Spaceknight

Hoping to just understand something without starting a HD-BD fight...

Sony paid Fox and WB a few hundred million to be Blu-exclusive. I get this from the studio's POV - seems doubtful Fox would make 120 million profit in the next few months from selling HD discs. Correct me if that's wrong, though. Just how much does a studio make per disc selling HDM?

But what is Sony's gain?
At the end of the day, how do they make a profit from spending 620 million or so to get those 2 studios to be exclusive? How do they earn back that 620 million and then more?

Qui Gon Jim

They hope to gain it back through licensing royalties for Blu-Ray over a long period of time.

RichC2

1) The "pay offs" are speculation, but I tend to agree there was something more than specs making them go exclusive.

2) Sony owns Blu-ray. Every unit sold will get them money, every movie sold will get them money. So while having these companies exclusive right now won't make them money, winning the war would make them an absolute fortune. As you can imagine, when and if it takes over for DVD, you'd have 1) profit from people buying players, 2) profit from people buying media, etc;

It's pretty obvious really. You're a little short sighted in your question is all.

DVD Polizei

Sony might actually want to sell more PS3's...

Mr. Cinema

MaxPower, who is a BD insider at blu-ray.com, said with 100% confidence, that there was no chance in hell Fox was even considering going HD DVD only. Some here will probably not believe that, but I'll take his word.

Also, Sony does not = BD. Matsushita (Panasonic) has as much, if not more, patents to BD as Sony does. The BDA is more than 2 companies.

darkside

Sony does get a bigger piece of the pie though. With DVD Sony and Phillips came out on the short end of the patents and both wanted to have the winning format this time.

Royalties is what this is all about and Sony has risked a lot on winning this war. The BDA is more than Sony, but Sony is the company that has risked a huge video game empire on winning this HD disc war.

beebs

Look at DVD Licensing and Fees to see the motivation here.

There are licenses to make a drive. There's a fee just to put the DVD logo on a device.

Then there's the actual hardware you need to make a player -- drive, decoder, video chipsets, etc. If you are the patent holder, you will likely sell lots of HW to other manufacturers as well.

Best guess is today to make a DVD player for someone who isn't part of the DVD license group is something like $20/player.

And then there is media license fees. Every movie sold pays a small fee back to the license holder. Every DVD-X and DVD+X all pay a small fee back to the license holder. Think $0.25 at first, now down to $0.04-.05. From what I undestand, Blu-ray additionally stands to many money on the manufacturing process on top of any fees.

It's not all going to go to Sony (blu-ray) or Toshiba (HD-DVD), but they know how much they stand to make. Toshiba acts as the agent to collect and protect the DVD license fees for all the license holders there. They, surely, know what it is worth and have been spending accordingly.

I am sure both sides believe there is a potential here for a decade of $100 million+ fees a year. Besides, of course, the money to be made by selling hw and sw yourself.

-beebs

Adam Tyner

I'd bet that most, if not every cent, of that however many millions of dollars came in the form of incentives -- marketing, subsidizing authoring and replication...that sort of thing. I doubt an actual check was written.

Qui Gon Jim

I agree, and I think that goes for any of the "payoffs" including the one made by Toshiba to Paramount.

Spaceknight

but then... long term, isn't WB just going to end up paying back most (if not all) of that 500 million to Sony?

I wonder how much Sony would have made in licensing without trying to affect HD, kind of how they make money on PS3 software without trying to block the XBox thru exclusive contracts. Will they really come out ahead with the different tactic? Because if you're talking a billion in revenue long-term, but they already paid out 600 million or more today, is that really going to work for them?

Gizmo

Sorry, don't believe it, especially from someone who works for the BDA and takes a paycheck home from them. Wasn't he at first denying Fox was even talking to the HD DVD camp?

Regardless, studios know in the next 1-3 years Blu-ray/HD DVD will not make that much money for them, DVD will. Getting a payoff is a great way of getting extra money from something that will not simply not make them that much money, if any. I doubt Fox is making oodles of money from selling 10k copies (if even that) of Castaway, the same with Paramount and Blades of Glory. Thats why I don't see Paramount "throwing in the towel' on HD DVD. Why would they give back $150 million in "incentives" when there is no way in hell they would even make a fraction of that if they went neutral/Blu again?

Gizmo

IF Blu-ray becomes the next standard...in the next few years, sure. But with two different HD formats, expensive players, expensive discs, and consumers not really caring...its a big gamble. Sony gambled with putting Blu-ray in the PS3. It forced them to launch the system a year late and 1.5 years later they are still in last place behind Nintendo and Microsoft (often being referred to as the Dreamcast/Saturn/Gamecube of this generation). Blu-ray did not do as well as they or any hoped. They sacraficed the video game wars for the movie wars and at this point, have lost both.

If Sony paid Warner Bros $500 million right now to make UMDs again, do you think they would turn it down? Hell no!

pro-bassoonist

Exactly.

Other than that SONY will be collecting royalties. Not as large percentage of them as Matsushita/Panasonic but a significant chunk if BR becomes the mass format. The success of the PS3 amongst BR enthusiasts also has a positive effect for their gaming branch.

Pro-B

Jericho

Well Sony/Blu-Ray Disc Association can counteroffer with "incentives" to Paramount. It might get a bit sticky legally (tortious intereference with contractual relations?). But the BDA can make it worthwhile to swicth if indeed Paramount can (may have to wait until June on that one).

namja

Yup. Sony doesn't need to worry about having to recoup "$620 million" in expenses. The actual out of pocket expenses for Sony will be much, much less. Sony's known for having made many dumb business decisions in the past, but this--getting dedicated studio support--certainly isn't one of them.

Drexl

Yeah, I don't think Fox was considering HD DVD either. BD+ is like crack to them.

Spaceknight

I can believe that Fox was in no way considering HD-only. But I would expect they'd at least be considering going dual-format and making some money selling to the many people who own HD players, especially if HD discs really have a small production cost.

Shannon Nutt

It's all about getting a proprietary format, and Sony's obsession with having a successful one.

Sony failed with Betamax. They failed with ATRAC. They failed with SACD. They failed with UMD. They failed (pretty much) with memory sticks. They almost screwed things up with Blu-ray, but fortunately they got their act together and it looks like this IS going to be the next-generation format.

As previous posters have noted, Sony will get royalties for every Blu-ray sold and pretty much have their say as far as far as the format's standards and licenses go.

Josh Z

As I've heard it, Fox was so humiliated by how much of a fuss they put up over BD+ only to have it cracked so quickly that all of their objections to HD DVD crumbled.

Hammer99

As I've heard it, Fox wasn't involved at all. Jeff Bewkes said "Make it so", and Warner went Blu.

Peep

I don't think proprietary means what you think it does. Or at the least, you misued it by labeling Blu-ray such.

RoboDad

As Peep said, Blu-ray is anything but a proprietary format. Does Sony hold some of the patents on it? Yes. Do they hold even a majority, let alone all of them? No, they do not. Will they receive royalties for the patents they hold. Of course, and has patent holders, they deserve them. Just as Matsushita and the other patent holders deserve the patent royalties they will receive. Will Sony "have their say" with regard to Blu-ray? Only as far as their membership in the BDA permits (which means they can be outvoted on just about any issue by Matsushita alone, if there is a need for such action).

If anything, HD DVD is more proprietary than Blu-ray, given Toshiba's mostly single-handed control and driving of that format.

PopcornTreeCt

At the end of the day, it seems like a big risk.

Shannon Nutt

Well, I meant it in the sense that Blu-ray sinks or swims with Sony, although others seem to think the format could survive/flourish without them (I don't).

I also slightly disagree with the idea that Sony isn't the major player in the format, regardless of how the patents/investments break down. All those companies in the Blu-ray Association are in bed together anyway, so it's kind of a moot argument.

The fact that Sony owns the trademarks on both Blu-ray and Blu-ray Disc tells you who's really in charge here.

Goldblum

Welcome to the world of business.