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Thomas K. Arnold

November 05, 2009
Best Buy's Code Blu

Best Buy's Mike Vitelli waxed philosophical at Blu-Con 2.0 when he said the chief obstacle to Blu-ray Disc going mainstream is the gap between consumers' awareness of the format and their familiarity with it. The two are hardly the same, he pointed out, noting that while just about everyone has heard about Blu-ray Disc a surprisingly large number of people still don't know much about. Citing anecdotes related to him by store personnel, he told a rather sobering tale of ignorance, with many people still thinking all they need to get true high-def out of their DVDs, and DVD players, is to hook them up to their high-definition TVs.

Education certainly is key, but first you have to get people to want to learn. And that's where pricing and portability come in. Blu-ray Discs may be sexy, but we have to level the playing field before anyone's going to initiate a courtship. Specifically, he was talking about price and portability.

All right, let's talk about price. I remember when Blu-ray Disc was launched and everyone was hoping for a $10 premium. "We're not looking for a replacement technology," one studio president told me at the time. "We're looking to grow the business." Well, those dreams went right the door when the economy tanked, and with a DVD purchase slippage of nearly 14% so far this year a "replacement technology" that will stop the slide sounds perfectly OK to my ears. The bottom line is that we simply cannot expect consumers who for years have been able to buy any new DVD release for around $15, at least its first week in stores, to shell out twice as much for a Blu-ray Disc. Bring the price of a new Blu-ray down below $20--heck, $19.99 sounds just fine--and you're in business, particularly now that player prices are under $200 (for a good one) and even under $100 for some cheapo models.

But that's only half the equation. When DVD was launched, the DVD player replaced the VCR n the home. Sure, you might have had a second VCR in the bedroom, but that was about it. Today, we've got DVD players everywhere--in the car, in each bedroom, even on the plane or train (courtesy of your laptop computer). There are way more players out there than ever, and Blu-ray Disc, unfortunately, is still pretty much home-bound. The computer industry has been slow to include Blu-ray Disc drives in their new computers, and I have yet to see a commercially available Blu-ray Disc player for my car--at least one that I can afford.

Put these two factors together and the combination is a tremendous roadblock to Blu-ray Disc's advances. You're being asked to pay more for something that's a lot more limited in terms of where you can play it. As Vitelli said, consumers walk into a store and have to make a choice: Blu-ray Disc or standard DVD. Even if they have a shiny new Blu-ray Disc player in their family room, they may ultimately opt for the DVD because they can play that DVD anywhere and everywhere.

As a parent with a yen for long road trips, I understand what Vitelli's saying. I am absolutely wowed by Blu-ray Disc and its superior picture and sound. If I could, I'd toss out all my DVDs and go completely Blu. But only one of my three kids could then watch the film in his own room, on his PlayStation 3. And our road trips would be endless bouts of the alphabet game or "I Spy."

We, as an industry, have to aggressively attack the two Ps standing in the way of Blu-ray going mainstream. Actual selling prices have to be lower, crossing that psychological $20 barrier. And we need to put the pressure on CE and computer companies to go Blu in everything they do.

At this point, I am convinced that Blu-ray Disc's ultimate success is inevitable. But how long it takes to achieve that success--well, to a large degree, that's up to us.

November 03, 2009
Blu Tuesday

I'm up in Beverly Hills today for Blu-Con 2.0, the industry conference and Blu-ray Disc showcase that is being put on by DEG: The Digital Entertainment Group, along with Home Media Magazine (in lieu of our annual Home Entertainment Summit) and several other trades. Our editor in chief, Stephanie Prange, is moderating one of the panels, and I'll be up on stage during lunch to present our annual Home Entertainment Visionary Award, which this year goes to...well, I'd hate to spoil it for you, so you'll just have to check back.

On another note, our magazine's annual TV DVD Awards contest is now in the consumer voting stage. Voting actually began yesterday and within an hour we had already tallied more than 1,000 votes. Join in on the fun by clicking here.

October 28, 2009
"This Is It" a Winner

I went to the world premiere last night of the Michael Jackson concert film This Is It, a patchwork documentary of sorts about the concert tour that never was. And while I have never considered myself a diehard Michael Jackson fan, I will say the movie captivated me for its entire two-hour run. I'll admit, part of it was my almost morbid curiosity about what, exactly, Jackson was like in what turned out to be the final three months of his life. And what the film portrays is a more personal, more revealing portrait of the real Michael Jackson than any previous documentary or film I've seen about the King of Pop. Director Kenny Ortega really did a good job with this movie, taking what one would think would be a series of random behind-the-scenes clips from Jackson's rehearsal sessions and fashioning them into a real movie that requires neither narration nor plot to offer a revealing glimpse into one of the most interesting pop cultural icons the world has ever seen.

Much has been made of Sony Pictures' contention that it will only keep the film in theaters for two weeks; I think if the movie catches on, it will stay longer, but then again, it's aimed at Jackson's fans, and those fans are going to rush out and see it right away. My prediction: The film will wind up grossing about $60 million in U.S. theaters, but when it comes out on DVD--and I've heard varying dates, both before and after Christmas, although nothing's been officially set yet--it's going to become one of the biggest-selling music discs of all time. It's made for Blu-ray--and I don't think Sony Pictures Home Entertainment executives will be disappointed in total sales, even though their hoped-for total, 3 million discs, seems a little high.

October 21, 2009
Media Missing the Point About Disc Decline

I sympathize with President Obama’s frustration with Fox News over what he perceives to be the network’s not-so-hidden agenda to “get” him.

Our industry has been fighting similar battles for years, but in recent months the rhetoric has been stepped up by such big mainstream media outlets as the Wall Street Journal and the Los Angeles Times, both of which seem to consider it a preordained destiny that packaged media is on life support and will soon disappear altogether.
 
The Wall Street Journal, for example, just published a story on the Walt Disney Co.’s latest venture into electronic delivery, a quasi-secret project (dubbed “Keychest”) that would allow consumers to pay one price for permanent access to a movie across several different digital platforms or devices. The headline: “Disney Touts a Way to Ditch the DVD,” which paved the way for the writer to proclaim, “the decline in DVD revenue has undermined the business model Hollywood has relied on for more than a decade.”

Reality check: We’re in the midst of a format transition, and it’s going to take a little while for Blu-ray Disc to fully compensate for the decline in DVD. Blu-ray is, however, making significant gains, particularly in light of the troubled economy, and remains the only way for consumers to watch movies and other programs in true high-definition on their expensive new HDTVs, which are now in nearly half of all U.S. homes.

Moreover, Disney and the other studios that are aggressively going after digital delivery options aren’t trying to “ditch the DVD,” but, rather, broaden the home entertainment market to include on-the-go users armed with iPods, laptops and smart phones. Convenience is the primary selling point; the quality just isn’t there for proper viewing in the home, especially now that everyone and his brother is getting a high-def TV and snazzy home theater system. 
 
Not to be outdone, the Los Angeles Times took a decidedly negative spin on third-quarter home entertainment numbers issued by DEG: The Digital Entertainment Group, maintaining that “Hollywood’s biggest and most profitable business shrank a little slower in the third quarter than in the first half of the year, thanks entirely to rentals.” As for the dramatic gains in Blu-ray Disc sales that were duly noted in reports in our magazine and other publications, the Times had this snotty reaction: “In its news release with the data, DEG attempted to highlight sales of Blu-ray disc sales, which rose an impressive 66.3% in the quarter. That’s a substantial slowdown, however, from the category’s 91% growth in the first half of the year.”
 
Reality check No. 2: Blu-ray’s first-half growth rate was bigger because HD DVD only gave up six weeks into the first half of 2008, which held back sales. So it’s really an unfair comparison. What the Times should have noted is that in an economic climate where everything is down, Blu-ray is one of the few products that’s selling better than it did a year ago — and that’s a significant accomplishment, by any measure.
 
The Times also failed to even mention what I consider the key point in the DEG release: That the number of consumer transactions to bring entertainment into the home rose 6.6%. That tells me that consumers have hardly lost interest in home entertainment; indeed, they’re snapping up more discs than ever, which translates into a tremendous vote of confidence for packaged media.
 
But then again, that’s apparently not the sort of analysis the Times wants to hear.
 

October 20, 2009
Behind the DEG Numbers

It was interesting to see the various news stories based on home entertainment spending numbers released yesterday by DEG: The Digital Entertainment Group. Most news outlets, including ours, really played up the rosy Blu-ray Disc numbers (to see our story, click here). Others, in particular the Los Angeles Times, chose to feed their own perception that packaged media is dying by focusing on the continued slump in DVD sales, which even with the mitigating factor of Blu-ray Disc are now down 13.9% for the year, slightly worse than the 13.5% deficit reported at the year's halfway point. Still other media outlets took the middle ground by noting that total consumer spending on packaged as well as digitally delivered media was down 3.2%, a modest drop given the troubled economy but still nothing to cheer about it.

Not one focused on what, in retrospect, is the real story: Consumer transactions, meaning purchases as well as rentals, rose a healthy 6.6%. That's a resounding vote of confidence in the core premise of our business, which, after all, is simply the act of bringing movies and other pre-recorded programming into the home (or the car, or the laptop) for at-will consumption. The transactions number does not distinguish between a purchase and a rental; both, it can be argued, involve a conscious decision by a consumer to go out and spend money on bringing a DVD or a Blu-ray Disc into the home. Now, studios don't like rental because they don't get as big a piece of the pie as they do from a sale. Heck, sometimes they barely get crumbs, if that.

But looking at things solely from a consumer interest angle, rentals are the same as purchases, and the fact that transactions are up 6.6% is a healthy indicator that consumers most certainly have not lost interest in home video. They're simply going back to their old ways--renting rather than buying--and they're doing so in record numbers.

What the studios need to do now is figure out a way to monetize that 6.6% gain so it doesn't continue to wind up as a 13.9% loss.

Insights from the "voice of the home entertainment industry." Thomas K. Arnold gives the inside scoop on entertainment news, DVD, Blu-ray releases, and what's happening at the key studios and retailers.