How to Remake the Home Entertainment Industry - BD first - DVD only at $5 delayed - High-Def Digest Forums
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Old 10-26-2011, 03:42 PM
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Default How to Remake the Home Entertainment Industry - BD first - DVD only at $5 delayed

HMM editorial:

How to change the current industry dynamics.

Stop making DVD only players

Release Blu-ray versions first for sell through

Delay DVD only for a month sell at reduced price to divert from rental


Quote:
How to Remake the Home Entertainment Industry


25 Oct, 2011
By: Thomas K. Arnold

Herman Cain may have his 9-9-9 plan to remake the tax system, but the Hermanator’s plan is nothing compared to my plan to remake the home entertainment business.

The big problem, these days, is that studios aren’t making enough money because too many people are renting discs from Netflix and Redbox, and the return to studios from rental isn’t nearly what it is from sellthrough.

So here’s my three-part remedy:

Consumer electronics manufacturers immediately stop making DVD players and only manufacture Blu-ray Disc players. The margins are better, and if they tout the fact that these players not only play high-definition discs but also are backwards-compatible – and make standard DVDs look better – I think they’ll do all right. As any first-year marketing student knows, consumers need to be educated, and if we’re concerned that too many people are still living in DVD land, then maybe a forceful eviction is what’s needed.

At the same time, computer manufacturers need to stop putting DVD drives in new computers and also adopt an all-Blu-ray Disc approach. Again, they can tout the backwards compatability angle, as well as the fact that Blu-ray Disc offers far greater storage capacity – which in this era of increasingly large photo and video files should be a great selling point.

The third thing that needs to happen is for studios to release movies on Blu-ray Disc a month before they release them on standard DVD. They can charge full price for the Blu-ray Disc, and then a month later offer bare-bones single DVDs for maybe $5 a pop. The idea here is that consumers who don’t want to wait, as well as movie collectors, will rush out and buy the new release on Blu-ray Disc, while those who are less enthusiastic won’t mind waiting a month to buy it for $5 a DVD.

This second category of consumer is the rental crowd, and they already are accustomed to waiting a month to get their movies from Netflix or Redbox – which they don’t mind doing, because it’s only costing them a few dollars.

By imposing a similar window on DVD and charging just a little more than the average rental fee, I believe many of these consumers will migrate back to the purchasing habit, particularly since buying a movie at places like Wal-Mart and Target is so convenient.

It’s a way for studios to take back the rental business, once and for all, and not have to share with anyone. Netflix and Redbox can still rent movies, but under this scenario the playing field between sellthrough and rental is leveled.

As for physical video rental stores, they can do it all: They can sell new Blu-ray Disc releases, rent them, and then after a month do the same with standard DVD. I believe video stores will regain at least some of the market share they’ve lost over the years, and at the same time get a crack at the lucrative sellthrough business that for the most part has eluded them.

What do you think?
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Old 10-26-2011, 03:44 PM
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DVD players are already being displaced at retail and that will only accelerate this fall.

The Pirates of the Caribbean: On Stranger Tides release this week with its 28 day DVD only delay and the previous Disney classic animation BD+DVD combos in the past year or so are already experimenting with the first couple parts of this idea.

The cheap DVD only to compete with rental is the only real new concept here.
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Old 10-26-2011, 04:09 PM
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I think studios hated those $5 bargain bins. So I dont think they'll like that idea one bit. It'll just leave people wondering 'Why am I paying $15 more for HD.'
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Old 10-26-2011, 04:54 PM
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This guy must have studied the Reed Hastings school of marketing:yay::doh2:.
Kill off blu ray by offering a $5 DVD a month after release! Consumers will wait a month to pay a dollar for rental, they sure as hell will wait the month to pay $5 for a dvd to own, surpassing blu ray.
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Old 10-26-2011, 05:02 PM
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That $5 price-point seems like a truly crazy idea to me, the sort of brain-fart that I suspect will have him going "Did I really suggest that? Unless he's fishing for hits :biggrin:

For a start, until BD adoption ramped up to close to that of DVD, the market would have to bear the immediate loss of all that DVD revenue, even outside his proposed window there'd have to be about 3 or 4 $5 sales for every lost full-price DVD transaction, just to break even. Then he talks about B&Ms getting back into the "lucrative sellthrough market" but I can't see there'd still be one when the BD market starts at about a quarter that of DVD, and there must be little margin for anyone in a $5 new release. What does he think would happen to all those bargain bin and catalogue DVDs if even barebones new releases are $5? Is there enough margin to make them worth stocking if they're sold for less or does he believe consumers would still see the value in them at current prices?

I can see this sort of scorched earth, kill DVD at all costs thing being used if the sellthrough market winds up on the brink of collapse, and I don't mean the >$10 billiion business that causes some to feign hand-wringing angst right now, I mean if it ever gets to the low billions. Or once BD accounts for the majority of sales it might work as a tactic to kill off DVD quickly.

Outside those two situations the only "positive" that comes to mind is the detrimental effect on cheap rental outfits like Redbox, but I think it'd be a heavy price to pay to put them out of business. Short term it'd be good for movie consumers I suppose, until the industry went bankrupt.

Does anyone have any ideas how this could do some good?

Ray Von
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Old 10-26-2011, 05:24 PM
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It'd make more sense just to not release the DVD at all than offer it as a bargain $5 release a month or 2 later. But even with what's going on in the market, there's still plenty of DVD only releases, including a number of TV series I am interested in buying. (Damn you warner).
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Old 10-26-2011, 06:14 PM
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I have to say, I don't agree at all with his approach to any of these:

Killing off DVD players? I can see this for home, but that is it. Portable DVD players still make a lot of sense. For the PC? I don't agree at all. I just don't see people wanting to watch Blu-Ray discs on computer screens. That is what the DC, UV, DVD, etc is for. The PC market has uber tight margins and the CE's are not going to want to add BD players vs DVD players. Especially when netboooks and tablets don't have them at all.

I like the idea of staggering barebones DVD releases. Just offer the more expensive combo pack the first 30-60 days. But $5 DVD a month later? Wow. Not a good idea
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Old 10-26-2011, 07:54 PM
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Quote:
What do you think?
I think you are living in 2005, in a fantasy world of your own creation. Wake up! It is almost 2012. Consumers are moving on from optical disc and leaving the industry behind.

Quote:
Consumer electronics manufacturers immediately stop making DVD players and only manufacture Blu-ray Disc players.
How are you going to force Chinese CE manufacturers to build and sell blu-ray players? You going to pass a law? They can build whatever people will buy. And they don't want to pay $25 in royalties to Japanese cartels.

Quote:
The margins are better.
So you want to force ALL consumers to pay more for optical disc players at a time when optical disc sales are collapsing. Brilliant.

Quote:
As any first-year marketing student knows, consumers need to be educated, and if we’re concerned that too many people are still living in DVD land, then maybe a forceful eviction is what’s needed.
Consumers ARE educated. They know what a blu-ray player is. They are choosing not to buy them, because optical discs don't fit with 2012 lifestyle. Even if they do buy players, they often aren't using them to play blu-ray discs.

Quote:
At the same time, computer manufacturers need to stop putting DVD drives in new computers and also adopt an all-Blu-ray Disc approach.
How are you going to force computer manufacturers (who operate on razor thin margins) to pay a lot more for blu-ray burners, and increase computer prices to consumers that overwhelmingly don't want blu-ray burners. You going to pass another law?

Quote:
Again, they can tout the backwards compatability angle, as well as the fact that Blu-ray Disc offers far greater storage capacity – which in this era of increasingly large photo and video files should be a great selling point.
You must be joking. It is 2012. Consumers have moved on to cheap, high performance, multi-terabyte hard drives to store their content. And blu-ray discs don't fit in iPads and smart phones. Even if they did, their power consumption would kill the battery in no time.

Quote:
The third thing that needs to happen is for studios to release movies on Blu-ray Disc a month before they release them on standard DVD.
The PotC experiment. Let's see how that one works out. But what is the motivation for studios? Blu-ray content protection is just as broken as DVD. Studios would be exchanging DRM free 480p rips for 1080p DRM free rips.

Quote:
They can charge full price for the Blu-ray Disc, and then a month later offer bare-bones single DVDs for maybe $5 a pop.
The ludicracy of this idea is obvious. TK's Take - "Let's push consumers toward blu-ray and away from DVD, but let's make DVD impossible to resist". "Consumers are buying too much DVD now when blu-rays are $5 more, so let's make it $15 more to buy the blu-ray". It defies logic.

Quote:
The idea here is that consumers who don’t want to wait, as well as movie collectors, will rush out and buy the new release on Blu-ray Disc, while those who are less enthusiastic won’t mind waiting a month to buy it for $5 a DVD.
Studio execs who might have stumbled onto this article are now shaking their heads in disbelief. They are now closing their browsers.

Quote:
This second category of consumer is the rental crowd, and they already are accustomed to waiting a month to get their movies from Netflix or Redbox – which they don’t mind doing, because it’s only costing them a few dollars.

By imposing a similar window on DVD and charging just a little more than the average rental fee, I believe many of these consumers will migrate back to the purchasing habit, particularly since buying a movie at places like Wal-Mart and Target is so convenient.
Who do you want to "charge a little more than the average rental fee"? Redbox? How are you going to force Redbox to charge more when you are charging consumers $5 to buy the DVD???

Quote:
It’s a way for studios to take back the rental business, once and for all, and not have to share with anyone.
Share what? Profits from selling $5 new release DVDs? Remember that retailers take 30% margin on DVD sales. That is $2 right there (assuming that retailers would want to sell discs with a $2 margin). Subtract cost to manufacture and distribute, and royalties, and what are studios left with? Nothing.

Quote:
Netflix and Redbox can still rent movies, but under this scenario the playing field between sellthrough and rental is leveled.
Leveled? Yes. With $5 new release DVDs, there won't be a rental industry. It will have been "leveled".

Quote:
As for physical video rental stores, they can do it all: They can sell new Blu-ray Disc releases, rent them, and then after a month do the same with standard DVD. I believe video stores will regain at least some of the market share they’ve lost over the years, and at the same time get a crack at the lucrative sellthrough business that for the most part has eluded them.
With $5 DVD sales, physical rental stores will cease to exist. And selling $5 DVDs is not a "lucrative sellthrough business".

Well there you have it. TKs Take - "How to Remake the Home Video Industry". He failed to mention even once the 30+ million iPads that were sold in the last year... The hundreds of millions of smart phones... Ultraviolet... Streaming video... Downloads... Android... iTunes... Rampant piracy... Hard drive connected media players... Home networks...Dirt cheap, huge capacity hard drives... The internet.

For TK it is all about selling optical discs. Apparently he hasn't yet pieced together that cratering disc sales might have something to do with the fact that consumers are moving away from disc, despite the industry. The industry has been left behind.

He has learned absolutely nothing from the music industry.
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Old 10-26-2011, 08:21 PM
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Quote:
Originally Posted by mikemorel View Post
......
Very well said.

Quote:
Consumers have moved on to cheap, high performance, multi-terabyte hard drives to store their content.
A bit of an aside, but anyone planning on going down that route right now should postpone for a while until the fallout from the terrible flooding in Thailand abates. Prices for HDDs went crazy yesterday, large drives at retail have almost doubled in price , if you can actually find anyone with stock. eBay scalpers are listing drives at 4 or 5 times value and looking at the state of the supplier channel they'll probably sell at that price. Supply isn't expected to recover fully until early next year, with further price rises in the meantime.

Ray Von
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Old 10-26-2011, 10:29 PM
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Quote:
Originally Posted by silverado View Post
This guy must have studied the Reed Hastings school of marketing:yay::doh2:.
Kill off blu ray by offering a $5 DVD a month after release! Consumers will wait a month to pay a dollar for rental, they sure as hell will wait the month to pay $5 for a dvd to own, surpassing blu ray.
Most consumers do not think that far ahead.

Generally consumers react to what they see in front of their face at the point of sale.
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