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Erik's Spin


Home Entertainment’s 'Blu' Summer

27 Aug, 2014 By: Erik Gruenwedel

At a time when subscription streaming and over-the-top video dominate the narrative in home entertainment, Blu-ray Disc remains an enduring format — despite media companies’ misguided efforts to embrace SVOD’s Trojan Horse.

Trans World Entertainment, which operates the 328-store f.y.e. retail chain nationwide, said double-digit sales increases of Blu-ray titles helped keep same-store sales declines to 1% in its most-recent fiscal quarter.

Hastings Entertainment, which operates 126 stores throughout the Southwest, saw revenue from new Blu-ray and DVD title sales increase 2% to 23% ($100 million) of total sales in 2013 from the same period in 2011, according to an April regulatory filing.

Industry wide, through the first half of the year, Blu-ray sales rose 10% in the second quarter alone, suggesting continued viability in a disc business many in the mainstream media have given up for dead. In fact, electronic sales of new releases — the format “du jour” — were less than 20% of total packaged-media sales in the quarter, according to DEG: The Digital Entertainment Group.

Alas, the DVD death spiral perception — perpetuated for years by the media — has now been embraced by media executives, many of whom openly gloat about the incremental revenue generated licensing content to SVOD stalwarts such as Netflix, Amazon Prime Instant Video and Hulu Plus.

Capitulation to streaming reached its zenith earlier this month when Time Warner CEO Jeff Bewkes — a perennial critic of SVOD — unabashedly lauded digital distribution.

“We're going to be up solid double-digits [this year]. And by that I don't mean 10% to 20%, I mean more,” Bewkes said.

Warner Bros. said it could expect to see a significant increase in the $400 million it generated in 2013 from licensing content to subscription streaming services. Nevermind that incremental revenue is dwarfed by the more than $1.1 billion the studio generated through June 30 this year selling movies and TV shows on disc, and to a lesser extent, digital platforms.

In the United Kingdom, a durable packaged-media market slowly but surely undermined by SVOD, Netflix now has more than 3 million subs. I have friends in Germany — a country with a strong economy that continues to support disc sales — who routinely ask about the latest American TV shows to buy on disc. Recent recommendation “Breaking Bad” was big hit. Now, its “Homeland.” I didn’t have the heart to tell them Netflix will open for business there next month.

To be sure, SVOD is a win for consumers, but it’s a loss to content holders and the home entertainment industry. Who makes a profit selling unlimited access for $9 a month? Just Netflix. Which is why its stock is in the stratosphere — valued nine times more than Microsoft; five times more than Walmart and Time Warner.

Lost among Wall Street’s brazen Netflix lovefest is the reality the service ended its most-recent fiscal period with $7.7 billion (!) in content liabilities, which some industry observers actually believe the SVOD service may outrun if it keeps adding subscribers.

Ever wonder why Netflix CEO Reed Hastings has that sheepish smile in photos? He’s laughing all the way to the bank.

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