and that is why Ken got pushed out.

For the trojan horse to work it needs to be highly almost blindingly desirable, and while PS3 has sold in reasonable quantities, it simply was not the run away winner that Ken had predicted.

I agree with most of your post. I think your analysis is missing a small piece of the puzzle though, and that is BD stand-alone player sales. If BD can sell stand-alone players on-par with HD DVD, then the PS3 could very well be the difference between having both formats battle it out evenly, and blu-ray taking an appreciable lead.

While the PS3 may not be very successful as a gaming-console, it still dwarves stand-alone player sales in both formats combined. Even if you ignore the 60% of PS3 owners who have no idea what they bought, the other 40% equal 4 times the HD-DVD market share. The PS3 will likely sell very well this Christmas season too...it missed the boat last year, but at $499 for the 80gb model (which I fully expect to happen in October), good games finally arriving, and most serious gamers already owning a Wii, I think a lot of people will turn to the PS3 for their gaming-fix this holiday (full-disclosure, I am a game-developer, though I mostly do PC games, I did do a PS3 game last year and am scheduled to start another one next year).

I would agree in general that if HD-DVD continues outselling blu-ray in stand-alone player sales, HD-DVD will eventually win this war, but I just don't see that happening. New hardware sales for either format is somewhat based on perception of which format is going to win, since nobody wants to buy something that is going to disappear on them. When I go to BestBuy and see one brand of HD DVD player on the shelf (Toshiba) and every other major CE company with a blu-ray player on the shelf, I will start to get the impression that blu-ray is probably winning this thing and that is what I will likely buy.

I also think that if blu-ray starts to take off and consumers start to see it as something they want, that among more casual gamers, the PS3 will start to be seen as an increasingly good value. This is precisely why Microsoft is supporting HD-DVD, they desperately don't want the PS3 to be seen as fulfilling both needs as it will increase the perceived value of the PS3 over the Xbox.

Well there is another measuring tool. It was just in a recent article at VB . . . how many movies does the average person buy per year.

It used to be 12. Now it is up to 14.7.

Just another way for the studios to figure out how many disc to press and what the expected profit will be.

IMO, Attach Rates are only important when a format is "emerging." Once it has matured (either mass adoption or niche) this no longer matters.

Can somebody explain to me the logic behind why attach-rates of movies to players matter (both short term and long term)?



Yes, because the HD HDMs are in their infancy, and sales at this point are miniscule. Attach rates is a barometer as to which format will eventually capture mass appeal and sell the most players.

I agree with most of your post. I think your analysis is missing a small piece of the puzzle though, and that is BD stand-alone player sales. If BD can sell stand-alone players on-par with HD DVD, then the PS3 could very well be the difference between having both formats battle it out evenly, and blu-ray taking an appreciable lead.

While the PS3 may not be very successful as a gaming-console, it still dwarves stand-alone player sales in both formats combined. Even if you ignore the 60% of PS3 owners who have no idea what they bought, the other 40% equal 4 times the HD-DVD market share. The PS3 will likely sell very well this Christmas season too...it missed the boat last year, but at $499 for the 80gb model (which I fully expect to happen in October), good games finally arriving, and most serious gamers already owning a Wii, I think a lot of people will turn to the PS3 for their gaming-fix this holiday (full-disclosure, I am a game-developer, though I mostly do PC games, I did do a PS3 game last year and am scheduled to start another one next year).

I would agree in general that if HD-DVD continues outselling blu-ray in stand-alone player sales, HD-DVD will eventually win this war, but I just don't see that happening. New hardware sales for either format is somewhat based on perception of which format is going to win, since nobody wants to buy something that is going to disappear on them. When I go to BestBuy and see one brand of HD DVD player on the shelf (Toshiba) and every other major CE company with a blu-ray player on the shelf, I will start to get the impression that blu-ray is probably winning this thing and that is what I will likely buy.

I also think that if blu-ray starts to take off and consumers start to see it as something they want, that among more casual gamers, the PS3 will start to be seen as an increasingly good value. This is precisely why Microsoft is supporting HD-DVD, they desperately don't want the PS3 to be seen as fulfilling both needs as it will increase the perceived value of the PS3 over the Xbox.

Well I am glad to see that we can have a discussion, endless bickering that sometimes seems to be here.

I think there a a few additional points to consider:
Certainly if BD brought out a player and matched HD price for price, things could take on a different direction. Problem is Sony and a number of the CE guys in the BD camp are totally wedded to the idea that brand and any perceived technology edge should command a premium. Problem is in this space they don't seem to be able to pull it off. Apple is outstanding in doing this, Sony doesn't seem to be able or willing to do it this time.

Supposedly there were many heated discussions in Sony as to why people will pay 600 dollars for a IPHONE and at the same time Sony needs to cut the price on the PS3

Part of it is people's initial impressions and the buzz. I would argue that while you can slug it out in the market, and make small gains, once you loose that initial first impression winner i've got to have it, it is impossible to win it back.
Now I would say neither HD NOR BD have that in their products, but Sony was banking on this with the PS3 and will things improve, sure, will they still sell units sure, but will they have the gang busters mass migration, no, they lost that to the Wii

I certainly do think that Microsoft is determined to stop Sony from expanding its role in the home or games to a more computer based entertainment center, this is MS turf and they will defend it. If you look at Microsofts real investment here it is in the codecs, long term it wants download or at least media server based world and that is where it invests its real money.
Since you are in the games dev side, I am sure you see that not only are they in the xbox space again to defend their turf, but also they are very definitely bringing the pc back into the gamers fold as a major factor. Sony was trying to position the PS3 as this media/entertainment computer to last 10 years, MS sees that the pc/vista or what ever directx10 or what ever is their best shot to blunt this.

So I think both sides had a number in mind of just how much support dollars they were willing to invest. Sony spend it early on, Toshiba is now doing the same a bit later. IMO IF and it is an IF TOSHIBA/HD can get hd as a feature to mainstream dvd players with a price differential over a non HD play to be minimal, AND get the price of some sort of combo down so that the media decision of hd vs sd is not a major barrier, then we should see hd sales move ahead.

It has always IMO been HD or BD vs SD but the bd camp does not want to see it that way, again IMO it is the HD upgrade to SD argument that the studios like today, vs the "PS3 is a guaranteed run away success look at the PS2 track record and as a bonus all these ps3 will be able to play bd"

It is the classic it is easier to get some to upgrade than switch, so it you make the technical switch look like an easy upgrade you reduce the inertia.

John

Well the HD DVD people tend to think that if one buys a Blu-Ray player (to watch movies) be it the PS3 or whatever else he is going to buy less movies then if one would have bought a HD DVD player false logic at its best.

Only some Blu-ray fans attribute that to anybody :( I haven't seen a single HD DVD fan say anything like that. If anything, people who bought PS3's just for movies could conceivably have a higher attach rate than the average HD DVD owner, but they are a very small minority of PS3 owners. The point is that people who bought PS3's to play games (the vast majority of owners) have miserable attach rates for movies, but at this time, at 2 million plus strong, they have a huge numbers advantage over HD DVD owners so the overall software sales are much better right now.

Good discussion DVDoctor and BagMan! It's refreshing to see such discourse.

I understand the concept behind attach rates, but in the context of HDM it seems to be used more as a tool for company marketers and evangelists to place their product (in this case HDDVD) in a more favorable light. I think far too much emphasis is placed on the PS3. I’ve always perceived PS3 initial role was to flood the market (create a beachhead as it were) with functional BD players long enough for the economies of scale for BD companies to introduce price competitive stand alone players.

Yes, they matter because it shows the consumer interest in the software.

2 million Blu-Ray players (PS3 + Stand alone) with ~1 movie sold per player?
400,000 HD DVD players (stand alone + add-on) with ~4 movies sold per player?

Clearly those who own a HD DVD player how a higher interest in purchasing movies.

where are you getting those sales numbers?

Blu Ray selling 2 million discs and hd dvd selling 1.6 million???

2 million Blu Ray "players" and 400,000 hd dvd ?

To the OP, I think that attach rates do not matter. What matters is how many discs you sell total.

Attach rates do not matter to anyone other than the HD DVD promotion group and HD DVD fans. Sales numbers of titles matter and the sales ratio/numbers for a particular title matter to studios.

Attach rates do not matter to anyone other than the HD DVD promotion group and HD DVD fans. Sales numbers of titles matter and the sales ratio/numbers for a particular title matter to studios.I pretty much agree. Attach rates of total players is only meaningful when combined with how many total players are sold. Doesn't matter whether they are so-called "stand-alones" or not. Bottom line is software sales.

One item I've seen referenced by some HD DVD spokespersons is projecting future software sales; so they try to divide the market by types of players, assigning attach rates and whatnot, to try and figure out how the software market will grow as the player mix chaneges (more standalones, fewer percentage of PS3's).

The trouble with all of that is no one really knows how accurate these types of scenarios are. For example, I've seen people say: "When PS3 gets better games, their BD attach rate will go down, cuz everyone will be gaming". To counter that, though, is that more and better games will drive sales of the PS3, and more overall market pentetration by HDM will raise awareness of the fact that PS3 can play those fancy blu discs. So maybe the number of people buying BD movies will actually go up?

It's hard to predict; those in the business have to try, but we get to speculate and then sit back and watch.

It sounds like most of us can agree that whoever sells the most stand-alone players is probably going to win this thing long-term (or else both formats will survive and dual-format players will become the norm if nobody pulls ahead significantly).

Now, there are all sorts of scenarios we could debate as to what would cause more stand-alone player sales. At this point, I don't see studio support as being lopsided enough to play a significant role, but that could change. If any other major studio goes format exclusive, that might be enough to tip the scales. If Universal goes neutral, that might very well tip the scale to Blu-ray, leaving paramount largely alone. If Disney or Fox go neutral, I don't think that would be enough to tip the scales, since blu-ray would still be left with plenty of exclusive studios to hold things in check. If both of them went neutral, then maybe.

CE support certainly favors blu-ray at the moment, which might be a deciding factor. Price certainly favors HD DVD and that may play out as the deciding factor.

I think we could probably also agree that the technical-merits of the formats is probably irrelevant at this point...I really don't think consumers are going to favor one format over the other because this format has a higher-capacity or that format is has better special disc-features.

Another possible thing that could sway things is retail support. If a major electronics retailer like BestBuy or CC were to drop either format, that would be a big deal, but that seems pretty much impossible for blu-ray at the moment and very unlikely for HD DVD as well. Some retailers like Walmart seem very likely to side one way or the other. I don't know how big of an effect this would have. With Target already on-board, getting Walmart too would probably add up to significant momentum for blu-ray. If HD DVD were to land Walmart, then it would probably be about an even wash with Target. (Target is largely regarded as having one of the better electronics departments among discount department stores).

If consumers stay on the sidelines because they can't tell who is going to win, this has to strongly favor blu-ray due to the PS3 effect. PS3 buyers will not be remaining on the sidelines since their primary motive is games, but a lot of them do have a secondary motive of movies. If HD DVD doesn't break 500k units by the end of the year, then I would consider that as consumers sitting on the sidelines, at which point the PS3 would likely prove to be a fatal blow for HD DVD, since it's installed base will be approaching 10 million units. Even with 60% of people not buying movies and the other 40% averaging a 2.5:1 attach rate (according to my math above), that would be a pretty significant software advantage.

If either format manages to gain 4:1 software sales over a period of 6 months, then I think you can consider the format war as winding down as well. If HD DVD doesn't hit some impressive stand-alone player sales by January, we may very well start seeing that level of advantage for blu-ray.

So, overall, I think there are quite a few scenarios where blu-ray comes out ahead...in particular, the big one being that blu-ray is favored in a market where consumer adoption is slowed, since the PS3 will not be slowed. I don't see quite as many scenarios where HD DVD can pull this out. Their best hope IMO is that cheap-players take off and blu-ray can't compete on price. That would also have to be combined with one of the blu-ray exclusive studios going neutral, or Warner going HD DVD exclusive. I just don't see that happening, but you never know.

I think you raise valid points
I agree, stand alone players are the key,
I think how well PS3 does according to its internal plan and vs competition will matter (and attach rates be relevant) only in regard to Sony or the other CE bd manufacturers willingness to move to agressive price points.
I still believe the ultimate factor in the near term (several years) is who is more successful upgrading the dvd base
And this will be a factor of perceived value, ease of upgrade, price of player, and price and availablity of software

The retailers are driven by what box they think they can move the most of at the most margin, either direct or indirect. They really could care less who wins only that they sell a ton of the winning system.

Walmart is an interesting case, their strategy is certainly to move more effectively into the CE area, they certainly look at Bestbuy Target Circuit city as competition, and which ever company strikes the best deal to give Walmart the "hook" product will probably get their attention.

A lot of it also comes down to perception, momentum and living up to expectations. A area where BD IMO has made serious mis steps is in creating an expectation and then not living up to even though the levels achieved are good.

So back to the original topic
Are attach rates important?
IMO only so long as the PS3 is a key factor, since it is a combo or crossover or what ever term you want to use for it AND because Sony insists on it being a major factor
If Drives in PC related products becomes a factor say by Toshiba making it, then once again attach rates are going to be a factor
In any case the studios are making judgements not based on only history but future forecasts with a confidence factor that takes into consideration history
u
So someone someplace looks at the question, can HD or BD sell X number of players and along with that sell X copies of our titles, and based on that how many additional copies of other titles will then then buy.
BD has to convince them that they will be able to increase the attach rate for current ps3's to a higher level, and at the same time match or beat the number of HD stand alone. The problem Sony has is they hate to take a price leadership position and so do most of the ce companies they have signed. HD seems to have no problem with this.

If you look at the various deals out there it is not out of the question that HD presented the following scenario

HD is going to bring a player to market that will be at a rock bottom price
HD will bundle with this player 5 hd TITLES that they will by from the studios and this will make the price to the consumer for the player free
HD gets some of the studios to offer a combo of some kind for the same price as the sd OR at a HD version for the same price as SD

Its the old razor and blades marketing program.

IF for argument HD allocated say 300 million to this including the much speculated 150 million, and the price to the studios for each copy was say 10 dollars or 30 million copies, (I think the mis quote elsewhere re the 30 million was not for players but copies of titles) that would seed about 6 million hd players into the market, all for in terms of the "war" not a massive amount of money. Key was HD had to wait until they could get the player cost down and the production cost of the HD's down and get it out there in time for the 2007 holiday season






John

Only some Blu-ray fans attribute that to anybody :( I haven't seen a single HD DVD fan say anything like that. If anything, people who bought PS3's just for movies could conceivably have a higher attach rate than the average HD DVD owner, but they are a very small minority of PS3 owners. The point is that people who bought PS3's to play games (the vast majority of owners) have miserable attach rates for movies, but at this time, at 2 million plus strong, they have a huge numbers advantage over HD DVD owners so the overall software sales are much better right now.

Well the fact is that every single post HD DVD supporters make they think that the attach rates will continue on the same level they are now even when J6P comes to the picture which is false and misleading. What we now have is home theater enthuisiast buying movies and few J6P with consoles or cheap HD DVD players. The number of J6P on the Blu-Ray side is making a difference because there are so many but if those owners would be on the HD DVD side their attach rates wouldn't certainly go up just because they bought a HD DVD player.

If you look at the various deals out there it is not out of the question that HD presented the following scenario

HD is going to bring a player to market that will be at a rock bottom price
HD will bundle with this player 5 hd TITLES that they will by from the studios and this will make the price to the consumer for the player free
HD gets some of the studios to offer a combo of some kind for the same price as the sd OR at a HD version for the same price as SD

Its the old razor and blades marketing program.

IF for argument HD allocated say 300 million to this including the much speculated 150 million, and the price to the studios for each copy was say 10 dollars or 30 million copies, (I think the mis quote elsewhere re the 30 million was not for players but copies of titles) that would seed about 6 million hd players into the market, all for in terms of the "war" not a massive amount of money. Key was HD had to wait until they could get the player cost down and the production cost of the HD's down and get it out there in time for the 2007 holiday season
John

Those projections are not realistic for 2007. Rock bottom prices, ok, we are already seeing those from Toshiba.

Bundling titles? Will hurt, not help HD DVD SW sales.

Subsidizing studio(s) to offer a combo HD/SD disc? It is not possible yet to manufacture HDM at DvD production levels. And even if they could they wouldn't count as HD sales.

6 million HD DVD players? Current sales projections from Toshiba for this year to NA, are about 1/10 of that number. Yes, there will also be cheap Chinese players, but with small profit margins, companies are not going to produce more units than they think they can sell.

Those projections are not realistic for 2007. Rock bottom prices, ok, we are already seeing those from Toshiba.

Bundling titles? Will hurt, not help HD DVD SW sales.

Subsidizing studio(s) to offer a combo HD/SD disc? It is not possible yet to manufacture HDM at DvD production levels. And even if they could they wouldn't count as HD sales.

6 million HD DVD players? Current sales projections from Toshiba for this year to NA, are about 1/10 of that number. Yes, there will also be cheap Chinese players, but with small profit margins, companies are not going to produce more units than they think they can sell.

Sorry for any confusion, IMO the 300 million, just used as an example could support 5 free hd dvd's for the sale of 6 million players, over some period of time, not necessarily 2007

IMO you underestimate the sophistication of the Studio's model. They have their own invoices to see how many copies were produced, shipped and paid for, so while the independent numbers would not reflect the sales, they are not looking for that, they would be looking at how many copies of their titles were being sold beyond the promo. Companies do this all the time with promo's

It could be argued one way or the other re the manufacturing capability, BUT on a selected list of titles, it certainly could be achieved

At this point we have no visibility as to what sort of orders have been placed by the channel, but conventional wisdoms holds that at some point down the price curve the demand increases exponentially. At say 150 dollars per player, we are not looking at a major cost for each million players across the total channel . Order the first million for 150 million, they sell out order the next 2 million for 300 million, they sell out order the next 3 million for 450 million, and you are at the 6 million players pretty rapidly

it really comes down to how elastic is the market, how large is the total market, how much of that market the product serves, and how large a share of market you can achieve in a given time frame.

Where attach rates matter is what is the product that each camp selects as its point product to achieve the sales numbers. Each camp has significant resources to invest in subsidizing a marketing plan, at the end of the day the lowest cost product with the highest attach rate should create the highest demand.