Wannabe

NEW YORK (Reuters) - Movie sales on DVD are likely nearing their peak worldwide as more people look to computer downloads and video-on-demand to watch their favorite programming, according to a report released on Wednesday.

"The PC industry is champing at the bit to provide downloaded movies that might compete with DVD sales, and Pay-TV services want to add movies to their video-on-demand services, to their new disk-drive-equipped set-top boxes, and to their emerging high-definition TV services," said Gerry Kaufhold, an In-Stat analyst and author of the report.

DVD sales growth is slowing, according to several recent reports. A study released by Adams Media Research in October forecast DVD sales of about $17.3 billion this year, a 12 percent rise from 2004. Adams forecast a 9 percent rise to $18.9 billion in 2006.

The industry also is grappling with a scuffle over what technology will underpin the new wave of high-definition DVDs, the report said.

"The migration to next-generation high-definition optical disc formats is not going smoothly," Kaufhold said.

On one side is Sony Corp (NYSE:SNE - news). (6758.T) with its Blu-ray format and studio supporters such as Metro-Goldwyn-Mayer Inc., and Fox Filmed Entertainment. The rival format is HD DVD, championed by a group of consumer electronics companies including Toshiba Corp. (6502.T).

John*D

Nothing will compete with having my favorite films/shows on a shelf in my home...

matome

Same with me. I want something tangible. The only reason I've slowed down my purchasing is that, at over 2000 DVD's, I pretty much have all the movies I want already and have been purchasing less new releases, as the current crop of films aren't really lighting my fire. Once my fave TV shows are completed, that'll be even less. Of course, there is HD/blu-ray coming up, but I doubt I'll be replacing all my DVD's with them. Probably cherry-pick.

RockyMtnBri

I concur. DVD has been the most massive media collection I have ever undertaken - I will only upgrade a handful to higher def.

marcellusk

yeah pretty much. I've spent so much money and time building my collection it hurts me to think about replacing ALL my movies (so far I'm at about 1500) I may get the disney/pixar movies on HD but the bulk will have to remain dvd. I just can't see myself getting rid of all my dvds.

illennium

As usual, note that the claim is not that DVD sales are slowing, but that DVD sales growth is slowing. As I understand it, this is a claim about acceleration rather than velocity (second rather than first derivative of the sales function).

viking99

I may ultimately replace many of mine with HD, however it won't be within the first couple of years. If HD goes like many other technologies, the first players will probably cost $500+ and the initial movie offerings will be $30+. Wait five years, and it'll be

viking99

Very likely the first time I've seen Calculus introduced into a thread. So what does that sales function look like on paper?

DiscGuy

DVD’s “on the shelf” will go the same way as laser discs, beta tapes and eight tracks….if the following occurs:

1. Instant access
2. Complete catalog
3. Cheap downloads

It’s all ones and zeros. The discussion here is the delivery method. It doesn’t matter if it’s pits on a disc or blips on your data line. If the downloads meet all of the above criteria, then DVDs will become extinct.

Wal-mart has two test stores that have done away with all physical CDs.

1. Customers browse a CD on-line catalog
2. Make selection
3. Content is burned on to a disc
4. Jacket is printed locally
5. Sale is completed

Advantages to Wal-mart: No inventory expenses, no shrinkage, minimal floor space required. But the next step is obvious: why should CD customers have to enter a Wal-mart to purchase a downloaded CD? Once everyone has a CD recorder (or other means of storage), all sales can be made directly to consumers at home.

Media-less entertainment. It’ll be here sooner than you think.

================

HD DVD? Not a big enough technology leap for J6P.

Shannon Nutt

It still amazes me that industry people think that VOD is going to kill off DVD sales (or whatever the home video format will be in the future). A vast majority of people still want to own a physcial product, even if VOD starts offering the same bonus features and extras as DVD. It reminds me of all those people that said book sales would drop when people could start reading novels on the Net.

cpgator

Yea, I hate that too.

Fok

I'd rather have a physical DVD that I can watch anytime.

John Galt

Exactly! People will want to own the DVD to take on a trip, to a friend's house, etc....the same way people want to own the book to take on a plane, read on the beach, at work, or wherever.

NatrlBornThrllr

I agree with something "matome" touched on. The reason the growth of DVD sales is slowing (note: not DVD sales, just the growth) is because most people who collect DVDs are getting to the point, or have already arrived at the point that they have most of the backlog titles they wish to own. A few years back, you had people just starting to gain interest in the format, so titles like Casablanca, Taxi Driver, Citizen Kane, Goodfellas, Pulp Fiction, and so forth...these were all big-sellers. At this point in time, anybody who might be interested in collecting DVDs has already started to do so, and they've likely already picked up these types of titles. As such, they're limited to new releases each week, as opposed to new releases alongside a handful of backlog titles.

Pair this with the fact that most collectors are growing tired of re-releases, and the decline in the growth of DVD sales is easily explained. What I mean by that is...people just aren't double-dipping as much as they used to. Take Pulp Fiction, for example. A few years back, everybody would've rushed out to upgrade their 1-disc version in favor of the 2-disc release, whether it was their favorite movie or just one that they enjoyed seeing from time to time. Double-dipping was exciting then. Now, it's a chore. Since we're so bombarded with re-releases now, the casual collectors aren't as inclined to go out and upgrade each and every title in their collection as soon as a flashier version comes along.

I don't doubt that DVD sales will peak soon. However, I think it has more to do with collections nearing completion than it has to do with Video-on-Demand, or whatever else these pseudo-reporters are pointing to as an explanation...

-JP

The Bus

If anyone in Hollywood is surprised by this, they should be punched. So, a new product introduced into the market, upon reaching maturity and saturation, fails to continue the rapid growth that brought it from a niche market into the mainstream? Well I'll be damned.

The title of the article is also misleading. I don't see DVD sales peaking for another year or two at least. It would also be interesting to see how many units are being sold. For what I used to pay years ago for a DVD ($20-$30, I was sadly oblivious to the .com deals), I can now get whole boxsets. (For $30 you can get Ghostbusters and and the Die Hard Trilogy and have cash left over). I know in the past two months I've bought more units than ever, although my expenditures haven't been commensurate.

illennium

It's not as simple as saying that people want a physical medium. There's bigger issues at play here. One is that content industries have strong financial incentives to move to a non-physical medium because that's a move from a quasi-property paradigm to a complete licensing scheme. In other words, when you download, you own nothing. You have some privileges that come with your license, but there's no first sale doctrine (eliminating a used market and therefore funneling more revenues to the content providers), DRM is easier to enforce, there's the potential for tracking every sale, etc.

The point is that while content industries might be chasing short-term profits right now, they're also gearing toward the future. And at some point in the (near) future, it will not be in their interest to even offer physical media for sale. Sure, they'll lose some short-term sales, but they have bigger game in their sights.

milo bloom

I was going to post from the other side of that coin. I imagine, that if VOD did take off fairly well, once it started getting beyond the usual early adopters, once that next batch of folks found out you couldn't make a physical copy to take in your car or for another system, they'd revolt pretty quick. That or someone would hack the copy protection and make it all a moot point again.

shacmasta

Excellent point.

I wish companies would stop trying to find the next big thing to line there pockets and try and improve the current things they are producing.

RoboDad

You seem to be contradicting yourself here. Whether the media is "burned" at a factory, the store, or in my home, if the movie or music ends up on a disc, it is not medialess entertainment. There is still something tangible that I can hold in my hand and carry from one player to another without incurring additional cost. What the movie industry wants is medialess entertainment, where you can only download a limited-use copy of a movie to a PC or set-top box, and then pay again if you want to watch that movie again on another player.

If tangible, "media-full" entertainment (i.e., DVDs and their eventual HD successor) ever do become extinct in favor of a pure download-only pay-per-use world, then my entertainment dollars will also become extinct.

Feathers McGraw

The only reason my buying has slowed down is the various companies' money grubbing efforts and stupid policies. Bogus "3 disk editions" attempting to make me buy an audio soundtrack I don't want just to get the normal 2 disk version, forced ads at the front of disks that take several minutes before I can actually control *my* disk, music modifications and syndicated tv shows instead of the originals, and just a general decline in quality. Compare the early Disney two disk versions to the new ones, there's simply no comparison, the new ones are just tossed together, no real effort at all.

DthRdrX

Bingo.

For the studios, a perfect world would be everyone of us walking into a theater, paying for a ticket, and walking out. A DIVX like approach to VOD would probably be their most wanted concept for home viewing. See how well that went? The perfect ideal to them is that the consumer walks out with nothing in hand to show for their money.

The entire industry has been buzzing for three years, predicting just what this article says about the slowing growth of the dvd market. The big name catalog titles have been rerereleased, and TV titles are now taking up a large percentage of what growth is left in the format. This is the reason why two camps, Sony and Toshiba, have been working and spending boatloads of cash to get HD out there in 2006.

The studios and CE companies see HD as a way to make up for that lost % of slowdown in dvd and dvd player hardware sales. It is only common sense that the HD market has more potential for growth over the next 20 years than the one that is almost peaking. HD doesn't have to surpass dvd sales asap. They want it to be a slow, proffitable period.

In short, the greed train is rolliing and now anything less than more market growth is considered unacceptable. Widescale VOD is so far away it's not even funny. The industry only wants to push one major cash cow at a time.

awmurray

I believe 17 billion looks something like this:

awmurray

Yes it is.

No, they have a strong financial interest in making sales. Why do I want to buy a "license"? I won't. It will completely shut down my spending. Think of all the DVDs we buy that we don't watch for months or even years in some cases. If those are sold on a per-view basis, there are no sales. I'm simply saying that I guarantee they will lose money from me-- and I'm sure other's here as well. I don't think the losses will offset the increased income due to the greater profit margin of selling "licenses". This is why that Circuit City turd (was it DIVX?) fell flat on it's face. I knew it would as soon as I heard about it.

Exactly. And this is positive because? We're going to sell you nothing. Wow! Where do I line up?

I buy a lot of DVDs used...

I can save them a lot of money: it won't work. Sorry. People will begin buying bootlegs of VOD product that someone recorded. I would.

Terrell

You fail to point out the reason that these went away. The only reason they went away is because a better format came along, could be purchased and owned, and placed on one's sheld. A format that was cheaper, had better picture quality, and was far smaller. Thus it took up far less space.

I don't see video-on-demand ever being more successful than actually being able to buy and own a copy of a film. It's too big of pain in the ass, and most consumers in my opinion aren't computer savy and don't want to spend time downloading shit on a computer or any other device. Besides, what about the millions who don't have broadband. Heck, even for those of us with broadband, imagine how much time it would take to download a 4+ gig DVD quality file. You'd have to plan your day around the download. Don't even get me started on downloading a hi-def file. That would be far worse.

I second that notion. The day studios try and go to a media-less system where you have to buy a license for a limited use, I can guarantee you they won't get a single dime from me.

illennium

OK, you didn't understand my point, so let me try again. There are advantages and disadvantages to licenses. From a consumer standpoint, they lower costs, but they also limit rights. Like you, I don't like them. I'm not sure where your sarcastic "sign me up" comment comes from. I didn't say they're a good thing for consumers. My point is this: Industry wants that model very, very much, and they're willing to lose a few customers to get there. I'm making no normative claim. That's just how it is. If anything, I agree that we should be worried about this. But if you want to sit on the sidelines and proclaim that this isn't going to happen because you or your friend or your grandma aren't going to support it, then I have news for you, because it's going to happen anyway--because most people just want the movie, or the music, or whatever. Look at MP3. I still buy physical CDs exclusively, but more and more people don't care about that--they just want the song to listen to, and they like the convenience of downloading it and getting instant access. This is the direction that the industry is headed, and those of us that oppose it need to do more than just give weak arguments for why it'll fail. Believe me, this is what I do for a living. I see industry heads every day, and I know this is what they want and how much they're risking to get there. Unless people like Lessig get through to the courts, which they haven't so far, this is the future of the industry.