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Optical (Blu-ray/DVD) and Digital (EST/UV) Sales Thread

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Old 03-02-2012, 12:48 AM   #1726
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Just getting news now of the titles to be released at the tougher comparison period at the start of the 2Q which last year had the good weeks of Tangled, Tron:Legacy and Harry Potter 7.1 in the first few weeks of 2Q 2011 and last week of 1Q 2011 around Easter.


This year will have the long delayed Hop, Girl with the Dragon Tattoo, Muppets, Alvin and the Chipmunks: Chipwrecked released a few weeks before the Easter weekend period (Sunday April 8, 2012). Easter week always gives a burst of seasonal sales (it fell in 1Q 2010 and 2Q 2011 in a statistical mismatch last year) so this year its in the same 2Q period as last year.

War Horse and We Bought a Zoo get the Easter week release and Mission Impossible: Ghost Protocol (April 17, 2012) so far is the big action adventure thriller with over $207 M box office to go against the Harry Potter and the Deathly Hallows: Part I $295 M box office head to head slot. (April 15, 2011)

Sherlock Holmes: A Game of Shadows with its $185 M box office is also lurking around for probable 2Q 2012 May release which was pretty modest in the 2Q 2011 period.





http://www.dvdreleasereport.com/

dvdreleasereport.com





Last edited by Kosty; 03-02-2012 at 01:03 AM..
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Old 03-02-2012, 02:19 AM   #1727
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Quote:
Kevin Tsujihara: Discs Key to Driving UltraViolet Adoption
29 Feb, 2012
By: Erik Gruenwedel

...

Tsujihara said consumer appetite for Warner movies continues to escalate. There were 1.3 billion paid transactions of Warner content (theatrical and home entertainment) in 2006 compared to 2 billion transactions in 2011.

“We don’t have a demand issue; it’s really an innovation challenge,” he said.

Tsujihara said the rollout of UV is driven by the current status of the three primary business models in home entertainment — subscription (by-mail and SVOD), rental (video store, kiosks and VOD) and sellthrough. All three generate revenue for Warner. It’s the margins that keep studio executives up at night.

Indeed, a transactional VOD rental is seven times more profitable to Warner than a kiosk or rental subscription; and a sellthrough transaction is 20 to 30 times more profitable than a kiosk or rental subscription, according to Tsujihara.


“We’re fine with low prices for consumers and there’s absolutely a place in the ecosystem for discount kiosks (like Redbox) but it is not day-and-date with sellthrough,” he said. “We think we can meet consumer needs while maintaining sound economics by creating the right release window.”
http://www.homemediamagazine.com/dig...adoption-26560
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Old 03-02-2012, 02:35 AM   #1728
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Redbox is buying about $800 M of physical product most directly from the studios then the rise in that amount over the past couple years with Redbox's rise has gone to the studios directly with their studio providing agreements where before those DVD sales to stock Redbox kiosks from retailers like Walmart were counted as consumer level DVD sales at retailers like Walmart when they had previous studio workarounds. In this case for Warner those Redbox inventory work arounds would again count as consumer level DVD and Blu-ray sales for the select titles they choose to stock.

If Blu-ray was 7% of the Redbox unit volume for 2011 and most Blu-ray rental transactions for the year were $1.50 vs $1.00 for DVD ($1.20 later 4Q 2011) then Blu-ray revenues for Redbox was probably around 10% or so of Redbox revenues assuming Blu-ray rentals stayed out about the same rate as DVD rentals.

Quote:
Coinstar CEO: Warner Workaround for Redbox ‘A Success’
28 Feb, 2012
By: Chris Tribbey

...

“We only buy around one studio, and that’s Warner,” Davis said. “We have direct deals with everyone else, and that has worked well. We think that we can bring a lot to the party when we work with our studio partners on helping them sell product. Obviously we buy a lot of product. If you look at it on an annual basis, we’re buying $800 million-plus in physical content.


...

Davis also noted in his presentation that Redbox aims to have 45,000 to 60,000 kiosk locations in the United States and that after its first-ever price increase during the fourth quarter of 2011, “We’re not thinking about pricing now. We made that move. It should last for a good while.”

...

Regarding Blu-ray, Davis said high-def currently accounts for around 7.5% of rentals at Redbox kiosks, but with the U.S. household penetration of Blu-ray players much higher (one third, according to the Blu-ray Disc Association), Davis said Redbox is hoping that number will rise. “We view that as white space,” he said of the difference.



http://www.homemediamagazine.com/red...-success-26547
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Old 03-02-2012, 02:58 AM   #1729
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Also on rental market shifts...

From NPD on Rental changes:

Quote:
Home News Press Releases The NPD Group: Sea Change in Movie-Rental Market Benefits Redbox and Netflix Watch Instantly in 2011

Brick-and-mortar retail stores continue to cede movie-rental market share, as kiosks and digital-streaming rentals become more accepted by consumers.

PORT WASHINGTON, NEW YORK, January 19, 2012 – According to The NPD Group, a leading market research company, U.S. consumer rental of movies in DVD and Blu-ray Disc formats fell by 11 percent in 2011, versus the prior year, and the landscape of retailers has shifted dramatically. The leader in physical-disc rentals was Redbox, whose unit volume increased by 29 percent year over year; as a result, Redbox’s share of DVD and Blu-ray movie rentals rose from 25 percent in 2010 to 37 percent in 2011.

NPD’s VideoWatch consumer tracker indicates that much of the share gains came from traditional brick-and-mortar retailers like Blockbuster, whose share fell 6 percentage points to 17 percent in 2011. Netflix’ share of DVD and Blu-ray rentals was flat for the year at 30 percent; however, in the fourth quarter (Q4) of 2011 the company reached a two-year low of 25 percent.

“There’s no doubt that Redbox has been the largest beneficiary of the collapsing brick-and-mortar store rental business, especially with ongoing Blockbuster store closings and the fact that there are also fewer independent stores than the prior year,”
said Russ Crupnick, senior vice president, industry analysis for The NPD Group. “The Netflix share erosion may have resulted from their recent well publicized challenges with pricing, and from their now defunct Quikster experiment; however, they are in the process of shifting customers to their Watch Instantly option, so not all of the physical movie rental share drop is a net loss.”

In fact, according to NPD’s VideoWatch Digital tracking service, nearly one in three paid movie rentals (31 percent) now come from paid video-on-demand (VOD) options. Netflix is the dominant provider of paid digital movie rentals, posting a 55 percent share in the fourth quarter of 2011, though Netflix’s share is down somewhat from the company’s peak of 59 percent in Q2 and Q3 2011.

“The movie-rental market is clearly undergoing a sea change, as consumers become better equipped to access on-demand and streamed movies and are more comfortable with available delivery options,” Crupnick said. “Even so renting physical discs from now-ubiquitous kiosks in grocery stores and other venues has taken the lead as the most popular movie-rental method in the U.S.”

Findings reported in this press release reflect movie rentals only, and do not include rentals of television shows or series; nor do they include free movies from over-the-top television (OTT) or cable providers. All findings are based on information compiled from 38,637 digital movie renters and 74,008 DVD/BD movie renters from NPD’s online consumer panel. The data has been weighted and projected to reflect the U.S. population (age 13 and older).
https://www.npd.com/wps/portal/npd/u...ases/pr_120119
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Old 03-02-2012, 11:42 AM   #1730
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Originally Posted by Kosty View Post
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Indeed, a transactional VOD rental is seven times more profitable to Warner than a kiosk or rental subscription; and a sellthrough transaction is 20 to 30 times more profitable than a kiosk or rental subscription, according to Tsujihara.
God the loss of sell through has to be a huge disappointment for the studios! No wonder they had so much riding on the success of a new physical format. So yes, I'd say expectations were high for Bluray and it has failed to meet those expectations. This seems undeniable.
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Old 03-02-2012, 12:01 PM   #1731
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Originally Posted by Malanthius View Post
God the loss of sell through has to be a huge disappointment for the studios! No wonder they had so much riding on the success of a new physical format. So yes, I'd say expectations were high for Bluray and it has failed to meet those expectations. This seems undeniable.
Interesting. Thanks for pointing that out Mal. So if rentals average $1.50 and sell-through $15, then sell-through costs 10x more on average then kiosk or subscription. And as stated if profits are 20-30 times more on sell-through, then sell-through revenue as a whole would be 2-3 times more profitable per dollar spent. Unfortunately for the studios, the OD rental pie has increased from around 30% in DVD's heyday, to around 40% now (thanks to steep sell-through declines while rental remains relatively stable).

I've always wondered what the profit margin is on rental vs. sell-through.
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Old 03-02-2012, 01:18 PM   #1732
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Originally Posted by bruceames View Post
Interesting. Thanks for pointing that out Mal. So if rentals average $1.50 and sell-through $15, then sell-through costs 10x more on average then kiosk or subscription. And as stated if profits are 20-30 times more on sell-through, then sell-through revenue as a whole would be 2-3 times more profitable per dollar spent. Unfortunately for the studios, the OD rental pie has increased from around 30% in DVD's heyday, to around 40% now (thanks to steep sell-through declines while rental remains relatively stable).

I've always wondered what the profit margin is on rental vs. sell-through.
OD sellthrough is like money printing machine. The actually physical product is dirt cheap. Its basically almost like Royalty revenue. The costs stay the same and the revenue pretty much all goes directly to the bottom line. This is why the decline in OD is hurting the studios more than they are telling. This is why they have been laying off so many people and having 28 day rental windows and why Warner increased that window to 56 days. It shows how desperate they are in.

It can't be denied, the rapid fall in OD sales is taking a HUGE toll on Hollywood. They want to hide that and SELL everyone a story that Blu-ray is doing well, when we have showed over the years it is not.
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Old 03-02-2012, 01:33 PM   #1733
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Originally Posted by bruceames View Post
Interesting. Thanks for pointing that out Mal. So if rentals average $1.50 and sell-through $15, then sell-through costs 10x more on average then kiosk or subscription. And as stated if profits are 20-30 times more on sell-through, then sell-through revenue as a whole would be 2-3 times more profitable per dollar spent. Unfortunately for the studios, the OD rental pie has increased from around 30% in DVD's heyday, to around 40% now (thanks to steep sell-through declines while rental remains relatively stable).

I've always wondered what the profit margin is on rental vs. sell-through.
WB spelled it out about 2 years ago. I will need to see if I can dig that up again.

Basically it goes (from highest to lowest) margin:

EST
OD sell through
VOD
OD B&M rental
OD Sub rental
OD kiosk

And the contribution and margin (percentage) between OD kiosk and EST is massive.
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Old 03-02-2012, 01:41 PM   #1734
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Originally Posted by bruceames View Post
Interesting. Thanks for pointing that out Mal. So if rentals average $1.50 and sell-through $15, then sell-through costs 10x more on average then kiosk or subscription. And as stated if profits are 20-30 times more on sell-through, then sell-through revenue as a whole would be 2-3 times more profitable per dollar spent. Unfortunately for the studios, the OD rental pie has increased from around 30% in DVD's heyday, to around 40% now (thanks to steep sell-through declines while rental remains relatively stable).

I've always wondered what the profit margin is on rental vs. sell-through.
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Old 03-02-2012, 02:01 PM   #1735
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OD sellthrough is like money printing machine. The actually physical product is dirt cheap. Its basically almost like Royalty revenue. The costs stay the same and the revenue pretty much all goes directly to the bottom line. This is why the decline in OD is hurting the studios more than they are telling. This is why they have been laying off so many people and having 28 day rental windows and why Warner increased that window to 56 days. It shows how desperate they are in.

It can't be denied, the rapid fall in OD sales is taking a HUGE toll on Hollywood. They want to hide that and SELL everyone a story that Blu-ray is doing well, when we have showed over the years it is not.
Blu-ray is doing best with new releases where the more concentrated profits and highest margins are. Much of the top line DVD and OD revenue decline is in the lowest margin catalog DVD sales segment. That's why the studios and retailers are in no hurry to abandon DVD and want to encourage Blu-ray usage for as long as possible as even in decline packaged media sales still are huge and profitable.

But of course overall revenue decline is still a concern as revenue streams like cheap rentals are nowhere near as profitable to the studios.

New release physical sell through is the most lucrative margins besides EST at high price points which has far lesser volumes.

In general, Blu-ray 3D+DVD+UV combos have the highest margins of any physical home video product beside lower volume collector editions, then BD+UV combos, then Blu-ray new releases, DVD collector editions, DVD new releases, Blu-ray catalog titles, then older DVD releases.

=================
EDIT:

The highest margins of all home video skus are in the limited edition collectors editions for Blu-ray and then DVD. But those are relatively limited runs and gross revenues. Multiple movie box sets and TV on Blu-ray and DVD box sets are also very high margin. All of those are pretty much subsets of the categories above in more general terms.
================


EST prices generally have been in the past so high that they have had low much lower volumes than physical sell through and the studios need to adjust that for greater volumes along with selecting price points for UV.

Blu-ray has been most successful in new releases where the highest margins for physical sell through remain along with the largest volumes on a per title basis. Blu-ray's success with new releases and its increasing marketshare has also resulted in a steady improvement over the past two years in the average disc cost sold for new releases to have actually increased since 4Q 2010. Consumers still buying new releases have increasingly migrated from plain DVD new release skus to more expensive and more profitable Blu-ray+DVD+DC combos and have not seemed to have discouraged by the average $5-$7 higher retail price points for the combos.

Increasingly over the past year more and more consumers buying new or recent releases have started buying the even more premium priced Blu-ray 3D combos at even greater retail price and higher margins as well.

From last week's Nielsen Videoscan first alert data:

full weekly graph set here



















Last edited by Kosty; 03-02-2012 at 10:56 PM..
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Old 03-02-2012, 02:12 PM   #1736
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Originally Posted by chipvideo View Post
OD sellthrough is like money printing machine. The actually physical product is dirt cheap. Its basically almost like Royalty revenue. The costs stay the same and the revenue pretty much all goes directly to the bottom line. This is why the decline in OD is hurting the studios more than they are telling. This is why they have been laying off so many people and having 28 day rental windows and why Warner increased that window to 56 days. It shows how desperate they are in.

It can't be denied, the rapid fall in OD sales is taking a HUGE toll on Hollywood. They want to hide that and SELL everyone a story that Blu-ray is doing well, when we have showed over the years it is not.
No one is denying that the decline in DVD sales is a major concern in Hollywood.

The margins and huge magnitude of the OD revenue stream even as it declines is also a reason that the studios and retailers (who benefit even less from rentals and digital cloud based transactions that can bypass them) is the reason DVD is still supported and Blu-ray and HD DVD were developed and supported as high definition versions of next generation DVD.

Both Blu-ray and DVD will be around for a while yet as they are hugely profitable even if the levels are lower than years before at DVDs peak.

But Blu-ray does not have to replace DVD all by itself either as it now exists in a world where the studios are improving on those other cloud based digital revenue streams as well that coexist in the second decade of the 21st century alongside Blu-ray and DVD as well.
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Old 03-02-2012, 04:04 PM   #1737
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Blu-ray is not hugely profitable. It is a financial disater. You can sugar coat it all you want it is not a success financially to anyone.

You are also wrong on your statement that margins are highest for new releases. Thats not true.

Last edited by chipvideo; 03-02-2012 at 04:10 PM..
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Old 03-02-2012, 04:21 PM   #1738
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It is a certainty that Blu-ray was developed and supported as it was seen as a way to stimulate OD sell through.

It has failed miserably in that regard. Last year alone it barely made up for 17% of DVDs decline. It grew a paltry $350 million last year despite receiving total studio support in new releases (including BD sell through only windows) and receiving arguably the most sought after catalog series in Home Video. It is almost unfathomably bad performance for it to only grow $350 million in light of the studio support it received, and with the large amount of DVD based it has to cannibalize from.
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Old 03-02-2012, 10:54 PM   #1739
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The highest margins of all home video skus are in the limited edition collectors editions for Blu-ray and then DVD. But those are relatively limited runs and gross revenues. Multiple movie box sets and TV on Blu-ray and DVD box sets are also very high margin. All of those are pretty much subsets of the categories above in more general terms.

Quote:
Originally Posted by Kosty
New release physical sell through is the most lucrative margins besides EST at high price points which has far lesser volumes.

In general, Blu-ray 3D+DVD+UV combos have the highest margins of any physical home video product beside lower volume collector editions, then BD+UV combos, then Blu-ray new releases, DVD collector editions, DVD new releases, Blu-ray catalog titles, then older DVD releases.

Last edited by Kosty; 03-02-2012 at 11:19 PM..
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Old 03-03-2012, 03:17 PM   #1740
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Blu-ray is not hugely profitable. It is a financial disater. You can sugar coat it all you want it is not a success financially to anyone.

Is that so?

Lets use some common sense and think about it for a moment.

Blu-ray has huge margins for a mass market high volume retail consumer good and even at its current magnitude it already dwarfs most consumer good retail product categories.

Take a recent week.

2.59 Million Blu-ray units that week at order of magnitude of $15 in receipts to the studios for a seven day period.

You do the math.

Blu-ray already has accumulated around $6 billion in sell through software revenues alone with hundreds of millions more in hardware and rental revenues. Much of that is profit to the studios and their retail partners.

Plus Sony's revenue stream from the PS3 with Blu-ray drives built in.

Plus Blu-ray is obviously profitable enough per title released so that the studios continue to increase the rate of Blu-ray releases over time and keep on producing Blu-ray titles. With around 6000 releases already studios and retailers see profits for Blu-ray releases that keep them releasing more and more Blu-ray titles over time at an ever increasing rate. More and more Blu-ray is being placed at retail inventory and retailers find Blu-ray skus more profitable than the DVD skus it displaces. Studios would not release and retailers would not stock Blu-ray Discs unless it was profitable.

Plus Blu-ray is profitable enough that consumer electronic manufacturers keep on making Blu-ray players, retailers keep stocking them at stores and consumers keep on buying them.

Obviously, somebody is making money on Blu-ray or we would not see it as an actively sold mass market consumer item that is growing year after year.


Common sense applies.


Blu-ray may not be as profitable or as large or growing as fast as some might have hoped, but to say its not a success financially for anyone is more than a stretch. Sony invested most in the development of Blu-ray and its certainly arguable if that was the best financial decision for Sony's sake.

But most Blu-ray supporting companies did not invest anywhere near as much and clearly see Blu-ray as a financially successful product that is generating profits for them on a routine basis and that's why they continue to support Blu-ray and release new Blu-ray skus into the marketplace on a annual monthly quarterly and annual basis.















Last edited by Kosty; 03-03-2012 at 03:25 PM..
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