The Price War in Blu-Ray

The media price war, which has seen dramatic price cuts in prices of DVDs, has now spread to Blu-Ray discs.

Video Business, a trade magazine, reported yesterday that Best Buy (BBY), Amazon.com (AMZN) and Wal-Mart (WMT) have set aggressive prices on the Blu-Ray versions of key new video titles, including Harry Potter and the Half-Blood Price, The Hangover, Terminator: Salvation, Night at the Museum: Battle of the Smithsonian and Stark Trek. Normally priced at about $25 for Blu-Ray editions, those titles are now seeing prices in the $16-$17 range. In a leaked upcoming Black Friday promotion, Target (TGT) is planning to offer some catalog Blu-Ray titles for as low as $3.99, with some TV season sets as low as $8.99.

Lowering price dramatically on standard definition and Blu-Ray DVDs will only make it harder for consumers to spend full retail prices on DVDs in 2010. While the economy is recovering and certain DVD titles have performed well in the early part of Q4 2009, we believe consumer spending on DVDs will almost certainly decline again in 2010, with rental continuing to grow its market share at the expense of retail DVD sales, particularly if pricing steps up significantly in Q1 2010 from Q4 2009 levels.  We fear Wal-Mart's  price cuts will ultimately pressure wholesale pricing.