AFTER DVD, WHERE IS HOLLYWOOD'S NEXT GOLD RUSH? (NYT)
By Stephen Saito
The New York Times' Ken Belson takes a look at DVDs, Hollywood's golden goose that many now feel may be laying the wrong kind of egg. Although Belson reports that U.S. consumers will buy $16 billion worth of DVDs a year, the market is slowing to just two percent growth. One solution would be to introduce a new format, but the studios are stuck in a war over HD and Blu-Ray technology. Meanwhile, their profits are slowing.
With most movies and many television shows now on DVD, studios are running out of new material to throw at consumers, analysts say. Some studios have been repackaging older hits into anniversary box sets and other promotions, but consumers may be tiring of that tactic, as studio chiefs sheepishly acknowledge.
"We were shameless," said Steve Beeks, the president of Lions Gate Entertainment, which has issued several new versions of the Terminator movies. "We would release special editions as long as people would buy them."
Movie studios have also been issuing DVD's closer to movie release dates. This has led to larger spikes in sales right after DVDs come out, but steeper declines later and more turnover on store shelves. For movies that gross more than $100 million at the box office, 84 percent of DVD sales are in the first six weeks after their release, up from 81 percent in 2003, according to David Hoffman, an analyst for Nielsen VideoScan.
And Belson reports that while there are other financial streams for video, such as on-demand cable and DVD rentals through companies like NetFlix, the incentive for studios to sell DVDs is immense when they earn $17.26 from every DVD sold versus $2.37 per film on demand on cable and $2.25 per rental, according to Adams Media Research. DVD sales also help the bottom line at retailers such as Wal-Mart, which not only pulls in $4.7 billion worth of DVD sales a year, but sells other products like popcorn and beer to consumers to go with their films.
Though studios want a smooth transition into an hi-def era, the future is uncertain with DVD still at its peak and with no clear winner early on in the format wars between the Sony backed Blu-Ray and the Microsoft backed HD-DVD.
Writes Belson:
Proponents in both camps hope that video game players will popularize their formats. The PlayStation 3, due out in November, will play Blu-ray DVD's, and Microsoft is creating an accessory for its Xbox 360 console that will play HD-DVD discs. The studios also expect the boom in sales of high-definition television sets to heighten interest in high-definition DVD's, including older movies re-released in the new format.
"As people invest in LCD and flat-panel TVs, they are naturally going to want to invest in high-definition movies," said Benjamin S. Feingold, the president of worldwide home entertainment, digital distribution and acquisitions at Sony Pictures Home Entertainment.
Even so, the companies backing both high-definition formats are likely to see only modest sales initially. Consumers will buy just $175 million worth of HD-DVD and Blu-ray discs this year; by 2010, high-definition DVD sales will still be only half those of standard-definition disc sales, according to Adams Media Research.
"While the go-go days are gone, it's going to take a lot for another category to supplant" DVD sales, said Mr. Hoffman of Nielsen. "The end is not here yet."
