The sales of stand alone Blu-ray players, exclusive of the Sony PS3, fell 40 percent from January to February and saw only a small uptick in March by 2%, according to the NPD Group. Customers are finding that the increased video quality over standard DVDs isn’t worth the cost of a new Blu-ray player, which averages $400.

Some observers had thought that the victory by Blu-ray in HD format war would lead to a surge in sales. What it may have done is simply expose curious customers to the high cost of Blu-ray players, and they’ve blinked.

Manufacturers, after some holiday specials intended to compete with HD DVD, have returned to normal pricing for their players. For example, the Samsung BD-P1400 which sold for $279 at Christmas at Amazon is still the number one seller, but is priced at $399.

NPD’s analysts have been saying for some time that customers find DVDs "good enough" especially when played on modern but inexpensive upconverting DVD players. In fact, according to NPD, the sales of upconverting DVD players have actually increased by 5 percent in the first quarter, year over year.

Industry observers believe that the price of the Blu-ray players will have to drop below US$200 before sales take off, and to achieve that, they may have to offer stripped down models that don’t support uncompressed audio and other niceties found in the current players. Sony Electronics President Stan Glasgow has said $200 Blu-ray players won’t arrive until 2009.

The Blu-ray Disc Association, which spent millions to win the format war, now appears reluctant to bring that technology to the masses in 2008 and appears willing to continue to settle for a trickle of early adopters for the rest of the year.