Two weeks ago, I wrote about an April 2009 Harris Poll that showed market penetration of Blu-ray players was still quite small, even a year after the competing HD DVD format was officially abandoned.

One of the surprises resulting from the Harris Poll was that 11% of the respondents owned and still use HD DVD players, compared to 7% of respondents that owned and using Blu-ray players. (9% of respondents reported owning a Sony PlayStation 3, which is of course BD-compatible.)

That edition of the Daily received a lot of responses, virtually all of whom agreed with my opinion that perhaps the market for "packaged" media is moving away from optical disc, and instead shifting towards direct Internet downloads and streaming media.

However, there was one prominent dissenter, an executive at a major Hollywood studio, who suggested that the Harris poll results were severely flawed, and that BD disc sales were much stronger than I realized. One concern (which also surfaced in post-poll analysis across the Web) was that many respondents to the Harris Poll were unable to distinguish between upscaling red laser DVD, HD DVD, and Blu-ray players.

Fair enough. So I started digging a bit deeper to get a better sense of the current state of the packaged media market. It didn’t take long before a few more news items relevant to this story came to light. Without further ado:

News Item - Sales of Blu-ray discs rose 91 percent to $407 million in the first half of 2009, according to the Digital Entertainment Group, with almost 20 million Blu-ray discs shipped in the second quarter alone. BD rentals were up 62% in the same time period, although overall consumer spending on "sell-through packaged media" (DVDs, BD, and tapes) was down 13.5%.

Blu-ray hardware sales surpassed two million units in the first half, an increase of 25 percent over the same period from 2008. There are now nearly 11 million Blu-ray devices in U.S. homes, including PlayStation 3 consoles, with about 75 percent considered BD-Live compatible. (Source - Digital Entertainment Group, July 2009)

For readers who don’t know, the DEG has become the industry voice for Blu-ray news and statistics. All of this data sounds impressive, except for the 13.5% decline through June in overall consumer spending for ’sell-through packaged media.’ And apparently there are still many more PlayStation3 consoles in homes than stand-alone BD players.

The release also didn’t clarify how many of those 20 million BDs were direct sales to consumers and how many were ordered by video stores and rental houses, such as Blockbuster and Netflix. Interestingly, the DEG press release also mentioned the growth of "…digital distribution (up 21 percent to $968 million, which includes $196 million for electronic sell-though)."

News Item - According to Strategy Analytics, consumer spending on online video content will reach $3.8 billion in 2009. The research firm sees paid video growing faster than free, advertiser-supported video over the next several years—at a rate of 39 percent annually through 2012, versus 37 percent for ad-supported video.

According to Martin Olausson, Strategy Analytics’ director of digital media research, consumers have embraced so-called stay-at-home entertainment options, such as Netflix WatchNow and Xbox Live Video Store, as well as various cable TV pay-per-view platforms. (Source - Strategy Analytics, July 2009)

The point of this study was to show that consumers are more willing to buy video content online, as opposed to watching episodes of TV shows on ad-supported sites such as Hulu. Presumably, that "willing to buy online" attitude extends to purchases and rentals of full-length movies.

News Item - Mitsubishi Digital Electronics will include a VuDu HD set-top box and a $50 credit for movie purchases with the purchase of one of their DLP rear-projection or LCD HDTV sets. The promotion, valued at $200, runs through August 10th. Frank DeMartin, VP of marketing, said Mitsubishi opted for the VuDu player over a BD player to differentiate themselves from the competition.

"Blu-ray player [giveaways] seem to be the norm and we thought we would do something different," DeMartin said. He also added that dissemination of movies from the Internet to the TV remains a work in progress over the next several years, in addition to how consumers embrace it with the burgeoning stream of Web-enabled media devices hitting the market. (Source - HomeMedia.com, July 2009)

Mitsubishi joins the ranks of TV manufacturers who are including streaming and download capabilities inside new TVs and BD players, except they’ve decided to partner with VuDu. Sony, Panasonic, Samsung, Vizio, and LG have also incorporated streaming media connections into their products.

So…there’s no question that Blu-ray disc rentals and sales, along with BD player sales, have increased over 2008. It’s also evident that many consumers still don’t understand the difference between red and blue laser DVD formats, which could be an impediment to stronger growth of BD player and disc sales.

However, even the DEG’s own numbers show a marked increase in digital delivery of movies and TV shows for the first six months of 2009. The Strategy Analytics study proposes that consumers will enthusiastically support online content delivery, and Mitsubishi’s current promotion hopes to leverage that support into increased sales of HDTVs.

As Bob Dylan once sang, "You don’t need a weatherman to know which way the wind blows." While the BD format is certainly growing in popularity, it’s not the grand slam home run that red laser DVD was. And BD player market penetration isn’t nearly as impressive, once you remove all those PS3 gaming consoles from the equation.

So the questions going forward are these: How fast will the BD format continue to grow, year-to-year? Are BD player and disc prices too high for consumers? How fast will the direct digital download market grow in comparison? And at what point will digital downloads and video streaming push optical disc formats to the sidelines?

Stay tuned…