According to a recent Screen Digest report, Blu-ray Disc over-production to meet retailer initial ordering is "already evident". Pipeline fill may account for an extra 30% above what is required to meet consumer demand, the report states. "Irrespective of its eventual destination, every disc in the supply chain must be replicated," said the report's author, Screen Digest analyst Richard Cooper.

"By contrast, actual BD replication capacity is lower than that suggested by combining the claimed capacity of operators in the market. Such figures frequently refer to disc output, taking no account of the yields. On short production runs, only about 60% of the dual-layer BDs used for most BD video manufacture are saleable, though this proportion has risen in 2009 and some lines manned by experienced operators are now reportedly achieving yields of around 78%," says Cooper.

Taking various factors into account, Cooper believes that the slower-than-anticipated take-off of BD in Europe in 2009 meant that replication capacity was far higher than required. "The largest contributing factor was the economic downturn late in 2008, the effects of which were still being felt in fourth quarter 2009. The time lag between ordering and delivery of new BD lines can be up to nine months. Lines commissioned before the full extent of the economic downturn became apparent continued to come on-line throughout 2009, extending capacity.

"Meanwhile, although consumer demand for BD increased substantially during the year, it could not keep pace with forecasts made in a more positive economic climate."

However, Cooper added, some degree of replication 'overcapacity' is required. With the peak in consumer video purchasing towards the end of the fourth quarter preceded by a peak in disc replication in October and November, replicators must have sufficient combined capacity in place to meet this demand peak, even if this means some lines go unused throughout much of the year.

"In the mature DVD market, in order to meet demand in the peak season, capacity for the year must be around 140-160% of actual disc demand for that same year. Such seasonality will be even more evident in the BD market, where the rapid rate of adoption and dependence on new release product means demand will be even more weighted towards the fourth quarter." However, BD annual capacity reached 300% by the end of Q4 this year.

Story filed 09.01.10