Blockbuster to Expand Blu-ray Retail Titles First, HD DVD May Wait

For over a year now, the retail high-definition market has been looking for a signal from places on high of any tipping of the scales, any crack in the dam that will help consumers make the ultimate choice in high-definition movie format investment: Should they invest in Blu-ray or HD DVD? This morning, such a signal may have finally come: US movie rental giant Blockbuster announced that 18% of its retail outlets will expand their offerings to include Blu-ray titles only, at least for now.

For retailers like Blockbuster, the problem has been one of real estate. Blockbuster and its online competitor Netflix can continue to expand their virtual storefront to include as many Blu-ray and HD DVD titles as studios decide to produce.

But physical shelf space is a critical commodity, especially for a store that guarantees availability for certain new releases. The less space there is available for a new title in any given store, the more coupons the company must give away, which is a very real expense.

So giving up space for any new format is a big gamble. Up to now, making room for two formats has been impossible, except for a select 250 stores nationwide where Blockbuster had been sampling customer preferences. Of the company's approximately 8,000 stores in North America, fewer than 3% have the space available for both formats.

This morning, Blockbuster spokesperson Randy Hargrove declined to go into more detail than what had already been released to the press on Sunday, except to say this to BetaNews:

"When customers are ready we can expand the Blu-ray offering into more stores and add HD DVD to more locations if that's what customers tell us they want. HD DVD titles will still be available in the 250 stores (only 3% of its retail operations) that had been carrying it and HD DVD along with Blu-ray titles will still be available for rental at blockbuster.com for our Blockbuster Total Access and Blockbuster By Mail online subscribers. Our policy online is that we will continue to offer both Blu-ray and HD DVD as they are released."

But that will still be a slight inconvenience to HD DVD customers with respect to the company's Total Access program. There, customers can rent movies online, receive them by mail, and return them to retail stores, swapping them for more titles during the same rental period. Without HD DVD titles in most stores, that program won't have much value to HD DVD customers.

Whether this constitutes a real "crack in the dam" may depend on how the company's biggest competitor, Movie Gallery (which also operates Hollywood Video stores), responds. That company manages 4,700 retail outlets in North America, many of them with tighter real estate restrictions than Blockbuster. Expanding its shelf presence for so much as one high-def format, let alone two, may be an impossibility for a great many Movie Gallery outlets. At the same time, the fast-moving consumer electronics economy mandates that if a player doesn't lead and doesn't follow, it's automatically out of the way.

Regardless of what either chain decides to do from here on out, any decision to carry just one high-def format will be a gamble on which portion of the movie spectrum will be more appealing to consumers.

The Blu-ray Disc Association boasts 20th Century-Fox, Lionsgate, MGM, Paramount, Sony Pictures (which owns Columbia and Tri-Star), and Warner Bros. as its member studios; whereas the HD DVD Promotional Group lists New Line, Paramount, Universal, and Warner Bros. among its members. Even with the overlap, Blockbuster's decision may have come down to which studios could be expected to produce the most desirable titles this summer.

On the AV Science Forum this morning, the response from high-def aficionados is a very clear indication that the Blockbuster move may have made the first serious dent in the ongoing battle between the formats. Writes one member, "I'm an HD-DVD supporter and there's no way to spin this into a positive. This is good news for Blu-ray... for real!"

Another borrows a very vivid phrase from the very symbol of contemporary British literature, Monty Python. "It's not a blow," he writes. "It's just a flesh wound."