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NY Times: Studios Try to Save the DVD

Old 02-24-08, 11:46 PM
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NY Times: Studios Try to Save the DVD

February 25, 2008
Studios Try to Save the DVD
By BROOKS BARNES and MATT RICHTEL

A winner has finally been declared in Hollywood’s high-definition DVD war. So why isn’t there more cheering?

In the 1980s, the triumph of VHS over Betamax helped develop the lucrative home entertainment market. DVDs, introduced in the 1990s, turned into an even bigger gold mine, accounting for roughly 60 percent of studio profits in recent years, analysts say. The entertainment giants have positioned high-definition DVDs as yet another blockbuster business.

But the victory of Sony’s new Blu-ray high-definition disc over a rival format, Toshiba’s HD DVD, masks a problem facing the studios: the overall decline of the DVD market. Domestic DVD sales fell 3.2 percent last year to $15.9 billion, according to Adams Media Research, the first annual drop in the medium’s history. Adams projects another decline in 2008, to $15.4 billion, and a similar dip for 2009.

So instead of celebrating the Blu-ray format — which remains a nascent business — the studios are scrambling to introduce an array of initiatives aimed at propping up the broader market. Some efforts, like the addition of new interactive features and changes in how DVDs are packaged and promoted, are intended to prevent further market erosion while nurturing Blu-ray.

But media companies are also introducing technology that they hope will solve the more difficult tasks of generating growth and delaying the obsolescence of DVD altogether.

DVD sales are sagging for various reasons, including a flooded marketplace and competition for leisure time. But the Internet is perhaps the biggest enemy.

Technology companies have watered down the DVD market by aggressively pushing Internet downloads. Apple’s iTunes now offers downloads of 500 movies and last month started renting titles like “Spider-Man 3.” Meanwhile, telecommunications providers like Time Warner and Comcast are pushing their faster broadband lines by promoting them as capable of delivering fast downloads.

Movie studios are fighting back by taking a page from the Internet playbook. Indeed, the centerpiece of the market rejuvenation effort is something 20th Century Fox calls “digital copy.” Fox DVDs, starting last month, now come with an additional disc holding a digital file of the title. Consumers can download the file to a computer in about five minutes — far less time than via the Internet — and then watch the movie there or transfer it to their iPod.

“This puts the DVD at the center of the digital revolution and returns the business to a growth trajectory,” said Mike Dunn, the president of 20th Century Fox Home Entertainment. Sony Pictures Entertainment, Universal Studios, Walt Disney and Warner Brothers are all pursuing their own versions of the idea.

Most technology consultants, while not as optimistic about the DVD’s future as Mr. Dunn, are greeting studio efforts with enthusiasm. Tom Adams, the founder of Adams Media Research, said the packaging of digital files with standard DVDs “has the real potential to steal the thunder from the Internet delivery of movies.”

But John Freeman, an industry analyst, sees the effort as a stall tactic. Although digital copies are “a step forward,” he said, that step is tantamount to Hollywood admitting that its lucrative hard-goods business is growing obsolete. Today, digital files on discs; tomorrow, mass downloading straight from the Internet.

Troubles big and small started buffeting the DVD business in 2005. First, overall sales of television shows on disc started to slip as releases lost their freshness — New to DVD! “Murder She Wrote: The Complete Eighth Season” — and consumers realized they were devoting a lot of living room space to bulky boxed sets they never watched.

Next, prices started to plummet as overall demand weakened and retailers and grocery stores turned to DVDs as loss leaders. DVDs sold for an average retail price of $15.01 last year, compared with $21.95 in 2000, according to Adams.

“Wal-Mart has indicated it is getting bored with older library titles,” said Stephen Prough, the co-founder of Salem Partners, a small investment bank that specializes in film catalogs. “When there is little to no consumer demand at a $6 price point, you’ve got problems.”

And a lingering battle among various participants in DVD marketing — hardware makers, studios and retailers — over which of two competing high-definition technologies would replace standard DVDs left consumers in limbo, analysts say. Last week, Sony’s Blu-ray finally won the battle after Toshiba threw in the towel on HD DVD.

Media companies, aware of investor concerns about the future of their cash cow, say the problems are overblown. Their position in part: DVDs will continue as a giant profit center because the Internet — despite the “marketing hocus pocus” of the telecommunications industry, in the words of one Fox executive — will remain too slow for widespread downloading to catch on for the foreseeable future.

International DVD sales are still growing, studios add, and some players do not concede that domestic growth is over. Bob Chapek, president of the home entertainment unit of Walt Disney, said that blockbusters like “Pirates of the Caribbean: At World’s End” achieve large numbers even if lesser titles are struggling. He said sales of Blu-ray discs would contribute to “a vibrant growth pattern” for the category by decade’s end.

“There is nobody worried about the consumer suddenly fleeing,” said Ronald J. Sanders, president of Warner Home Video.

Blu-ray DVDs, which sell for a 25 percent premium, will without question restore momentum to the DVD market, but there is disagreement over how much and how soon. “There is still plenty of concern at Sony, Best Buy and Blockbuster that this isn’t going to achieve the same level of success that the DVD has,” said Robert Heiblim, an industry consultant with RH Associates.

Microsoft said this weekend it would stop making HD DVD players for its Xbox 360 game system. Toshiba, reflecting on its failure with HD DVD, said the industry might be overestimating interest in a new format. Jodi Sally, Toshiba America’s vice president for DVD marketing, said consumers en masse do not feel a nagging need to upgrade.

“Our biggest competitor was that consumers seem to be satisfied” with DVDs, she said.

Studio executives dismiss that view as sour grapes, pointing to their own research. Fox, for instance, estimates that sales of Blu-ray discs will soar to nearly $1 billion in 2008, from $170 million last year. “Blu-ray growth will more than replace losses from the mature business,” said Mr. Chapek of Disney.

Disney is leaving nothing to chance, mounting an aggressive campaign to persuade consumers to upgrade to Blu-ray. Among its efforts: a Blu-ray exhibit, built to look like the Sleeping Beauty Castle at Disneyland, that tours shopping malls; Blu-ray previews on its DVDs; and a $10 rebate when consumers buy certain Blu-ray movies.

Still, the studios are hedging their bets. Home video executives are racing to “refresh” the traditional DVD to raise sales.

Some, like Warner Brothers, are getting results through more marketing. Mr. Sanders said the studio was releasing more movies on DVD and on video-on-demand services at the same time; typically the two are separated to prevent undercutting either revenue stream. “By pairing up the marketing, V.O.D. and DVD both do a lot better,” he said.

Sony is trying to milk obscure titles from its library that it previously considered unsustainable on DVD, said David Bishop, president of Sony’s home entertainment unit. Last month, it said it would make certain niche movies available to consumers through Hewlett-Packard’s manufactured-on-demand service. “It allows us to sell some of the deeper catalog that retailers would not normally carry,” said Mr. Bishop.

Over-the-top packaging stunts are also helping buoy sales. “We are trying harder to create very handsome, collectible packaging that retailers are proud to put on their shelves,” said Ken Ross, general manager of CBS Home Entertainment. CBS and its distribution partner, Paramount, recently had success with a 34-disc set, priced at $199, of the entire run of “I Love Lucy.”

Mr. Ross sees no weakness in TV shows on DVD — CBS will release 15 percent more titles this year than last — but he said the company was trying to make exclusive agreements with retailers, like a recent deal with Borders for Showtime titles.

“This business certainly isn’t as easy as it used to be,” he said.
Source

Personally, my dvd buying habits have dropped off considerably. I buy movies that I love & and I know that I'll watch over and over again. I guess my collection's complete, nothing new for my to buy except for the kick-ass re-releases of Goodfellas and Blade Runner. Aside from that, I won't be picking up the latest Martin Lawrence flick anytime soon.
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Old 02-25-08, 12:14 AM
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If any studio insiders read this thread, and if they care, my reasons for buying less DVDs are simple...

1) The economy. Gas is up, food prices are up, utility bills are up...seriously, is there any reason to wonder why the sales of things like this go down?

2) Inferior releases on the first release. It used to be I could pick up the two disc edition loaded with special features on the day of the release and get it on sale. And generally not have to worry about a double dip, or if there was a double dip I could rest comfortably that I bought a solidly good edition. Now we get pretty much bare bones DVDs...all rushed out quickly to capitalize on a rental market, I am sure. But why should I drop money on a big title like Michael Clayton or In the Valley of Elah in the first week when they are skimpy or have no bonus features at all. Those DVDs are glorified VHS tapes. And when the SE does come out right away, there is always a single disc version that gets marked down at the stores and the two or three disc edition isn't marked down at all. Go back to reason #1.

Uh...that's about it. There's not much the studios can do about the economy, but maybe limiting the number of times a movie is "dipped" and putting out the two disc SEs right away on sale and by passing the single disc version would appeal to fans more. We don't have the money to keep up with constant releases of the same title, and nobody wants to drop $20.00 on a new DVD when they know they can snag it for ten bucks or less six months later at Wal Mart or Target. I want to get more for my money, and I have plenty of DVDs unwatched to tide me over for a while if the studios can't change their ways.
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Old 02-25-08, 12:25 AM
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Originally Posted by calhoun07
Those DVDs are glorified VHS tapes.
This is an incredibly stupid thing to say.
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Old 02-25-08, 12:37 AM
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Originally Posted by GreenVulture
This is an incredibly stupid thing to say.
I don't think you read his entire post.

I agree with calhoun07. Stop making so many damn versions and just come out with one version. This article sounds familiar with another post, but I will say the same thing, which is, this is a bunch of bullshit about DVD sales declining to such a "disaster". A bunch of whining and crying about not making several hundred times the cost, and becoming more greedy. I firmly believe DVD sales are doing just fine, if not BETTER.

Why?

Anime DVDs never penetrated the US markets until recently, and I would bet if you talked to any anime distributor (like Shawne over at RightStuf), he'd tell you his buisiness has grown quite well and anime on DVD is in the highest demand ever.

It also might be particular studios complaining about their DVDs not selling as much, versus the entire DVD industry altogether.

Also, where's the rest of my NYPD Blue? How about more Hill Street Blues seasons? It's time the studios stop their bickering and start to actually work for their money, instead of giving the consumer a pile of shit to purchase from.

Last edited by DVD Polizei; 02-25-08 at 12:44 AM.
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Old 02-25-08, 01:14 AM
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Originally Posted by DVD Polizei
I don't think you read his entire post.
No, I did.

Really, all of the heavy-hitters and guaranteed top sellers have already hit DVD (Star Wars, Indiana Jones, etc.). Combine this with a downturn in the economy, affordable alternatives like Netflix, DVD players having hit their saturation point awhile ago...I wouldn't be surprised if sales continued to drop.

And for the love of God, will they stop pushing this download shit? I doubt it's going to be a viable source of revenue until all of the US has, at the very least, a reliable broadband Internet connection.
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Old 02-25-08, 01:19 AM
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I think part of the problem is that consumers are aware of the double/triple dip thing.

Ever since studios figured out they could double/triple dip on DVD's, buying movies has seriously lost its fun. Why buy _____ upon release when it is a pretty good bet a better edition will show up 6 months from now?
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Old 02-25-08, 01:38 AM
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Originally Posted by calhoun07
1) The economy. Gas is up, food prices are up, utility bills are up...seriously, is there any reason to wonder why the sales of things like this go down?
I could not agree more with your post.

Just about every other area of the business is impacted as well. Whether or not we like to call it as it is our country is indeed in recession so I don't see why DVDs would remained unaffected by it. With this in mind for many, many years the distribs have been lamenting the damage piracy has incurred on their profits. When in reality much of the sluggish profits they harvested even during some of the strongest years of growth were due to lack of proper marketing. Similar is the situation at this moment -- with the financial woes looming over the country I would think that they would focus on adequate pricing for the DVD market as well as improving overall quality/selection. Much of the product that is being offered is either lacking the proper treatment (transfers/extras) etc. or the variety simply isn't there.

Pro-B
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Old 02-25-08, 04:33 AM
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I have no problem with a combination of a barebones release at one price point and a good 2-disc special edition at a $5-10 higher price point, as long as the releases are simultaneous or that the studio lets people know the better release is coming. With films coming out on DVD as little as two months after the theatrical release, I don't begrudge them taking the time to get a special edition right rather that toss a couple of deleted scenes and a puff piece "making of" featurette and call it special.

I don't think DVD sales should be a "one size fits all" philosophy. There's lots of people who only want to see a movie and not the extras, and given a choice will opt to save a few bucks rather than pay for something that's of no use to them.

It's the uncertainty and the tendency to milk films for every last dollar through a series of "special" and "ultimate" editions that is rapidly turning off would-be buyers. The entire DVD industry is only a decade old and some films are already in their fifth or sixth incarnation. We are now at a stage where serious afficionados of film in general or a particular movie can never be sure when we are getting the studio's final say on a movie. We've all been burned by buying a film, even a "special edition" and then hearing a month or two later that a new and improved version will be coming out, sometimes even at a lower price point than we already paid. So the tendency is to wait, sometimes forever.

If the studios would look at the big picture rather than each movie as an individual project from which they are trying to extract the most mileage, they would see that turning off the serious film buffs, those who will willingly buy better editions of films, is a bad mistake.

For catalogue titles, make up your minds if the film deserves any type of special treatment and take the time to do it the way you want it to look before releasing it. I can readily understand not spending money to do a documentary or a commentary on a 40-year-old film coming out on DVD, but if you plan to do it, wait until it's ready before releasing it.

For current films, the same logic applies. Decide how you will handle the release and go for it. Don't hold back a handful of extra "goodies" to milk the audience and burn your most loyal customers.

Most businesses make every effort to cater to their best customers. Frequent flyers go to the head of the line; they aren't told to wait after everyone else and then pay even more for their ticket. Most people don't care what's on a DVD other than a decent looking print of the film itself and they go to Blockbuster every Saturday to plop down their five bucks to see whatever is on the giant poster in the window that week. It's those of us who will gladly pay extra for quality material who are getting burned over and over again by greedy studios.

I understand studios coming back and treating some movies right that were rushed into DVD in the early years of the genre before the studios really understood the nature of the market (some in fullscreen non-anamorphic releases). For the vast majority of movies being released nowadays, however, there is no excuse for this shoddy, piecemeal method of divvying up content in bits and pieces ("is it time to give them that director's commentary yet, naa, let's wait a few more months and see how many people will settle for that 'making of' documentary before we do the super-duper ultimate collector's edition II"). Treat customers right and there will be more sales in the long run.
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Old 02-25-08, 05:51 AM
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I have about 300 or do dvds right now. My reasons for slowing down are pretty simple really. (Gone from 2-3 a week to maybe 2 a month)

a) There just aren't all that many new films coming out that interest me. I've never been that big a tv watcher, and the few I do like are usually priced at $50 and above per season. Just a bit too rich for me.

b) Things are starting to get a little tight in my room thanks to the dvd shelves.

Switching to dvd thinpacks would be a big help.
As for Blu-Ray, I'm not so much interested in high-def. Unless the movie is filmed at a high resolution, whats the point? I'm actually more interested in being able to fit an entire 24 episode tv series, plus extras on two disks.

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Old 02-25-08, 06:54 AM
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I'll post what I've said before...

Why would people care about the visual quality of crap (which describes 75% of what's released on discs)? After all, there's been no real effort to use all that extra disc space on extras, so all we can care about is seeing the latest National Lampoon disaster is HD quality, with audio that few people can even decode on their systems.

Plus, why would we trust that studios who just recently were embracing full-frame pan & scan transfers will all of a sudden care about the visual quality of their films?
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Old 02-25-08, 08:44 AM
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Old 02-25-08, 08:52 AM
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It's hard for me to be concerned when DVD sales are still over $15 BILLION. Even with sales declining, that is enough to purchase a small country.
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Old 02-25-08, 09:06 AM
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Originally Posted by dadaluholla
It's hard for me to be concerned when DVD sales are still over $15 BILLION. Even with sales declining, that is enough to purchase a small country.
That was my thought as well. It's hard for me to hear the mewling cries of the studio heads when they're shouting from the tops of their 500-foot tall Scrooge McDuck money bins.
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Old 02-25-08, 10:07 AM
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But the Internet is perhaps the biggest enemy.
ugh! No it's not.

I've slowed way down with my dvd buying, but not because I now download my movie, but because there a finite number of catalog releases I (or anyone) am going to buy. Now that most movies are on dvd, people have bought all their past favorites, and new releases aren't enough to continue dvd sales growth. And with discs lasting far longer than VHS, people don't need to re-buy things. The studios should've known this - it's pretty much the same thing that happened with CDs - people re-bought the shit the love on the new durable format, and then sales declined. It ain't rocket science.
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Old 02-25-08, 10:34 AM
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Originally Posted by slop101
ugh! No it's not.

I've slowed way down with my dvd buying, but not because I now download my movie, but because there a finite number of catalog releases I (or anyone) am going to buy. Now that most movies are on dvd, people have bought all their past favorites, and new releases aren't enough to continue dvd sales growth. And with discs lasting far longer than VHS, people don't need to re-buy things. The studios should've known this - it's pretty much the same thing that happened with CDs - people re-bought the shit the love on the new durable format, and then sales declined. It ain't rocket science.


Exactly. My catalog collection is right where I want it to be. Save for random flicks here and there I will see in a store.
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Old 02-25-08, 11:06 AM
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Originally Posted by stingermck


Exactly. My catalog collection is right where I want it to be. Save for random flicks here and there I will see in a store.
Yep, and I dont know why studios dont see this...
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Old 02-25-08, 11:22 AM
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Originally Posted by slop101
ugh! No it's not.

I've slowed way down with my dvd buying, but not because I now download my movie, but because there a finite number of catalog releases I (or anyone) am going to buy. Now that most movies are on dvd, people have bought all their past favorites, and new releases aren't enough to continue dvd sales growth. And with discs lasting far longer than VHS, people don't need to re-buy things. The studios should've known this - it's pretty much the same thing that happened with CDs - people re-bought the shit the love on the new durable format, and then sales declined. It ain't rocket science.
I agree with all of this.

What I don't like is the tendency to blame the internet for problems.

"Sales are down 3.2%!" The all powerful internet is clearly the only factor at work to bring down your sales a massive 3.2%
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Old 02-25-08, 11:27 AM
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Also, try releasing something that hasn't been released AT ALL before doing triple dips.

Give me all the 70's and 90 Captain America movies, Birds of Prey and Batman TV show. The Wonder Years, just to name a few. Hell even Howard the Duck and you have my money.

Spend some time on unreleased stuff, and clearing red tape for held up releases, rather than just sticking in crappy - deleted for a reason scenes - into an 'extended cut'
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Old 02-25-08, 12:24 PM
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Do we really need a WS, FS, and a 2-disc version of the same movie?

How about we teach the public that WS is the "whole picture" and FS cuts a lot of the picture off (roughly %40). How about just releasing the 2-disc version? I mean the price difference between the 1-disc and 2-disc version isn't that big, so why not just do away with the 1-disc and the FS?

I do blame the internet for slower sales of DVDs, but it isn't the only reason why DVD sales have declined. The fact that studios seem to be releasing the same movies in different editions, than unreleased movies or TV shows is one of the other big factors of DVD sales declining. Do we really need Halloween released again? How about releasing some long overdue TV shows on DVD. I can think of a ton just off the top of my head that need to still get more seasons out / haven't even started being released on DVD.

I do like the "digital copy" idea (It's included in the 2-disc collector's edition of American Gangster) and I think it would give some people the incentive to continue buying DVDs.
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Old 02-25-08, 01:37 PM
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Originally Posted by nateman
I do like the "digital copy" idea (It's included in the 2-disc collector's edition of American Gangster) and I think it would give some people the incentive to continue buying DVDs.
But those are usually only available for a limited time. What about the people who don't buy a dvd on release day? Isn't the American Gangster digital copy only available until May?
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Old 02-25-08, 03:27 PM
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This is probably the WORST time to launch a new format-when most people are satisfied with the status quo-or can no long afford the luxury of buying movies.
The *optical media* market is saturated. BD is just a variation-not a revolution in video like VHS>DVD

There are people in financial/Real Estate sites/circles who say the economy is going to get worse.
As in *much* worse.
The mainstream media? Heads in sand-Brittany having a baby is the big news.
Our psychotic president-now with only 20% of national support, is still trying to figure a "believable" excuse to invade Iran. Cant use the old "WMDs" ruse again....or are they? Look for draft notices in your mail soon if youre 18-42-some claim they already have-even though the bill hasnt passed yet

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Old 02-25-08, 03:49 PM
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Typical glass-is-half-empty Hollywood mentality. Lack of growth = OMG we're losing our shirts. The home video sell-through market was practically non existant 10 years ago. Now it's just not enough.

And if you really want me to buy into Blu Ray, how about getting a player in my home for an affordable price? People aren't buying DVD's due to the economy but we're expected to get excited about these $400 players and their $30 movies? No thanks, but I'll be waiting.
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Old 02-25-08, 03:57 PM
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I don't think the DVD market is in any jeopardy whatsoever.

But I think I'm already seeing the writing on the wall that Blu-Ray will never be a primary medium like CD & DVD. Disney can push all they want, people don't care. The leading edge will move on to non-physical medium, and the trailing edge will be happy with upconversion.
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Old 02-25-08, 05:02 PM
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Originally Posted by nateman
Do we really need a WS, FS, and a 2-disc version of the same movie?

How about we teach the public that WS is the "whole picture" and FS cuts a lot of the picture off (roughly %40). How about just releasing the 2-disc version? I mean the price difference between the 1-disc and 2-disc version isn't that big, so why not just do away with the 1-disc and the FS?
While I agree with you about WS/FS, keep in mind that many people care very little about extras. All they want is to see the movie and pay as little for it as possible. If they are buying a movie and have to choose between Title A with no special features at $15 and Title B with special features at $20, they will go with the cheaper movie, all things being equal. And Netflix and Blockbuster, who are the two biggest purchasers of DVD's, will also want to pay as little as possible for them for the exact same reason.

Adding special features at no extra cost gains very little in terms of additional sales to the general public. Adding those special features for an extra cost does, since afficionadoes will pay the higher cost and the average viewer will go with the cheaper no frills title.
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Old 02-25-08, 05:20 PM
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Why are the sales down?

1) Many were waiting for the format war to be over. I know several people including me who stopped buying because I didn't want to replace these purchases with a "winning" format in 6 months

2) The players cost way too much. Why is a $400 game machine (ps3) one of the cheepest players out there?

3) Hear of stories of "this disc didn't play". People are waiting till the manufactors to get their act together and make players that play the movies. I shouldn't have to download a patch every few months to keep my player working. There is a standard right? build to it, studios you too... you guys didnt have this problem this long when the first generation DVD's came out.
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