Hardware vs. Software
Can BD dominate without cheap hardware? can HD DVD dominate without extensive software (content)?
These are the questions that will be decided in 2007. IMHO Christmas 2007 will be the deciding point for these formats.
HD DVD always had the price advantage. Even when both technologies were nothing but paper dragons HD DVD (then AOD) was argued as the more cost effective solution. Launching the format with a $499 player was a masterful move by Toshiba. The truth is $499 is simply still too much for 95%+ of Americans.
Let's take a look at DVD player pricing:
Year Units Avg. Price HH%
1997 349 $489 0.00%
1998 1,079 $390 1.00%
1999 4,072 $270 5.00%
2000 8,499 $201 13.00%
2001 12,707 $165 21.00%
2002 17,090 $142 35.00%
2003 21,994 $123 50.00%
2004 19,990 $108 70.00%
DVD player sales started out a paltry 300K units and prices around $500. Moving price down to $390 allowed the market to expand 300% to over million units. Dropping the price again to the $200s quadrupled the market to 4 million units sold in 1999. 2000 was another record year with the avg price slipping to $201 (meaning some players down into the $149 price range) and another doulbing of annual sales. After that the % growth slowed indicating lower prices were not necessary to push sales.
Would DVD have grown even with a more modest price reduction ($500, $400, $350, $300, $250)? Yes it would however it is unlikely we would have seen the massive growth that led to mass adoption.
The cheapest standalone player is $499 for HD DVD and $799 (announced) for BD. Both of these are too high. DVD tripled once it hit a sub $400 price and quadrupled when it hit sub $300. I don't think HD will be any different. The PS3 is the wild card but for many Americans it is a non starter. There are simply millions of Americans who will not buy a PS3 as their HD player. While some will many won't.
If prices and content stay the same I see BD winning simply because year after year it's library will grow larger. So HD DVD needs one or more studios to switch. Time is on BD side they "win" with the status quo. What will make a studio switch? Massive sales. 2:1 advantage is nice but 2:1 over a market that makes up 1% is nothing to get the studios excited. Now a $299 player and 20x increase in players would make the numbers more meaningful. The first title to sell 1 million copies on a format would be a huge milestone. If the title was dual released and one side sold 1 million and the other something like 300K that would be very telling.
So the way I see it the big question is:
How fast and how low can HD DVD bring prices down? If it is "soon" enough and low enough for J6P they win. If they don't BD wins and it takes much longer to reach mainstream. It would be possible for BD to kill HD DVD and remain a niche product like Laser Disc until something mainstream comes along in 5 years.