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

[1stSilverado]

Originally Posted by Kosty

Is that so?

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

Blu-ray has huge margins for a consumer good and even at its current magnitude it already dwarfs most consumer good 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 releases 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 of that was the bets 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.

You are stating an error when you mention profits to studios, as not one studio will put their revenue in a pot and share with everyone else.
one good week for one studio is not profits across the board, logically we can assume that there are ups and downs for the studios when regarding blu ray, now you have to think if the good weeks outweigh the bad, we should be seeing coverage of attrition from DVD, but that is not occurring, so logic would tell us that good weeks do not outweigh the bad.

[Kosty]

Originally Posted by PSound

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.

Its not that the box office strength of releases being down -26% in the first quarter of last year or Avatar being in the 2Q comparisons from 2010 to 2011 had anything to do with that Year or Year growth rate....

Its only "almost unfathomably bad performance" only if you want to ignore obvious variables such as the Year over Year release strength disparity in your observations. Professional decision makers at the studios and in the retail industry understand those factors and you just cannot pretend that they do not exist.

Blu-ray certainly grew better when the comparable releases were better in the 3Q and 4Q of last year and in the past few weeks as well.

Let's see how things work out in the future with better releases, shall we?

Originally Posted by Kosty

All of the weeks with really large TBO mismatches affected the YoY cumulative trend mostly negatively as most of those weeks were in favor of 2010.

Here is the 2011 vs 2011 Cumulative YoY Trend with the major inflection points annotated for the weeks where there was more than $200 M TBO disparities (all except Toy Story 3 were more than $280 M disparities for the matching weeks).

2010 clearly had more impact weeks than 2011 had but all were major inflection points in the YoY Blu-ray trendline.

If the 2012 vs 2011 TBO is more favorable or just more even than it was in 2011 vs 2010 then that should benefit the 2012 Blu-ray YoY cumulative metric.

[Kosty]

Originally Posted by 1stSilverado

You are stating an error when you mention profits to studios, as not one studio will put their revenue in a pot and share with everyone else.
one good week for one studio is not profits across the board, logically we can assume that there are ups and downs for the studios when regarding blu ray, now you have to think if the good weeks outweigh the bad, we should be seeing coverage of attrition from DVD, but that is not occurring, so logic would tell us that good weeks do not outweigh the bad.

Blu-ray is covering more of new release sales than the decline in DVD revenues from older release sales.

But Blu-ray releases by title stand alone and can be and are profitable by themselves even if they are not in the aggregate generating more revenues in total than DVD was the year before.

Blu-ray does not have to be as successful or sell at the same magnitude as DVD to be profitable. It can be argued that any week where profits are made at packaged media sales magnitudes are a good week as well even if its less than before.

But its certainly true that for most weeks Blu-ray's growth has not covered fully DVD's attrition so its that your only definition of a good week or bad, that's been rare enough in the past few years. So far the last couple weeks here in 1Q 2012 are an exception as is the overall YTD 1Q 2012 comparison.

[PSound]

Originally Posted by Kosty

Its not that the box office strength of releases being down -26% in the first quarter of last year or Avatar being in the 2Q comparisons from 2010 to 2011 had anything to do with that Year or Year growth rate....

I know you are going to actively promote Blu-ray here, but even you cannot expect to ignore facts and not get called on it. Hell, I don't even give the BDA that pass.


I was talking full year performance. Full year. Including the release of the crown jewel of catalog series with an exclusive 2011 BD release - Star Wars. Including a massively successful summer blockbuster sequel getting a Blu-ray only sell through release window.

Both of those were purely of benefit to Blu-ray, not to mention the massive promotion that BD receives, including combo packs.

With all that studio support, including actions meant to solely benefit Blu-ray (even at the expense of DVD), Blu-ray still only grew a measly $350 million in 2011. Barely covered 17% of DVDs decline during that same period. Facts. Undeniable.



And now here comes Kosty's PR spin ignoring (of deflecting from) those full year numbers.....

[Malanthius]

@Kosty.
So what has Blurays return on investment been thus far? Don't forget to include all the lost money on PS3s sold. You have to include that as the PS3 was critical in Blurays win of the format war. You also have to minus start up costs for tooling, restoration costs for catalog ect ect...

You must know the answer because you sound pretty sure about Blurays profitability.

[Kosty]

Originally Posted by Malanthius

@Kosty.
So what has Blurays return on investment been thus far? Don't forget to include all the lost money on PS3s sold. You have to include that as the PS3 was critical in Blurays win of the format war. You also have to minus start up costs for tooling, restoration costs for catalog ect ect...

You must know the answer because you sound pretty sure about Blurays profitability.

Who cares?

The studios. consumer electronic manufacturers, replicators, retailers and smaller content providers or consumers do not care on bit on what return on investment Sony got off the research and development and deployment of Blu-ray.

Plenty of companies, most in fact, were content to let Sony take all the risk to solve all the problems with Blu-ray and now happily take the benefits and make money off the format.

Its an academic question that no one cares about and probably no one would ever know for certain. But with Blu-ray being a mass market success and with the PS3 and its royalty stream being a successful console Sony certainly did better than if the PS3 and Blu-ray had been an market failure or short termed format like HD DVD.

Sony DADC and Sony makes plenty of money on PS3 console games, Blu-ray Disc and DVD replication and royalties as well.

But most in the industry would not give a damn about what Sony invested to get Blu-ray going. Retailers nor consumers don't care either.

[Kosty]

Originally Posted by PSound

I know you are going to actively promote Blu-ray here, but even you cannot expect to ignore facts and not get called on it. Hell, I don't even give the BDA that pass.


I was talking full year performance. Full year. Including the release of the crown jewel of catalog series with an exclusive 2011 BD release - Star Wars. Including a massively successful summer blockbuster sequel getting a Blu-ray only sell through release window.

Both of those were purely of benefit to Blu-ray, not to mention the massive promotion that BD receives, including combo packs.

With all that studio support, including actions meant to solely benefit Blu-ray (even at the expense of DVD), Blu-ray still only grew a measly $350 million in 2011. Barely covered 17% of DVDs decline during that same period. Facts. Undeniable.



And now here comes Kosty's PR spin ignoring (of deflecting from) those full year numbers.....

It seems that you are more upset about those top line numbers than anyone else around.

As I said, those revenue results have to be placed into the perspective of the expectations for the performance based on the releases compared to a year having Avatar and two Twilight Saga movies in the year before. Blu-ray did far better than DVD did with the same releases to work with as well.

The studios seemed pretty pleased with the performance of those major new to Blu-ray releases as well and that's why we will continue to see them coming in the coming years.

Plus all of the other points I made before about revenue gains not being as indicative of consumer demand as unit sale growth nor are revenues as important as profits and margins either.

You can just continue to deny that the release strength comparisons do not matter, but people know better.

Besides recent periods mean more than earlier ones and the better numbers for most of the 3Q and early 4Q last year as well as what we are seeing already in 1Q 2012 are always going to be given more weight.

Retailers and the studios by their nature will look to increasing Blu-ray marketshare, unit sale volumes and profits for individual releases over time more than some industry gross top level metric like format revenues.

When a particular studio or retailer can obviously see that a certain type and genre and box office performance for a title this year or last generating more Blu-ray units sold, greater revenues, greater profits at a higher margin that the DVD sku it displaces and does better in those metrics than a similar title in years past then that's noticed.

The raw gross revenue metric for the year is not cared as much as the demonstrated increasing levels of sales for similar titles in the more identifiable performance at the more detailed level.

People look at industry wide general metrics with more sophistication as not only do they contain a mash of variables that affect the results but they apply unevenly to different companies.

General trends are noticed of course but people understand things like how box office strength affect the results.

[PSound]

Originally Posted by Kosty

It seems that you are more upset about those top line numbers than anyone else around.

Hardly.

And that is the point. No business sees that sort of top line revenue decline and truly believes everything is just fine and dandy, which is how you spin the industry reaction.

It is absolute pure BS to state that Blu-ray growing a measly $350 million in 2011 and accounting for only 17% of DVD sell through decline is "OK" or "acceptable". The loss of billions of top line revenue with the replacement tech only accounting for 17% of the decline is never OK in any industry.

You spinning it otherwise just demonstrates that what you are here to project is not based in any sort of business reality. It is PR spin and nothing else.

[Kosty]

Originally Posted by PSound

Hardly.

And that is the point. No business sees that sort of top line revenue decline and truly believes everything is just fine and dandy, which is how you spin the industry reaction.

It is absolute pure BS to state that Blu-ray growing a measly $350 million in 2011 and accounting for only 17% of DVD sell through decline is "OK" or "acceptable". The loss of billions of top line revenue with the replacement tech only accounting for 17% of the decline is never OK in any industry.

You spinning it otherwise just demonstrates that what you are here to project is not based in any sort of business reality. It is PR spin and nothing else.

Same old BS from you that my commentary and point of view is just PR spin. Just because I can look at this complicated subject with a different perspective or I choose to talk about other factors than the more simple obsession that you have with the overall revenue metric does not mean that you are right and I am wrong.

Where have I said everything is just "fine and dandy" or "OK"? Either with Blu-ray or anything to do with packaged media or studio or retailer home media in general? There is a lot of concern around in many areas as a result of the DVD gravy train slowing down and its a period of transition that has a lot of uncertainty.

But Blu-ray is a market success and along with more robust digital cloud based offerings now and in the future, Blu-ray is part of the solution and not so much the problem you pretend it is. Its your personal model that Blu-ray is expected to cover DVDs attrition all by itself and few people I talk to or see that are involved in this stuff think that way anymore if they ever did.

Blu-ray is expected to be around with digital options like Netflix and Amazon and Hulu and UltraViolet all together for the foreseeable future as they all gain usage from legacy DVD users.

Its your own limited paradigm here that is making the assumption that Blu-ray is supposed to be making up for DVDs attrition all by itself. Now keeping track of total DVD + BD = OD Optical Disc or packaged media sales sell through is still a useful exercise and overall metric as besides the limited EST sales that's still the highest margin revenue stream category, but its not like Blu-ray is expected to grow to what DVD alone was at its peak.

Blu-ray is a successful and growing high margin revenue stream that is part of the solution to declining DVD revenues for the studios and retailers but its just not expected to do it all by itself.

Its not just PR spin on my behalf if I choose to concentrate more on the positive growth side of the equation than you do in your persistent negative outlook toward Blu-ray and your optimistic outlook toward subscription streaming.

I respect your point of view but its not the only valid perspective out there and my disagreeing with it or adding my own perspective is not just "PR spin" as you state in your attempt to discount it when I disagree with you.

You hardly are the sole decider of what "business reality" especially when you obviously and clearly limit much of your focus to a smaller subset of metrics than other people do that look at these things in more of a professional context as they actually are involved in the management of these products and services.

No one is saying that lower revenues for OD is not a concern or that its hoped that Blu-ray can do better in the future than the top line revenues for the past annual comparison showed between 2010 and 2011. But there are also other metrics that show more promise than the overall gross format revenue numbers that you dwell upon.

2012 is already showing better results for Blu-ray and that's probably more that is thought about in the industry that what happened in any period in the past in any case.

[PSound]

Originally Posted by Kosty

Its your personal model that Blu-ray is expected to cover DVDs attrition all by itself and few people I talk to or see that are involved in this stuff think that way anymore if they ever did.

(snip)

Its your own limited paradigm here that is making the assumption that Blu-ray is supposed to be making up for DVDs attrition all by itself.

No, it isn't. And you are downright putting out falsehoods to support your PR spin if you state so.


Studio execs certainly expected Blu-ray to make up for DVD attrition in right around the end of 2010 timeframe. They may have lowered expectations significantly since then, but they would have had to plummet to the cellar if they went from expecting Blu-ray to cover DVD attrition by the end of 2010 to expecting Blu-ray to barely cover 17% of DVDs decline for all of 2011.

Those are facts. You stating that it was only my expectation does not support what otherwise might be other valid points. Now you may be limited in what you can concede while pushing Blu-ray here, but that does not change the facts.

[bruceames]

I don't think Blu-ray is expected to cover DVD's attrition NOW, but in 2008 it was indeed thought so by many, and not just a few. However expectations have obviously been lowered, simply because Blu-ray has not performed up to expectations. To borrow a phrase from Goofnut, "it's not complicated".

[Kosty]

Originally Posted by PSound

No, it isn't. And you are downright putting out falsehoods to support your PR spin if you state so.


Studio execs certainly expected Blu-ray to make up for DVD attrition in right around the end of 2010 timeframe. They may have lowered expectations significantly since then, but they would have had to plummet to the cellar if they went from expecting Blu-ray to cover DVD attrition by the end of 2010 to expecting Blu-ray to barely cover 17% of DVDs decline for all of 2011.

Those are facts. You stating that it was only my expectation does not support what otherwise might be other valid points. Now you may be limited in what you can concede while pushing Blu-ray here, but that does not change the facts.

Overstating the significance of that Q&A session again I see as well as forgetting that digital was mentioned in the very next sentence.

You fail to consider that that equation has two parts as well, one being the rate and magnitude of DVDs decline and the other the rate and magnitude of Blu-ray's growth.

Once again you are distorting what I said. I never said that it was only your expectation in the past, to some degree many people in the past may have hoped that to be the case to one degree or another. But probably no one did not expect that digital and Blu-ray together would not be working together to offset DVDs inevitable decline.

Hard to accurately project back in 2005 or 2006 or 2008 what would happen in the future, but no one probably thought that Blu-ray alone was going to be the only revenue stream to replace DVD as the Internet based and digital revenue streams were already being developed and used.

Major players even argued that next generation DVD was not even required at all and all digital cloud based streaming and downloads could replace DVD all by itself without the need for HD DVD or Blu-ray at all. Saying that Blu-ray was expected to be the only revenue stream to replace DVD all by itself is nonsensical. Perhaps it was hoped that Blu-ray growth might over DVDs attrition by itself with digital being a bonus on top of that, but even that scenario would have seemed unlikely at the time.

[PSound]

Originally Posted by bruceames

I don't think Blu-ray is expected to cover DVD's attrition NOW, but in 2008 it was indeed thought so by many, and not just a few. However expectations have obviously been lowered, simply because Blu-ray has not performed up to expectations. To borrow a phrase from Goofnut, "it's not complicated".

Yep.

And I find it hard to believe that studio execs were looking at 2011 (with BD exclusive sell through windows and a Star Wars catalog release) and thinking, "Blu-ray growing $350 million in 2011 and making up 17% of DVDs decline is right around what we are projecting".


If they did, Kosty would have had to label them as "pessimistic" (to say the least).

[Kosty]

Originally Posted by bruceames

I don't think Blu-ray is expected to cover DVD's attrition NOW, but in 2008 it was indeed thought so by many, and not just a few. However expectations have obviously been lowered, simply because Blu-ray has not performed up to expectations. To borrow a phrase from Goofnut, "it's not complicated".

DVDs attrition has also been faster than probably anticipated as cheap rental options like Redbox and Netflix and other portable and free entertainment options have impacted DVD sell through as well.

Even if Blu-ray exceeded its growth projections through 2010 if DVD declined faster than anticipated then Blu-ray could have still met expectations for growth and still not met the hopes of covering DVDs decline as possibly hoped for because DVD attrition was greater than projected.

[Kosty]

Originally Posted by PSound

Yep.

And I find it hard to believe that studio execs were looking at 2011 (with BD exclusive sell through windows and a Star Wars catalog release) and thinking, "Blu-ray growing $350 million in 2011 and making up 17% of DVDs decline is right around what we are projecting".


If they did, Kosty would have had to label them as "pessimistic" (to say the least).

Well they probably would not have a lot of confidence in any projections like that anyway as the studios do not control retail price points and overall revenues anyway. Retailers do.

The studios care less about overall retail revenues than they do with wholesale revenues and units anyway.

But you are just fooling yourself if you think that the strength of releases was not considered. Or that the studios care more about their own growth and revenues and profits that that of some overall industry metric. Industry trends and metrics are important but what is vastly more important are the more specific performance levels at individual companies or for individual releases over time.