Support NeoGAF

[Kleegamefan]

http://www.businessweek.com/bwdaily/dnflash/jul2005/nf2005071_7277_db035.htm

JULY 1, 2005

NEWS ANALYSIS
By Ronald Grover

End of the DVD Party?

First Dreamworks' Shrek 2, now Pixar's The Incredibles. Retailers are shipping back scads of unsold copies. A bad plot twist for Tinseltown

For years, it has been the salvation of movie studios. Even if a flick bombed at the box office, film execs could always rely on putting it onto a DVD, promoting it in video stores, and making some or all of their money back. And with the price of DVD players steadily dropping to as little as $40, the market for those little shiny disks has become a gold mine for Hollywood, generating an estimated $18 billion in retail sales this year and growing at an annual clip of 66% since 2000.

Indeed, the market has become so lucrative that movie studios have been rushing their films from the theater into DVD sales quicker than ever. Some industry experts think that's a big reason for the recent box office doldrums, where ticket sales could end up at 20-year lows (see BW 7/11/05, "What's Driving the Box Office Batty").

Now small but troubling signs are emerging that the DVD market's growth could be trailing off faster than Hollywood expected. On June 30, Pixar Animation Studios (PIXR ) cut its earnings-per-share estimate for the second quarter to 10 cents from 15 cents, due to slower-than-expected DVD sales of its blockbuster The Incredibles. The stock of Dreamworks Animation (DWA ) dropped sharply in mid-May, after the studio reported that returns of its own blockbuster Shrek 2 left sales 5 million short of its forecasts.

"SLUGGISH PERFORMANCE." Major retailers have noticed that DVD sales have been softer than anticipated recently, too. During its first quarter, ending May 28, Best Buy (BBY ) said it saw revenue declines for DVD sales that were "comparable" to the double-digit sales hikes it reported for video-game sales. A Best Buy spokesman declined to comment further.

Circuit City (CC ) cited single-digit increases for its same-store sales of DVDs during the same period. And Trans-World Entertainment (TWMC), which operates more than 800 stores nationwide including the Wherehouse and Strawberries Music chains, reported a 2% decline in same-store sales in its own first quarter. Trans-World CEO Robert J. Higgins attributed the results in part to "sluggish performance" since Easter of DVD sales.

That led Sanford C. Bernstein analyst Tom Wolzien to speculate in a recent research report that a long-anticipated slowing of DVD sales may be showing up sooner than expected. "These data points...suggest that U.S. consumer demand may be cooling faster than our models suggest," Bernstein wrote. For the moment, Bernstein is projecting that DVD sales will increase by 9% in 2005 and 4% in 2006. That compares to a 29% growth in 2004, according to PricewaterhouseCoopers.

RELEASE-A-MINUTE. Why? That's sure to be a hotly contested topic at the usual Hollywood watering holes. But some things are certain. Studios are hustling their DVDs quicker to the Wal-Marts of the world. In 1998, moving a film from theater to DVD took an average of 200 days, nearly seven months. Today that's about 137 days -- or around 4.5 months, according to industry newsletter DVD Release Report. Looking for Sandra Bullock's flick Miss Congeniality 2: Armed and Fabulous? Warner Brothers put that less-than-stellar box-office performer onto DVD in a lightning-quick 88 days.

In addition to movies, studios have been pushing out DVDs of classic TV shows such as old Seinfeld episodes and the X-Files, further filling those aisles with content. That means folks may be staying home from the movie theater to watch DVDs, but it also makes DVD sales just another marquee business. Like at your neighborhood theater, a hot new release seems to be coming out every week.

Result: Retailers increasingly are shipping back unsold DVDs -- even those as hotly anticipated as Shrek 2 or The Incredibles -- because they don't have enough shelf space to keep all those titles, figure several analysts.

TOO MANY CHOICES. Then there's all the additional competition for viewers. Folks are watching more TV, according to a recent report by Turner Broadcasting, as well as playing more video games and surfing the Net. On top of that, cable and satellite operators are pushing nearly free digital video recorders, giving TV viewers the opportunity to record their own shows instead of buying DVDs in the stores.

"We live in an environment where leisure time is fragmenting, and choices are proliferating," says former Artisan Entertainment CEO Amir Malin, who operates the $250 million entertainment Qualia Capital fund, which that invests in media and entertainment properties.

Malin says recent DVD releases like MGM's (MGM ) Be Cool and Sony's (SNE ) Hitch have underperformed as DVDs, causing him to contemplate whether the entire industry may be headed for a "seismic change."

Hollywood doesn't like "seismic" events, unless they're in their latest action flick. But then again, this year's crop of summer movie "blockbusters" haven't exactly been packing folks into air-conditioned moviehouses. And if current patterns persist, once these summer films hit the sale racks as DVDs later this year, they may not be bringing in the gold the way their predecessors have done in the past.

 

[DMczaf]

Malin says recent DVD releases like MGM's (MGM ) Be Cool and Sony's (SNE ) Hitch have underperformed as DVDs, causing him to contemplate whether the entire industry may be headed for a "seismic change."

:lol Yeah, using Be Cool as an example of DVDs underperforming.

 

[bishoptl]

But if titles like The Incredibles aren't performing up to (relative) snuff, there is an argument to be made.

 

[distantmantra]

This hit the Anime market a while back, I was wondering how long it would be until the entire DVD market faced the backlash of oversaturization.

 

[Ninja Scooter]

i think consumers, even the casual ones, are getting smarter about double dips now. Most of them would probalby just rent Hitch or Be Cool if a new "EXTENDED EDITION" is coming in 6 months. Blame this on Hollywood's own greed, its finally coming back to bite them in the ass. Another byproduct of this is the used DVD market is growing. Hell there is now used DVDs for sale at most grocery stores, and Blockbuster has a huge section of used DVDs.

 

[Kleegamefan]

But if titles like The Incredibles aren't performing up to (relative) snuff, there is an argument to be made.

Not to mention the numbers from Best Buy, Circuit City and Trans-World Entertainment....

 

[Teddman]

i think consumers, even the casual ones, are getting smarter about double dips now. Most of them would probalby just rent Hitch or Be Cool if a new "EXTENDED EDITION" is coming in 6 months. Blame this on Hollywood's own greed, its finally coming back to bite them in the ass.

Exactly. I don't know how many times Hollywood is going to make the mistake of just assuming a trend of ridiculous sales growth is going to continue for years on end.

As for me, I never did buy many DVD's and wondered who the Hell was snapping up all those copies in the first place. Netflix has been a Godsend personally, and I think as online DVD rentals gain in popularity, you're going to see DVD sales drop even further. This is just the beginning...

 

[Ninja Scooter]

But if titles like The Incredibles aren't performing up to (relative) snuff, there is an argument to be made.

true, but i'd be interested to see how many copies they sent out. Odds are they overestimated based on how great it did at the box office. Im sure in some ways the honeymoon is ending though. Like with everything, there was a boom when you could sell anything on DVD, but now things are settling. I don't think it means that the DVD format is in trouble. Its up to the movie companies to figure out the consumer trends and change their business model accordingly, rather than just bitch and complain cause all 5 billion copies of Shrek 2 didn't sell. same thing is going to happen in a year or so with all the TV shows on DVD. Watch when some publisher is bitching that What's Happening? season 6 didn't sell for shit.

 

[SuperPac]

Sooner or later it will probably also hit the TV-on-DVD market as people realize they just don't need all the seasons of Double Dare on DVD.

...

I do, but "people" don't.

 

[bishoptl]

I'd buy a box set release of The White Shadow, if any Hollywood types are reading this.

 

[Ryck]

lol it even had the same title


http://www.ga-forum.com/showthread.php?t=53861&highlight=dvd+party

 

[ChrisReid]

http://www.ga-forum.com/showthread.php?t=53861

Edit: Even my reply is old.

 

[Suikoguy]

Good, the sooner to bluray the better (knows i'm in the minority)

 

[Synth_floyd]

They need an uber storage format where you can store a whole show onto one disc. So you don't have to buy all 9 seasons of Seinfeld. You just have to buy the complete Seinfeld series on one disc.

 

[Ninja Scooter]

Good, the sooner to bluray the better (knows i'm in the minority)

yes, because the key to solving this problem is to introduce the consumers to a new $500 piece of hardware that will play all the movies they already own.

They need an uber storage format where you can store a whole show onto one disc. So you don't have to buy all 9 seasons of Seinfeld. You just have to buy the complete Seinfeld series on one disc.

you think its just the format? They split the series up into seasons because they CAN and people will buy it. I doubt even with BluRay you will see entire runs of popular shows like Seinfeld on one disc. They will make you buy each season for $40 a pop cause they can get away with it.

 

[maharg]

They need an uber storage format where you can store a whole show onto one disc. So you don't have to buy all 9 seasons of Seinfeld. You just have to buy the complete Seinfeld series on one disc.

Do you really think this would make any practical difference? They'd probably still sell them in seasons, just with more extra crap added (there's no end to unused footage on a tv show) and the price would not change at all. Or they'd sell whole series, but they would cost $500 or more.

I find it amazing that people just *do not get* that the price you pay has almost nothing to do with material cost. Even at 9 discs a set, the material costs per unit are probably somewhere south of $10. They charge the prices they do because people are willing to pay that price, and it's the price that -- in theory -- allows them to make the most profit.

 

[Afro Thunder]

http://www.ga-forum.com/showthread.php?t=53861&highlight=dvd+party
My thread: :lol

 

[Synth_floyd]

I'm talking mainly about convenience. All 9 seasons of Seinfeld will take up maybe 50 discs or so? I guess the uber-disc would have to hold maybe a terrabyte and use lots of compression but it'd be neat if the whole thing was just on one disc. You wouldn't have to have 9 boxes of DVDs lying around or switch when you wanted to see different episodes, etc. Or you could have 30 years of SNL on one disc and search for skits by actor, content, type, etc. or just watch the regular episodes. I wonder why SNL hasnt' been released on DVD yet anyway? I don't think many people are interested in 1976 episodes of SNL but I'm sure they could get some money out of it.

 

[Ash Housewares]

they could the drop the prices and I'll buy 'em

I'll take a $10 Incredibles

 

[acidviper]

There is a problem when the HDTV broadcast looks better than a DVD. I really don't know what is going to happen to DVD's that look like crap now when everyone gets used to HD. I guess it'll be like PSone vs Xbox 360.

 

[Lil' Dice]

They should go back to waiting 6 months to release a theatrical release to DVD.
Right now some people are thinking: "Why not just wait 4 months until it hits DVD?
And others say: "Nah, i just saw this movie 4 months ago, i don't feel like seeing it again.

Or maybe Hollywood has been releasing some truly shitty movies....

Either way, you'll never hear the movie industry take the blame for anything.