Time is running out for Blu-ray discs, the high definition (HD) format that are supposed to be replacing the DVD.

Despite the launch of new Blu-ray players and talk of rising sales at the Consumer Electronics Show in Las Vegas, manufacturers know they are in a race to make a real impact on the market before the new kid on the block, downloading or streaming HD films directly from the internet, consigns the format to a footnote in video history.

Blu-ray discs have the same physical dimensions as a DVD, but provide better quality sound and pictures for HD movies, thanks to more expensive laser technology. They were launched nearly three years ago but only became the preferred medium after winning an HD format war a year ago.

Blu-ray has just had an impressive year of growth. Consumers are looking to take advantage of the rise of HD TV programming by broadcasters before the coming switch to digital TV and in the US they are buying more HD TV sets than standard definition sets.

At the Blu-ray Disc Association press conference at CES, chairman Andy Powers listed the US Blu-ray statistics: with more than 1,100 movie titles now available, 24.09 million discs were sold in 2008 compared to 5.67 million in 2007.

The Dark Knight batman movie was the standard bearer for the format, becoming the first million-plus seller on Blu-ray in America.

Sales of Blu-ray players are also climbing fast, helped by huge Christmas discounts in America which saw the cost of players drop below $200. Eight per cent of US household are now estimated to have Blu-ray hardware, including Sony's Playstation 3 consoles which can play the discs.

But the problem for Blu-ray is that these figures still mean that Blu-ray is a high-end niche product, bought mainly by early adopters who can afford to pay the higher prices of the discs and the players - still about three times the price of a DVD player.

Sales of DVDs are not being dented by sales of Blu-ray discs. In the UK, figures from the British Video Association reveal that the number of DVDs sold last year actually rose slightly by 1.9 per cent to 252.9 million at an average price of £8.97. There were only 3.75 million Blu-ray discs sold in the year at an average price of £19.29. The top-selling DVD Mamma Mia! The Movie shifted more than 5 million copies in just five weeks while Dark Knight sold only about 300,000 copies on Blu-ray.

Differentiation viewed as the single biggest problem for Blu-ray. People like DVDs and do not see Blu-ray as sufficiently better to make the jump to the new format. This is understandable. The leap from VHS to DVD was huge compared to the more subtle improvement in viewing experience offered by Blu-ray over DVD. What's more, consumers have been confused by the HD format war - many say they are still holding out for the battle to be settled - and others wrongly believe that you cannot play DVDs on a Blu-ray player. The switch has been further confused by the emergence of "upconverter" DVD players which improve the picture quality of ordinary DVDs to near HD quality.

Rob Enderle, principal analyst with the Enderle Group, a leading technology advisory company in the US, said that only after watching an upconverted DVD and a Blu-ray disc one after another could most people tell the difference. "Blu-ray is going to play a transition 'between' role - it can sustain the high end of the market but as soon as the flip comes to downloads or streaming - and I think that will be in the next couple of years - then it will not make any further progress. I am not convinced Blu-ray will ever go mainstream," he said. He fully expected Blu-ray to be the last physical movie format before digital downloading became the norm, he said.

Certainly there was more "noise" among the hundreds of thousands of attendees and exhibitors at CES about downloading and streaming TV programmes and movies than about Blu-ray. One of the biggest themes at the showcase of cutting edge consumer gadgets was how the big TV manufacturers like Samsung, Sony, Panasonic and others have signed up to a new system of widgets which allow users to access internet content including YouTube directly from their television sets. Steve Ballmer, CEO of Microsoft, declared in his keynote speech that the border between TV and the internet was being dissolved.

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