The State Of The Union Report

[stratman]

Last year wasn't kind to the home entertainment industry, having suffered a raging format war and an over crowded fourth quarter, the studio bosses are spinning a more optimistic view for 2008, hoping that the growth in the high-def camp will explode and make up for losses in the aging DVD market.

Overall, we spent 22.9 billion dollars on home entertainment rentals and purchases, marking a 3.1% loss from 2006. Both sales and rentals slipped, dropping 3.3% to $15.38 billion and 2% to $7.5 billion according to research by VB (Video Business.)

But with evidence in January of surging interest in Blu-Ray Disc following Warner Brothers decision to jump ship the studio chiefs are looking for a more stable 2008. Though the HD DVD camp will be releasing some high profile titles such as Bee Movie and American Gangster.

Paramount president Meagan Burrows was philosophical in outlook, "The industry has experienced it's first downturn this year, we'll need to reverse this and reignite our efforts for the consumer in 2008. But we feel poised for a for a phenomenal year, with a combination of beloved franchises and fresh innovative product."

Transformers, last year's top title was Paramount's biggest release since 1998 VHS formatted Titanic. According to Burrows, "Transformers generated $189.5 million, inspiring Paramount to follow that success with a combination of the new Iron Man and the long established Star Trek."

Warner Home Video president Ron Sanders said that 2007 was a disappointing year for video, though box office numbers were good. He's still optimistic for 2008, "The good news for 2008 is that there aren't a lot of sequels. there will be a lot of fresh content, which will be something that resonate with the consumer." Warner will spearhead 2008 with Dark Knight, Speed Racer and Get Smart.

Lionsgate's Ron Schwartz said that in 2007 sequels accounted for 25% of the market compared to 18% in 2006. "Sequels as a whole will under index non sequels in DVD performance, but the market held up well, where we did not see decay in terms of non sequel properties." For example in Lionsgate highlights , Crank generated $64.1 million in DVD , representing 231% more dollars than it's box office revenue. Bratz earned $23.5 million on DVD, 235% better than it's theatrical run. Blu-ray is also flexing it's muscle, this month the studio's BD releases of War and 3:10 To Yuma have already outsold each of Lionsgate's 2007 BD titles, including ones that earned more at the box office.

Walt Disney Studios Home Entertainment plans to expand it's BD slate with it's first made-for-disc releases Tinker Bell and Little Mermaid: Ariel's Beginnings. Disney's Lori MacPherson was cautious and hopeful, "I think high-definition is certainly the big opportunity, and our hope is that the market will get back to flat or have single digit growth."

"This was a good transition year," added Mike Dunn, 20th Century Fox Home Entertainment president. "We had the primary issue of consumer not investing in software that could be obsolete. Yet with Warner choosing BD, I think the most important thing is that the Blu-ray demand will be there."

Sony Pictures Home Entertainment president David Bishop believes the studio's tent pole, Spider Man 3, might have performed better if fewer resources had been spent on the format war fight. "Although Paramount and Universal Studios Home Entertainment remain HD DVD exclusive, there is a growing industry consensus around Blu-ray, which now has the exclusive backing of studios with a combined market share of 75%. That money could have been used for other uses, we could have sold a few million more units, so much of our marketing efforts were about one-upmanship," laments Bishop.

However, with Paramount's resounding success of Transformers on standard def and HD DVD, there is still plenty of fight in the underdog format. Universal president and HD DVD backer Craig Kornblau foresees high definition software of both formats punching up business in 2008. "Right now, our current plan is to solely exploit high-def content in HD DVD, we will be watching consumer adoption very carefully with the two formats. I definitely think we will see tremendous growth in high-def."

So fellow Audioholics this is where sit right now. Mr. Kornblau has left a door open for Paramount to jump ship, "we will be watching consumer adoption very carefully with the two formats," it sounds like a warning to Toshiba, if the numbers don't improve. we're gone.

 

[evilkat]

The problem is, even though WB jumped onto BD, the jump was late enough that there is a siginificant number of people who bought HD STANDALONE players left high and dry. People who bought the standalone players bought it ONLY to watch movies (as opposed to PS3 buyers) so there's a good chance that HD titles will see higher sales as a percentage of their HD player owners, which might spurr on the war. For PS3 owners, I would argue that the overwhelming majority bought it for games, and if BD turns out to be a very transient format, they would feel less of a loss.

 

[aberkowitz]

The problem is, even though WB jumped onto BD, the jump was late enough that there is a siginificant number of people who bought HD STANDALONE players left high and dry. People who bought the standalone players bought it ONLY to watch movies (as opposed to PS3 buyers) so there's a good chance that HD titles will see higher sales as a percentage of their HD player owners, which might spurr on the war. For PS3 owners, I would argue that the overwhelming majority bought it for games, and if BD turns out to be a very transient format, they would feel less of a loss.

I would argue that a significant number of the people who bought the HD standalone players (the $99 A2 deal) haven't actually purchased an HD DVD to date- ignoring the 8 movies they were getting for free with the player. Considering the average price of an HD DVD new release is somewhere in the $25-35 range, somebody who is so price sensitive that tehy would only buy a player once it hit $99 is not going to shell out that kind of money for content. Many of these buyers are probably just using their A2 to play SDs and are totally happy with it.

Toshiba's mistake with their price drops was assuming that the average consumer understood what they were getting with an HD DVD player and would be willing to pay high prices for better quality discs. This was a complete misreading of the customer who was going to Wal-Mart to buy they player @ $99.

 

[Tom Andry]

Wait... people actually GOT those free movies? I've been waiting since Black Friday!

 

[aberkowitz]

Wait... people actually GOT those free movies? I've been waiting since Black Friday!

Haha- Tom, I bought my PS3 in the middle of September and I think my free movies came sometime at the start of December. KEEP WAITING!!

 

[Johnd]

I can't believe Transformers was Paramount's biggest hit in the past decade. But I must confess that I've not yet seen it.

Black Friday Tom? A little patience please. I've been waiting (patiently, I'll add ) 3 1/2 weeks longer than that! And I'll add that I have not bothered to call Toshiba (or their handler...whomever deals with the free HD's) or email them...that's just the kind of guy I am. I'll give them a few more weeks before I start questioning delivery. Yeah, about 2 1/2 months now...patience is a virtue.

 

[evilkat]

I would argue that a significant number of the people who bought the HD standalone players (the $99 A2 deal) haven't actually purchased an HD DVD to date- ignoring the 8 movies they were getting for free with the player. Considering the average price of an HD DVD new release is somewhere in the $25-35 range, somebody who is so price sensitive that tehy would only buy a player once it hit $99 is not going to shell out that kind of money for content. Many of these buyers are probably just using their A2 to play SDs and are totally happy with it.

Toshiba's mistake with their price drops was assuming that the average consumer understood what they were getting with an HD DVD player and would be willing to pay high prices for better quality discs. This was a complete misreading of the customer who was going to Wal-Mart to buy they player @ $99.

I've seen some threads posted by buckeye where you get HD-DVD titles for as low as $13-$15 range. Granted they're not the creme de la creme titles, but if you were going with HD-DVD u knew that you would have a smaller selection anyway (although who knows if people actually considered this).

 

[stratman]

Here are a couple of stats released today: January, Blu-ray set-tops dominated 90% of all high-def hardware unit sales for the week ended January 12th, HD DVD set-tops represented 7% and dual-format players totaled 3%.