One of the main challenges facing Blu-ray, according to the latest ABI Research, is that many consumers are not actually dissatisfied with the quality delivered by their conventional DVD players, when up-converted to play on high-definition TV sets.

"We are starting to see an increase in the number of DVD players with built-in upconverters, and the video processing is getting better with each new generation," says ABI analyst Steve Wilson, . "Today about 35% of all DVD players sold include upconversion. ABI Research expects that figure to climb to about 60% by 2013" said Wilson.

The state of the standalone Blu-ray player market is not all that encouraging. The Blu-ray installed base today is heavily tilted towards Sony's Playstation 3. Wilson continues, "The studios better hope that people are playing movies on their Playstations. Otherwise there's very little installed base. In 2008 about 85% of the Blu-ray players in the market will be found in PS3s; the dedicated consumer electronics and PC-based types of Blu-ray players won’t catch up in terms of market share until about 2013."

The PS3's attach rate (the number of disc purchased by machine) started low, just under one BD movie per console, and falling if one goes by the latest TNS Worldpanel figures presentedat the recent BVA Research Day showing that only one in six UK PS3 owner bought a BD disc.

In an effort to spur the market, optical disc manufacturers are lowering prices and PC manufacturers are offering lower-cost configurations. Bare-bones PCs with Blu-ray players are arriving. "But, if you’re only going to spend $500-600 on a PC, are you really going to spend 40% more for a built-in Blu-ray player?," asks Wilson.

Meanwhile consumer electronics manufacturers are maintaining high prices for dedicated players. "The studios had hoped to have settled the war," Wilson concludes, "but I think they’re going to be disappointed when they don’t see the volumes of players going up they way they would have liked."

A view echoed in anew report from Bernstein Research which predicts that mass adoption of Blu-ray won’t start until the end of 2009, when players fall beneath $200. Blu-ray ownership will not hit 25 percent of US households until the end of 2011.

The good news for the home video market is that Bernstein Research expects Blu-ray sales will help revenues grow 2.4 percent compounded annually between

Story filed 27.04.08