Film Studios Can 'Cannibalize' Their DVD Sales, Or Lose Them Completely

from the time-warp dept

Wed, May 27th 2009 9:22am — Carlo Longino

"Like music before it, and lately the book industry, major film studios are grappling with the transition from distribution of physical DVDs to electronic delivery. It is a change the studios need to make, to cut costs and curtail piracy." You'd be forgiven for thinking that line was from a story about the film business from several years ago, but it's from a piece over the weekend in the WSJ laying out that movie studios still haven't figured out this internet thing. Of course, with guys like Michael Lynton in charge, that doesn't seem too surprising. Anyway, the main point of the WSJ piece is that studios have been slow to move because they're afraid of killing off DVD sales, which still account for 43 percent of film revenues. Here's the rub, though: DVD sales are already slipping, and efforts to boost them by pushing new kinds of plastic discs on consumers aren't helping. The studios seem to believe that their content is valuable enough that they can dictate how people purchase and enjoy it, and that they'll keep on buying, regardless of how their preferences and desires change. This attitude has already shown up in the studios thinking of yanking their movies from Netflix and trying to hamper the Redbox rental service. Clearly, the idea that studios can protect DVD sales by hamstringing downloads and online services isn't working. Using the fear of cannibalizing DVD revenues with online services isn't particularly smart. Studios face the choice of perhaps cannibalizing their own sales, or losing the revenues to somebody else completely.

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Filed Under: business, dvds

33 Comments

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Anonymous Coward, 27 May 2009 @ 9:41am

"Studios face the choice of perhaps cannibalizing their own sales, or losing the revenues to somebody else completely."

Umm, who are they going to lose the sales to? It isn't like two studios made the same movie.

DVD sales are slipping perhaps because buying DVDs is perhaps a luxury, something that isn't as popular in these poor financial times. In fact, the blog entry you link to (rather than linking to the actual story, Mike will be proud of your SEO skills) shows this clearly, the more expensive the DVD, the more sales are off. That would appear to be a question of ability to pay, and not a lack of demand. It also is numbers in dollar figures, not units sold.

It's a big jump from here to saying the studios need to change their business model completely.
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Hulser (profile), 27 May 2009 @ 9:54am

Re:
Umm, who are they going to lose the sales to? It isn't like two studios made the same movie.

Why, illegal downloads of course. You can lose sales to illegal sources as well as legal.

It's a big jump from here to saying the studios need to change their business model completely.

The idea that DVD sales are slipping is ancillary to the argument that the movie studios need to change their business model. What's clear from Carlo's post -- and a common theme of many TD posts -- is that the movie studios are having a hard time adapting to a new marketplace. Rather than controlling what replaces DVDs, they're so fearful of "losing" profit, even to themselves, that they're going to end up losing much more in the long run.
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Anonymous Coward, 27 May 2009 @ 10:09am

Well, technically...
Fava Beans are in season right now, and the 2003 Chianti from the Grosseto region wasn't too bad...
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Ima Fish (profile), 27 May 2009 @ 10:11am

DVD sales were high because the economy was great and it was cool to "own" a high quality version of your favorite movie.

Now the economy is in the dumps and people have released that you do not need to own movies, it's much cheaper to rent them. Let's face it, exactly how many people are going to watch Paul Blart: Mall Cop more than once? Who needs to "own" Hotel for Dogs?

And there's one other reason for the decline in DVD sales, blu-ray. Now I'm certainly not arguing that the small sales of blu-rays are killing DVD sales. No, what I'm arguing is that most people realize that DVDs are "last year" and that high definition is today and the future. Knowing that, who wants to buy a SD DVD, knowing that the technology is already dated?

And please don't bring up DVD up-sampling. If you seriously believe that an up-sampled DVD looks as good as a blu-ray, you are not qualified to offer an opinion on the matter.
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Anonymous Coward, 27 May 2009 @ 10:16am

The patent doesn't even appear to cover the method of identifying the song. "The automated database uses a central processing unit and search stored information as known in the art to analyze the music and compare it to stored works..."

The patent is for using already known ways to analyze music and adding a very general user interface. So basically, person A comes up with way awesome way to do action X and patents that. Then person B patents doing X when a user presses a button. Now person A can't sell something doing X with a button without paying B?
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Anonymous Coward, 27 May 2009 @ 10:18am

Re:
Posted in wrong tab, this was supposed to go to patent article.
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Anonymous Coward, 27 May 2009 @ 10:26am

Re:
Troll. What I do *seriously* believe is that an up-sampled DVD looks *good enough* on my 1080p plasma tv that for most movies the marginal quality difference for blu-ray isn't worth the premium price. It's still much better than the crappy quality of non-digital broadcasting or the utterly horrible quality of VHS tapes. If the story is good enough, it really doesn't matter if I can count the pores on the nose of the heroine, or whether I can just see that she's pretty. Blu-Ray is overrated - no amount of image quality will compensate for bad content. And good content will overcome any incidental shortcomings of the medium that delivers it. Gamers are starting to realize this - a good game is worth much more than a shitty game with state-of-the-art graphics.

DVD sales aren't being hampered by Blu-Ray, they are being hampered by being too goddamned expensive. Blu-Ray even more so. I've observed the prices of DVD's creeping up over the last decade until the point was reached where it was easier to wait for the price to drop than to buy new, or wait for it to show up in the library or whatever.
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Designerfx (profile), 27 May 2009 @ 10:27am

Re: Re:
Incorrect here.

It's been proven time and time again: give people a service, a reason to pay, and they will.

In lieu of that reason, service, people will create their own service (filesharing).

This is not rocket science, but it is for lazy people who don't want to try to find new methods.
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qhartman (profile), 27 May 2009 @ 10:39am

I want fewer "things"
For me, my decline in DVD purchases is something of a knock-on effect of my "green" lifestyle changes. I don't want more "stuff". Since I can access all the media I want via downloads / streaming / rental, the appeal of having to lug around a physical artifact that I will actually only use a handful of times is _not_ appealing.

A perfect example of this is Dark Knight. I was crusing a Circuit City that was closing and they had copies for $10. I reflexively picked up a copy because it was a good deal, and I knew I wanted to "own" a copy. But as I approached the register, I looked at the box and it occurred to me that I didn't want to have to store and/or dispose of that container and disk at some point. So I put it back on the shelf, and added it to my Netflix queue when I got home instead...
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Hulser (profile), 27 May 2009 @ 10:47am

Re: Re: Re:
Incorrect here.

What exactly are you saying is incorrect? You replied to my comment, but you seem to be agreeing with it, not contradicting it.
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Anonymous Coward, 27 May 2009 @ 10:47am

It isn't a good idea to cannibalize your own sales before you need to though.

If they do that themselves, they know profits will drop x percent. If the loss from filesharing is above that, they should do it themselves, if it isn't, they shouldn't.

They can fight filesharing to extend the time it takes to reach that point, and then go ahead and do it themselves. Anything else would be stupid.

Of course, you have to determine when you reach that point (or maybe they have already reached that point, I would imagine McKinsey or BCG has already told them that)
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Anonymous Coward, 27 May 2009 @ 11:03am

Re: Re:
Illegal is good only to a point - most people aren't willing to wait a couple of days for P2P to deliver a product, a product that is often not good, not what they expected, or of poor quality. P2P is a solution only for a certain part of the population.

The argument that they need to change business models is an opinion. More importantly, the article from the WSJ that is pointed to is an opinion, and all the other links in the story are to techdirt posts by Mike that are also opinion.

Most importantly, they are opinions that don't consider alternate solutions for decline in dollar sales, such as lower DVD prices, people with less disposible income, people not currently buying because they are waiting to move to blu-ray, more people seeing the movies in Theaters rather than buying the DVD later, etc. So the opinion expressed isn't so much based in reality as much as a sort of group wishful thought, a tightly focused desire to move to more easily "infringed" digital delivery systems, to make more stuff "FREE!".

This is light on facts, heavy on opinion, and of course, an opinion based on quoting other opinions.

This is actually more what Masnick's law really is: If you state an opinion over and over and link to as many similar opinions, you can treat them as facts in the future.
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Anonymous Coward, 27 May 2009 @ 11:07am

and um...
I think the 'material' in this story has been 'reported' anout a billion times. Even for an op-ed piece it is lame, hardly better than a ninth grader's "Shakespeare was a great writer." How about requiring posts to have some meat on the bones?
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Anonymous Coward, 27 May 2009 @ 11:08am

and um...
I think the 'material' in this story has been 'reported' anout a billion times. Even for an op-ed piece it is lame, hardly better than a ninth grader's "Shakespeare was a great writer." How about requiring posts to have some meat on the bones?
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Hulser (profile), 27 May 2009 @ 11:21am

Re: Re: Re:
The argument that they need to change business models is an opinion.

Yes...and? You're surprised that a web site that provides analysis on the subject of technology contains opinions?

Most importantly, they are opinions that don't consider alternate solutions

Who says these "alternate solutions" aren't being considered? Just because they're not enumerated in the post, doesn't mean that they aren't part of the overall argument. Besides, the reason for the decline in DVD sales is irrelevent. I repeat, the reason that the movie studies need to change their business model doesn't have to do with a short term decline in DVD sales. It has to do with this new fangled contraption called "The Internet" and how it will make the sale of plastic discs irrelevent.

This is actually more what Masnick's law really is: If you state an opinion over and over and link to as many similar opinions, you can treat them as facts in the future.

Feel free to provide a well-reasoned counteropinion rather than a ambiguous attack on the concept of the opinion.
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Hulser (profile), 27 May 2009 @ 11:29am

Re: and um...
If you don't like posts of new examples that support a set of ongoing technology themes, then perhaps Techdirt isn't for you.
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Mechwarrior, 27 May 2009 @ 12:04pm

DVD sales had been declining prior to the recession.
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TPBer, 27 May 2009 @ 12:16pm

DL times
If it takes the above poster a couple of days to DL via torrents, either you are no good at it or your service provider is shit. I can get an average of 10 .avi (700-1.4 gb) in one overnight session on time warner. Maybe you should either learn how to do this more efficiently or quit posting stupid comments about Dl times. Never ceases to amaze me how many people cannot figure out how to do this simple task, I guess it's the same goobers that stand in line a Redbox. That makes me laugh because those are not even very current compared to the torrent sites. Try to get a good screener of Star Trek there.
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R. Miles (profile), 27 May 2009 @ 12:28pm

Re:
And there's one other reason for the decline in DVD sales, blu-ray.
Uh, no. "DVDs" encapsulates Blu-Ray sales as well, Ima. Both segments are dropping sales. Even though there's an "increase" of Blu-Ray purchases, overall, all sales are down.

If I were to buy a new DVD, I'd do so in "SD" format. I'm not going to shell out $300 for a new player just for increased resolution when an SD version looks damn good on my plasma.

While some will argue the economy is at fault (and partly, I'm sure it is), services like Netflix are booming for good reason. As you said: Who wants to watch Mall Cop more than once.

Renting, by far, is cheaper than owning, and given Netflix's recent membership numbers, the "duh!" statement should be coming from movie distributors who can't do simple math.

I've not purchased a DVD in quite some time, and don't intend to. I don't rent, either. Simply because Hollywood doesn't put out anything of a $20 value to me.

For those rare movies which do, they become gifts.
:)

Oh, and piracy being a factor? Doubt it. The average consumer isn't pirating, despite what blowhards think. To download, review, and burn to DVD is just well above the average consumers' head to do.

Remember, we're talking about an audience which didn't even know the difference between Blu-Ray and HD-DVD. Does anyone honestly think these people pirate?

If one does, please allow me to sell you a bridge. Just opened up today for sale.
;)
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AAA in LA, 27 May 2009 @ 12:31pm

Re: Re:
Not only illegal dl's. It can lose to OTHER forms of entertainment as well (video games come easily to mind). DVD sales are down for a variety of factor, the economy being one of them, i'll give you that. However, it would be naive to think that redbox, on demand, hulu, has not altered the landscape significantly.
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SRJCollege@gmail.com, 27 May 2009 @ 12:35pm

Re: Re:
If the story is good enough, it really doesn't matter if I can count the pores on the nose of the heroine, or whether I can just see that she's pretty

I bet if I went back to the early days of DVD, I could find someone like you claiming that SVHS was good enough and the DVD was overrated...you're a genius that doesn't let reality get in the way of your arguments.
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Jim, 27 May 2009 @ 12:51pm

Shareholder Value Disconnect
This subject highlights a significant failing of many large corporations. Wall Street execs pile-drove their companies into the ground because they personally made a lot of money doing it. For much the same reasons, many execs at major media companies will do the same thing, even while they know they're doing it. The main priority of a highly-paid exec is to remain a highly paid exec. It's only important that they appear to care about shareholder value. It is so much easier for an exec to go to his/her stockholders and/or superiors and say there is a way to protect billion dollar revenue streams by lobbying for anti-consumer laws, and by using a magic pixie dust called DRM. It would be very difficult for them to propose a way that their companies could make the transition and thrive. As long as they can keep their paychecks, bonuses and fringe benefits coming for another quarter, many, if not most, don't give a hoot about the future of their companies. Piracy can actually be very useful to these folks since it gives them an excuse for bad numbers.
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Pieman, 27 May 2009 @ 1:03pm

Re:
DVD up sampling is not as good as blu-ray but you have to consider the source of people making these comments, it may look as good depending on your tv size. For owners of smaller TV's it probalby looks the same.
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Anon, 27 May 2009 @ 1:11pm

Re: Re: Re:
DVD gained a lot of points over VHS because a DVD can hold more information. Ever notice how movies over 3 hours needed to be stored on more than one tape? With a DVD you don't have that problem.

While Blue-ray can hold far more information than a DVD, it doesn't matter, because even long movies can be stored on one disk. It isn't a matter of convienience anymore, it's now an issue of cosmetics. How much detail are you willing to pay for? As someone above said, who cares if you can see the pores or not, as long as the story is good?
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Anonymous Coward, 27 May 2009 @ 1:21pm

Re: Re: Re: Re:
i already did. The data provided is in dollars rather than units sold. That fails to indicate if demand is down, sale price is down, or if users are moving to older, lower priced DVDs. It doesn't take into account the product mix for a given year, as an example if 2007 had a high number of DVD box sets at higher prices, compared to 2008 possibly had less. It doesn't consider the economy.

Thus, it is an opinion, and an opinion based on nothing more than a desire to make that opinion true.

"Yes...and? You're surprised that a web site that provides analysis on the subject of technology contains opinions?"

Not at all, What I object to is the citing of third party sites as source material, when it turns out that the source material is also opinion, often based on source material from another third party opinion site. I object even more because the tactic of Mike on Techdirt is to turn around and backlink to these opinion pieces on his own site at a later date, and reference them as fact or "nearly fact". it clouds the water.

I expect opinion, I don't expect it to be presented as fact.
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BigKeithO, 27 May 2009 @ 1:41pm

Re: Re: Re:
Why do Blu-Ray fanboys find it so hard to except that some people just don't care about the change in quality? Does Blu-Ray look better than a DVD? With the right TV, yes it does. Do the majority of people care about the difference in quality? No!! Just because you enjoy it more doesn't mean that the average Joe gives two shits about it. Personally, I like to have the latest and greatest when it comes to tech toys but I have yet to jump on either the HD-DVD or Blu-Ray bandwagons. Why? Because the cost does not justify the marginal increase in image quality. A lot of people feel the same way as I do.
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spaceman spiff, 27 May 2009 @ 2:50pm

Studios and DVD's - deserve to die!
I just bought a huge collection of DVD's from Amazon.com - a high school graduation + birthday present for my Little Brother. Discounted, it came to almost $200 for 10 seasons of a popular SciFi program - 54 discs. Of those discs, 8 were unreadable and another 5 or so were severely scratched to the point the viewing experience was degraded. Amazon.com, to their credit, shipped me a replacement immediately upon my notice to them of the defects, but in any case, this is just totally BOGUS! 3 of the 5 season 9 discs were unreadable. If I hadn't QC'd the package upon receipt, who wants to bet that the flaws would have been found while the product was still under warranty?

So, how many DVD's do you think I'll be purchasing from this publisher in the future?
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Anonymous Coward, 27 May 2009 @ 4:36pm

Re: Studios and DVD's - deserve to die!
I see what you did thar!

This is me.
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Lawrence D'Oliveiro, 27 May 2009 @ 4:56pm

Apropos Quote
“All evolution in thought and conduct must at first appear as heresy and misconduct.”

—George Bernard Shaw

(Found on Colin Jackson’s site)
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cram, 27 May 2009 @ 7:36pm

Re: Re: Re: Re:
"Besides, the reason for the decline in DVD sales is irrelevent. I repeat, the reason that the movie studies need to change their business model doesn't have to do with a short term decline in DVD sales."

I don't understand. DVD sales reportedy account for 43% of a movie's revenues. How can that be irrelevant? Will those revenues come in from somewhere else?

And you say the decline is short term, but then go on to say they will become irrelevant. Please decide!

"It has to do with this new fangled contraption called "The Internet" and how it will make the sale of plastic discs irrelevent."

But plastic discs are "scarce" goods, which are supposed to cover your ass when you are giving away the movie free. And they currently account for 43%, near damn half of a movie's revenue. How is a studio to recoup the 43% decline in revenue through DVD sales if plastic discs are soon to be irrelevant? More expensive theater tickets, T-shirts?
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Anonymous Coward, 27 May 2009 @ 10:10pm

Re:
No, what I'm arguing is that most people realize that DVDs are "last year" and that high definition is today and the future.

Oh puleeze, blu-ray is so "last year". HXGA (res up to 7680x4800) blows it away. If you don't know that, you are not qualified to offer an opinion on the matter. Go hide back under your rock.
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BigKeithO, 28 May 2009 @ 9:17am

Re: Re:
HXGA dates back to 2005. Isn't it just a display tech? Huge costs and low refresh rates... How does this relate to Blu-Ray?

Its not like movie studio's are recording their movies in a HXGA format for the high end scientific crowd to display super high res versions of their movies on. See the original comment, "No, what I'm arguing is that most people realize that DVDs are "last year" and that high definition is today and the future." High definition is today is the key part there, HXGA is a fancy tech but it sure as hell isn't the mainstream. If you don't know that you are not qualified to offer an opinion.
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DVD, 2 Aug 2009 @ 11:45am

Owning DVD’s
I still want to own a lot of DVD's that I still need to buy. Long live owning movies.
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