The Story of 2012 - DVD Sell Through Revenue

PSound

I have to go back and see exactly what I stated, but it was definitely between 20%-25%. I started to push that idea after Q1 and then began asserting it after H1.


It ended up being an optimistic view that was repeatedly labeled as "pessimistic" at the time. I fully expect that label to be applied again, despite my track record and the clear evidence (hat tip to Bruce) showing Blu-ray plateauing based on box office lead-in.

Kosty

Last year we had Avatar and Alice in Wonderland from 2Q 2010 drive down the YoY comparisons. We have nothing like those two titles in the comparisons from 2Q 2011 once we get past the next four weeks results.

Where we end up after the first three weeks of 2Q 2012 will have strong inertia to be maintained until we get to September as there is nothing major in the 2011 comparisons to drive the statistics down that much.

It indeed will be interesting to see how the Blu-ray YoY growth ends up and the end of the year and I agree a lot depends on what strength of the summer tent poles we end up with.

With box office still way up this year we may not see so much a box office normalization and much of the upcoming TBO strength may end up being even more favorable to Blu-ray than what we have seen so far this year.

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Kosty

I would not call a 4% YoY gain "exceptionally week" but indeed it has been less than what we have seen in past years, especially in the month of January (weeks 1-3) where the December holiday carryovers did not do as well this year as they did the year before.





YoY line charts

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Kosty

I think tripling of any YoY metric is significant. Its not a linear relationship to how much sales should improve with a percentage change in box office. How much it should increase or whether or not its below expectations depends on one's perspective.

Yours is obviously more skeptical than mine but there is nothing wrong with that at all.

You sometimes just seem to be perpetually disappointed no matter what the result would be.

What would you consider to be an appropriate level of Blu-ray's growth for the period with the TBO gain we have experienced with a lot of that gain being with the genre of the Twilight Saga release?

I understand that you think a high of +32% and a current level of +27% is not impressive. What would you consider it then, disappointing? adequate? modest?

What would you consider impressive then?

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bruceames

It depends on what that metric is and how long it has been sustained. Going from 2% to 6% is also "tripling" the metric, BTW.

Well since your view is so optimistic and you post so much, I feel a need to "fill in the blanks" if you will. Plus it can be fun to take the other side just to have something to debate about. I may not show it often, but I am rooting for OD. I've always been a fan of physical media and especially the shiny disc.

Modest. Adequate would be around 36%, relative to what DVD is. Impressive would have to be 50%+, considering the difference in box office. But then again, it's hard to be impressed with a format that barely breaks $2 billion in its fifth year and has yet to earn a 25% market share.

Impressive is the resiliency with which DVD is holding on, and is the story so far this year. But in any case the bottom line (OD) is what matters as far as physical sell through is concerned, and so far it looks good for OD this year (at least as long as the BO holds out).

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RIP Kosty.

PSound

Yes!

The performance of DVD and the resiliency it is showing so far in 2012 is impressive. Especially in a market where it has essentially been obsoleted by a product that it shares shelf space with, and one where the Blu-ray SKU often has a DVD in the case!


Blu-ray is exactly where one would expect. Up due to box office strength, but still trending at the level of plateauing.

bruceames

Well considering the rate of growth rate decline, you are right. All things considered, Blu-ray is right where one would expect.

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RIP Kosty.

Kosty

I always appreciate your point of view and fully appreciate as a counterpoint to mine and I hope you value my comments in response to your views in the same way.

If you are doing some of it from a devil's advocate all the better as that's always a useful exercise. Some of that is my motivation as well to some of your commentary as well. I agree its fun to talk about this stuff and debate about what we observe and what it means.

I think together all of our various points of view and perspectives cumulatively are a better appreciation of the situation than they would be by themselves in isolation.

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Kosty

I agree that Blu-ray is about where one should expect based on the strength genre and TBO of the releases we have seen so far this year.

I just disagree that its current growth rate is "trending at the level of plateauing" especially if its a growth rate that's higher than what we saw for last year.

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PSound

Yep. It has not deviated from it's current rate of growth decline, which I fully expect to continue this year.

Kosty

Just wondering how you could possibly say this?

Blu-ray's current rate of growth is +27.6% YoY in the HMM statistics which was higher than that metric was at any point in 2011.

At the same point last year through 12 weeks, the metric was at only at +8.09%.

The DEG stats at the end of 2011 were a +19.4% growth rate and the HMM EOY 2011 stats were at +17.7%.

We now are at +27.6% which is significantly higher than those numbers.

The current pace is a significant increase not a decline.

Blu-ray also reached a peak of +32.7% already this year in the week that Lady and the Tramp and Twilight Saga was released.

Those benchmarks are significantly higher and better than at any point in the last two years since we have kept track of them and clearly show that the rate of growth has increased and not declined from 2011 to 2012.

That kinda makes your statement not accurate at all.

Its only if you add in some magical pixie dust of disappointed unstated expectations that the increased growth is somehow less than it should be with the increased box office that you seem to be able to justify saying that. Is that what you meant?

If so, isn't that inconsistent not to consider that the lower growth rate in 2011 over 2010 also was influenced by the release strength as well?

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bruceames

He was accounting for the box office YoY differential. It makes quite a difference when you throw that in there. You certainly did last year. Why the change this year?

I estimate that Blu-ray would have grown about 30% last year under flat BO conditions, and it was 68% in 2010, so Psound's estimate of 12-18% sounds very much in line with the established growth rate decline.

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RIP Kosty.

PSound

Again, my track record is pretty damn good when projecting growth.

Box office matters. I accounted for it last year when it was down and H1 growth was single digits. I am accounting for it now when BO is up > 20% and Blu-ray is showing growth that is slightly stronger than BO growth.

I am expecting 2012 BO strength to outpace 2011 BO release strength. And with that in mind, 12-18% growth for Blu-ray looks correct.

Blu-ray growth is slowing. Period. How much it slows is based on BO release strength, which Blu-ray is particularly susceptible to (both on the upside and downside). Major catalog releases could also play a role, but the biggest gun has already blown its wad in 2011.

Kosty

I'm not changing my opinion on how much the strength of the box office performance and genre and power of the releases affects things. It mattered last year and it matters again this year.

I would contend that it was you guys that tried to downplay it last year as a factor. I certainly see that its a huge factor this year as well.

Thank you both for the responses.

I understand your point of view there even if I may not agree with it.

Obviously, it will be interesting to see where the YoY metric ends up with but I think we are already trending to be above that pace.

Last year we had the comparisons with Avatar and Alice in Wonderland from the year before that drove that YoY metric down and that factor is not a consideration in this new yearly comparison.

Once we get the data for the next month we will have a better idea of where the YoY metric will be throughout the summer and into the fall when its all up to the performance of the summer blockbusters.

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bruceames

I never tried to downplay it. I played it for what it was. Blu-ray actually did pretty good in Q1 last year, up 10% the BO was down 26%. But back then we were coming off the heels of a year where Blu-ray did 68% for the year, so in spite of the poor BO, 10% seemed low. But when you look at that quarter from the perspective of the quarters that followed instead of those that preceded it, it was actually pretty good.

Q2 2011 BO was down 4.4% and Blu-ray was up 10%. That was not as good. Remember Avatar is accounted for in the BO metrics, so that card can't be played twice. Besides, it did at best par for its BO on home video.

Q3 2011 BO was up 12.2% and Blu-ray up 58%. But of course Star Wars bumped up the BD percentage quite a bit

Q4 2011 BO was down 5.9% and Blu-ray up 15.5%. Pretty much par for the course.

Q1 2011 BO is up 22.2% and Blu-ray up 27.8%. Again, very much in line with the degeneration of growth thus far experienced in the last 2 years.


And what pace might that be?

Those movies were accounted for in the BO YoY. If you want to isolate them as factors, then first you need to remove their respective BOs from the statistics. For example:

Q2 2011: box office was up 16% (removing Avatar's $745 million in BO power from the 2010 stats) + Avatar happened last year. It is NOT BO was down 4.4% + Avatar happened last year. That's like trying to play the ace of spades twice on the same hand.

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RIP Kosty.