"Electronic Delivery Trumps DVD"
 

This was from IMDB website, Sept 18/08

"Studios can earn far more by selling their films on the Internet and on cable than on DVD, Time Warner chief Jeff Bewkes told a Goldman Sachs investors conference in New York Wednesday. Each electronic sell-through, he observed, produces $13-14 in profits for a studio versus about $10 for a DVD. He also noted that with improved quality of product available online, including high-definition downloads, the competition from camcorded bootleg movies has lessened. Online piracy, he indicated, had "flattened out" over the past 18 months."

Is this the direction the studios will go to increase their bottom lines?

Maybe someday.

Look, this topic comes up at least every other day. One more pseudo-controversial quote from this bungling boob isn't going to make it so. Nine months ago he was convinced that Blu-ray was the future of home media -- what's changed?

I don't understand the comment about bootlegs. Camcorder bootlegs are for movies in theaters. The last time I checked, they weren't releasing brand new movies as downloads the day they hit theaters. So, I don't see how legitimate downloads are in "competition" with camcorder bootlegs.

They can make more money because there's a higher possibility of content being lost or inaccessible one day for one reason or another. Double dips are one thing for DVD's, double dipping because maybe you got a new service, got a new box, hard drive failure, whatever the case may be... the early on companies that DO go full bore on downloads that you can purchase, won't be full proof.

But there's always, always, always going to be a big market for those that like to have physical media. You will never see physical media go the way of the dodo. Downloads will become more popular and make the studios a bit more money, but I don't think they'll ever be more popular than DVD.

Just because the margin on a single DVD sale is less than the margin on a single download, that doesn't mean that downloads are ultimately more profitable for a given company. Profitability is a function of unit margin and unit sales. Are there as many people downloading as there are buying DVDs? I doubt it. Will there be at some point in the future? Only if the right delivery scheme comes along so that that whole thing can be done on the couch with your remote and television (like current cable VOD, but with an ownership rather than rental approach).

Additionally, those DVD margins are a big reason the studios wanted a new hi-def physical format. I'm sure the margins on a single Blu-ray release are higher than $10.

I can see why the studios want things to move in that direction.

1. No distribution and transportation costs.

2. No manufacturing costs.

3. No store promotional costs

4. No middle-men they have to share profits with.

And they can probably add that it's more environmentally responsible to boot!

They would still have to find a way to build awareness of what's available which DVD rental stores and retailers do very well.

I hope this is not the case as I do like having physical media with the packaging. Hopefully the masses agree.

Didn't somebody from Lionsgate say they were pulling in around $15/unit for Blu-ray sales? And they're even using BD-50s with lossless sound . . .

Maybe Jeff Bewkes could take a lesson.

This is another comment similar to what bill Gates said around Windows 3.1, where he believed that books would become obsolete and everything would be read on computers. Yeah right! These corporate idiots don't know jack shit and what most likely will happen is that DVDs last longer that these buffons on their jobs.

If the studios think this is why profit margins from downloads will be higher, they will be sadly disappointed.

Because it is for those same reasons that most consumers will expect to pay much less for a download than a DVD. DVD pricing ($15-$20) for downloads is not gonna fly with the general population.

I've said it before and I'll say it again. There is no way I will ever, EVER purchase movies in a download-only format. I don't care if it has 10x the resolution of Blu-ray and 10.1 lossless audio. If they want me to purchase it, then they will give me a tangible, physical medium that I can keep.

Rentals are a different matter, but electronic purchases? No way. Not even worth discussing.

What if its $4?

Precisely where I stand on the issue.

Pro-B

You'll change your mind.

(I'm not saying you're afraid, but) Years ago people were scared of changes such as travel by air or communication that wasn't face to face. There are better examples, but I'm not awake yet.

I'm a packrat/collector that loves physical media, but I see the times changing.

In the near future everything will be digital, and our entire libraries will be available to us wherever we are.

Why would I want my 5000 movies only available to me at home and taking up an entire room or two of space, when I could have them with me 24/7 in virtual space?

I'm not changing my mind unless it's something I'm FORCED to do. I like to have a silly amount of movies sitting on a shelf for display. I like to collect them.

I like physical media myself as well but I feel downloads will be a big part of the market in the future.

Music is usually just ahead of video as far as trends are concerned and downloading movies are certainly on the horizon.

For the younger crowd music has become "easy-come, easy-go" with down-loading the latest songs for free, then deleting them when they get bored.

I feel the "rental" mentality will become the norm with so much more electronic entertainment competition from video games, 250 channels on TV, internet, music downloading, iPods, cell phones etc.

This is how movies will become for a lot people, music has already set the framework.

Personally, if a like a movie enough to watch it again , I'll buy it.

I don't have any plans to download any movies online for money, but I love me some free, ad-supported hulu. Once they expand their library, it WILL prevent me from buying some DVDs if it's a movie I'm unsure of and I just want to watch it once. The aforementioned IMDb just put up some movies and I found the streaming to be glitch-free (although the ad breaks wasn't timed particularly well on what I watched, Liar Liar), and the quality seemed to be better than VHS (when you go full-screen mode, the quality stays steady and doesn't look "blown up").

But again, I only like it because hulu is free. Like some other people, if I'm going to sink my hard-earned cash into something, even if it's a dollar, I want a physical item. I have a little bit of a grey area -- if, for as low as 3 or so bucks, I could download an entire disc image and artwork and run off a copy myself, maybe I'd do that for some less important titles. But again, in line with others' arguments, I like having nice collectory things I can display on a shelf. I take time and effort to pick good movies and build a collection of movies I like watching and relaxing to. And that in a nutshell is why this kind of stuff is not going to beat physical media in the eyes of the people. For some of us, this is a hobby, not just being a consumer.

I agree completely that downloads will eventually become a significant part of the "home video" market for movies. As soon as a viable* rental download system is available for consumer use, I will be signing up for it.

* By viable, I mean one that follows the same business model that Netflix currently uses for DVDs -- for a flat, reasonable monthly fee, a certain number of movies are allowed to be rented concurrently, and when one is "returned", the next movie in your queue is automatically delivered in its place -- using HD downloads instead of delivered DVDs.

I don't see any problem with that model. In fact, it would allow me to eliminate probably 75% of my DVD collection, since most of them are movies that I might want to watch a second time at some point, but they aren't "collector series" films.

My point was that for movies that I do consider to be in the "collector series" category, an electronic-only delivery mechanism is one that I will never consider using, and no amount of marketing or guarantees from the studios will ever make me change my mind.

And while I think we are mostly in agreement, I'm not sure that I consider the rental mentality new, by any definition. VHS was a predominantly rental-only medium for almost two decades before DVD came along. ;) Downloads just shift the delivery mechanism, not the entire paradigm.

No, it's not new idea by any means but when VHS came out it was designed almost stricty for the rental market with a $89.95 SRP on almost every title. It wasn't until the mid-eighties that they even thought of selling movies to the general public. I remember Paramount led the way with Indiana Jones and the Temple of Doom & Top Gun being sold for $29.95 as a new release.

When DVDs were launched the studios released their titles with $29.95 SRP price tags encouraging people to buy titles rather than share profits with the DVD rental companies.

I have a feeling downloading, by its nature, will go back to the VHS "rental" model cutting out both the rental companies and some of the expensive manufacturing/transport/distribution costs of physical media.

I'm sure you'll still be able to buy physical media titles but the focus may eventually shift.

Here are some posts from Blu-ray insider Maxpower1987 talking about downloads:

"So what's on the agenda these days, digital downloads. I saw they made a splash with the new DECE consortium opening up for business. A lot of familiar names in that. It all stems from the format war, the major players all decided they didn't want a repeat of Blu-ray vs HD DVD when it comes to digital downloads. So it is similar to the formation of the BDF way back in 2002. DECE is going to set the agenda for digital downloads over the next decade and many companies will join by the time they are ready to push forward."

"Yes. I believe BD is the final optical disc format, so do all of the CE companies, studios and retailers.

Right now what DECE is working on is creating a viable ecosystem so that digital downloads function in the same way as an optical disc would. Basically you can take it with you wherever you go, watch it on a box made by any CE company so it isn't tied down to just one brand. They are looking closes at the DVD/BD model of distribution, where all stores, studios, and CE manufacturers conform to the same standards or fall by the wayside.

Right now some players aren't in, but they will fall in line just as MS, Universal and Paramount did when Blu-ray asserted its dominance over HD DVD."

"Blu-ray quality. It is going to be Blu-ray but downloadable.

As you may have guessed the infrastructure for this type of service isn't going to be in place for another 10-15 years, but it will be introduced around 5-7 years from now.

What does that mean? Well, retailers are going to step up, it will eventually mean that you can go to a retailer, take a 50GB flash drive and download a movie which you can then transfer to your player or leave on the drive or move it back and forth to play at a friends house. Obviously once on the player it will be attached to that household, so transferring your movie to your friends player isn't possible.

Eventually it will be account linked, where you have an account with DECE much like a PSN or XBL sign in and movies you have bought are linked to your account. So you can go to a friends and sign in on their player and watch movies bought on your account there. Obviously there are a bunch of things that need to be worked out, and I will probably be involved, but not for another few years..."

Well, good luck with getting all those companies to agree on a DRM standard.

I don't understand this idea about going to a retailer and downloading a movie to a flash drive. Don't I have a broadband connection at home? Why would I bother going to a retailer to download something? How is that more convenient than a disc? I thought the big selling point of downloads was to cut out the retailers and allow us the convenience of buying something instantly at home.

Yeah, there are bandwidth concerns, but this is years down the line.

Sorry, he lost me here:

Yeah.

Yeah, that sounds really exciting to me...-ohbfrank-

Clearly, this is just a way to give the studios more control over how, when and where you can use the products you "buy" from them. Thanks, but NO THANKS.

Precisely. That is the whole point of the ecosystem Max is talking about: guaranteed control. Hence why physical media will represent a substantial portion of the majors' business portfolio as well. Downloading will impact the rental sector with the rest of the market controlled by Blu-ray (or, whatever is left from DVD, if anything).

The notion that there would be a mass upgrade to a market model where the majors won't have the same type of control they do with physical media allowing unrestricted downloading to flourish (and there are many confused posters who believe that this would be an issue that will be eliminated via downloading) is flat-out naive. Downloading would, at best, eliminate the middle man, while bringing the "rental" consumer closer to the producer. And neither control nor delivery options would be synchronized to meet both security concerns and quality demands for quite some time.

To make it very clear to those who believe that these two will be introduced on a mass level any time soon (read couple of years): they won't jeopardize Blu-ray's life-span at all during the next 10+ years. The mass physical media market is here to stay and unfortunately for some it so happens that it ends with 1080p/Blu-ray.

Pro-B

I agree, specifically with the highlighted portion of your post.

Everyone poo-pooing MaxPower's post need to take the Blu and Red glasses off for a second and read it. I interpreted it as follows:

Your disc will be replaced with a DRM digital file. That file will be able to be purchased on-line, or in a store. The files will have portability, likely from some type of check-out scheme where once a movie is "checked out" of your library, to a media appliance such as a flashdrive, it will need to be "checked in" on whatever device that will be used to play it. It will then need to be "checked out " back onto the flash and so on.

In a way this is physical media, except it will utilize a volatile flash ram rather than a disc-based ROM.

Think how cool the idea of an "at your fingertips" VODish library combined with the portability of a disc ROM library would be.

I do agree getting the DRM squared away is an issue, and I also agree that we are 10 years out from this. Still, this sounds very exciting to me.

To further clarify my earlier post, let's use music as an example.

Until recently, you had to have physical copies of everything. A 1,000 CD collection took up an entire bookcase or three and was very difficult to transport.

Now, all 1,000 of those CDs are with me 24/7 on my iphone, either thru free streaming from my home computer, or physically copied onto the device. Technology is only going to improve, and someday our entire collection will be able to be streamed to our car or wherever we happen to be, no need for a device or a collection taking up space at home.

The exact same thing is happening with movies.

I'm more of a packrat and physical media fan that any of you, really. But times are changing.

I love physical media. I'm sticking with it, until:

1) there's something I really want that I can download
2) it is at a reasonable price
3) there's no plans for a physical media version...

At that point, I'm gonna consider it. It's all about the movies for me. What difference does it matter how it is delivered. I'd strongly prefer a physical product. But I see the writing on wall with this stuff. It's only a matter of time.

-beebs

It's best not to make rash assumptions about what people have or have not considered, before casting aspersions.

My hatred of going to a download-only purchase model has nothing to do with any love of any particular physical format. It has to do with not having any interest in purchasing a movie that does not come with a tangible copy that I can keep, hold, view on any TV of my choosing, loan to a friend or family member, all without having to incur any unusual expense or odious DRM compliance steps.

Further, I refuse to participate in a model that removes that much control from me, while adding the risk of losing an entire collection in one fell swoop of a damaged or failed hard drive. Yes, DVDs and BDs can fail, but when/if they do, that costs me one movie. A failed hard drive could cost me dozens, or even hundreds. Even if they are freely replaceable (which is still a hotly debatable issue, based on past experience people have had with some other DRM-based download services), how much time will it take to rebuild the library on a replacement drive or STB?

No, that level of INconvenience is not for me. If it floats your boat, that's great for you. But if the day comes when I can no longer buy movies on a physical medium, I'll simply stop buying movies.

And to further use your analogy (which we have done numerous times on this forum) the book-business is even less restrictive and easier to manipulate than music is. There are practically very few restrictions that apply to online distribution. Aside from CETA everything is streamlined in a manner that makes it utterly convenient for the consumer to avoid physical copies of the latest bestsellers. Yet, downloading is a mere fraction of the market.

As noted earlier, if at some point you feel that downloading (films) will be satisfying enough for you and you don't need to own a physical copy of your "property" then by all means this is the model for you. But I would go a step farther than RoboDad and make the following very clear: I am convinced that there is a substantially larger segment of "owners"/customers that want to own a physical product (read disc format) than there are people that are willing to switch to downloading completely. With other words, physical media will be here for many generations, certainly as far as mine is concerned and beyond.

Pro-B

FWIW, I was not directing my comments at you in any way. As I said, our views are pretty meshed on this topic. I was mainly responding to the disqualification of everything the guy says because he took a dunk at HD DVD.

But what if the scheme allowed you to portabilize the content? Does having a 1:1 disc:film ratio make or break it? If you carry a flash drive to your friend's house or a read-only disc is it that big of a difference?

I am in total agreement. If your drive goes poof, then you need to pay nothing for the replacement files. However, as an IT manager, I have seen WAY more bad media discs than I have hard drives or flash memory.

That's fine. For me, if they came up with a way that combined the portability of current ROM based media with the convenience of VOD, I would be all over it. I don't see a system like this as an inconvenience, much like it is very difficult to say an iPod is not more convenient than a CD collection.

BDs are bits on a disc. Who cares whether those bits sit on a memory device or in a plastic disc that sits on a shelf in a plastic box?

The other upside I see to this is that there would be no room-consuming collection, and there would be no waste generated by manufacturing and packaging media.

Print is not an apt comparison. To completely counter this argument, look at what the internet has done to print magazines and newspapers. How many hundreds of magaznes and newspapers have folded because there is an easy alternative to reading the content, without the lead time?

I think convenience wins out in the end. Books are sort of different. I do still think that if they made an ereader that was easy on the eyes, and was very simple to use (sort of like an iPod) that it could take off, and take a chunk of printed book's business. Fiction is really the only area that has not gone electronic. Almost any printed reference manual is outdated by the time it is done printing.

It is as generic of an analogy as is music to film. A music CD could be sold in portions (selected songs, etc). A film cannot be sold in the same manner Itunes captures music. Yet, there are plenty of comparisons on this forum between the two.

In any event, it is pointless to argue any further. Time will tell where the market heads. If there is one thing that is absolutely certain it is the fact that the studios will have just as much control over your downloaded "property" as they do now, with physical media. In my opinion, in that regard they will do even better with severe repercussions for the end consumer.

Pro-B

Just because YOU say a topic is done does not make it so. The only one "arguing" here is you. You can never ever seem to have any discussion if it at all involves the end of BD be it tomorrow, or 10 years from now. Jesus. News flash: BD WILL NOT LAST UNTIL THE END OF TIME. HD DVD would not have either. Or HDVHS or DVD. The format du jour is irrelevant to the current discussion.

Just so you know that right now, when you buy any DVD or BD you own nothing except a license to view the content. The only "property" is your license.

So you are saying that HTPCs are not more convenient to use than disc based set-ups? I don't have a HTPC, but I will unequivocally say you are wrong. It is far more convenient to find a title in a list and click on it to start playing than it is to find the disc in your collection, open it up, power on the player, put it in, and let it start playing. This applies whether the deliverable is a song on a CD or a movie on a DVD or a BD.

So I want to get you on record:

You are saying that if a system evolved where you could store digital copies of your films, with little hassle in case of a disaster, that allowed portability, but that was not on a disc based media that you would balk at it? Because it is not on a disc you'd say no?

There is no need for you to lose your temper. You quoted my post earlier which implies that you were "talking" to me. I responded in a manner I believe sums up my thoughts on the issue very well, hence, I also concluded that there is no need for us to argue any further. Should have been obvious that this does not address your participation further in this thread.

Thanks.

Pro-B

This raises an ethical question with regard to resale -- especially if the seller profits from the sale. Essentially, this arrangement would imply that when Buyer 1 purchases a disc, the "license to view" is effectively paid to the property/content owner (ie, the studio). But when Buyer 1 sells the disc to Buyer 2, no "license to view" is purchased from the content owner -- if, indeed, the studio is still to be considered the owner of the disc. I suppose one could argue that Buyer 1 "transfers" his license to Buyer 2, but by accepting payment for the disc Buyer 1 has essentially caused the content "owner" to lose potential income, in that two people have held control of a license for which said "owner" only received a single payment.

Let's take this a step further and identify Buyer 2 as a second-hand video reseller such as Hastings or The Wherehouse. After making the purchase from Buyer 1, Buyer 2 will resell the disc/"illegitimately obtained license to view" to Buyer 3 at a profit to Buyer 2. The "license to view" has now been held by three parties, while the content's owner received payment only for the original license transfer.

Having said all that, studios selling downloads only could effectively kill the second-hand video sales market. Everyone would be forced to pay the same amount for a given title, and resale (or license transferral) would presumably be impossible.

Surely it's much more convoluted than that, but that seems to be the gist of it, right?

Sorry, my bad. I need to pay more attention to who said what sometimes. :)


It is a big difference for me, for two reasons.

First and foremost, because of the fragility of the media. You mention that you have seen more failed media discs (by which I assume you mean CDs and DVDs) than hard drives or flash, and that is true. However, my experience is that the overwhelming majority of failed media discs is due to abuse and/or mishandling, whereas hard drives and flash drives can and do fail during normal use. A stray static discharge, even during what should be a "safe" hot swap, can fry such a device beyond recovery. Add to that manufacturing defects, other power surges, AND mishandling/abuse, and the chance for failure increases significantly.

And second, because of the obvious amount of control such media gives the studios over how and where I can access such "portability". They do NOT want you or me to be able to take movies to a friends house free of charge. They really want that friend (or us) to pay an additional fee for the privilege. With DVD and Blu-ray, they have no such leverage. With DRM-controlled bits on a RAM drive, they DO have that leverage, and more.

I agree, but my take is that it will be the rental option that reduces the room-consuming collection. Give me a decent VOD rental mechanism (as I described earlier in the thread), and I'll be all over it, and the size of my disc-based collection will decrease by as much as an order of magnitude, maybe even more. The resulting 100-200 disc collection will not be room-consuming.

I think the book analogy works better than you may be giving it credit for. In fact, it is nearly perfect. A convenient and affordable ereader would/will most likely kill the paperback book market (as well as most user/reference manuals), but it will do almost nothing the the hardbound book market. Paperbacks are very analogous to video rentals, where hardbound books are analogous to "collector edition" DVDs and BDs.

Give me a good ereader that can accept downloads from any source (unlike the kindle, which is tied ONLY to Amazon), and I'll buy one, and that will be my new paperback reader. But it won't stop me from buying hardbound editions of books that I love for my library.

I agree. In a perfect world, we could have a new system like this that will have the best of both worlds, but we all know that greed will set in, and the controls will be too restrictive. Hopefully they learned something when DVD destroyed DiVX. Make it reliable and user-friendly, and offer something that hasn't been offered before and you could have a hit.

OK, I'm with you here. You actually said what I couldn't really put into words. I think most people view books and DVDs and CD as disposable, especially paperback books.

If I read between the lines of your comments correctly, and correct me if I am not, you, like me, are now looking at this huge media collection you have and going "now what?" I have tons of paperbacks that I am ready to part with, and have whittled myself down to a couple dozen hardcovers that I want to keep. I think the DVD collection will be next. I have hundreds of movies that have only been watched once. Fortunately, I am a cheapskate and the price of that one viewing is not much more than a rental so I won't be taking an astronomical hit when I sell these movies off.

You are dead on here. I think that corporate greed will be the deciding factor on a lot of this stuff. The same corporate greed who brought us two different hi-def formats (from two companies, I might add, who are partners in the PS3). To me this is the biggest thing I have against digital distribution.

Like I said, I was vehemently opposed to this last year, but some aspects of this are starting to make sense to me.