By : Erik Gruenwedel | Posted: 04 Dec 2008
With the holiday season an integral part of home entertainment’s fourth quarter packaged media sales, Home Media Magazine asked studio executives about Black Friday and how the traditional day-after Thanksgiving discount sales day impacted Blu-ray sales and whether it was a catalyst for year-end results and into 2009.
This week we interviewed David Bishop, president of Sony Pictures Home Entertainment.
HM: Black Friday appeared to be positive for Blu-ray hardware and software, in addition to DVD. How was it for Sony Pictures Home Entertainment?
Bishop: It was good for Blu-ray. Hancock sold nearly 300,000 units through six days of release and a lot of that was on the Black Friday weekend. We were really encouraged with what we saw. Additionally, the numbers we are getting from our partners on the hardware side, both from PlayStation and Sony Electronics are very encouraging. A lot of key retailers actually sold out of Blu-ray players, which is a sign that it is one of the four or five hot consumer electronics items in the marketplace.
Besides us, all of the studios have not only mentioned Blu-ray and DVD in their main ads, but they are also calling ads specific to Blu-ray. That will go a long way toward driving consumer acceptance.
HM: What is SPHE doing to capitalize on the momentum?
Bishop: I’m not going to give you details but January is going to be a critical time period because Blu-ray hardware has sold so well. We anticipate January from a Blu-ray perspective on software to be very strong.
HM: The floor price for BD players through the holidays is around $200. Is that enough to persuade budget-conscious shoppers to commit fully to the format?
Bishop: As is evidenced by the sell-off of Blu-ray players over Black Friday weekend, I would say we hit the sweet spot regarding price. Some stores were sold out by 9:30 a.m. Clearly, it is a top gift item. There will be more price-point-oriented promotions throughout December and that momentum will continue.
HM: Is SPHE planning any major “fifth-quarter” releases on DVD or Blu-ray? Are you releasing first-quarter 2009 BD titles aimed at taking advantage of new Blu-ray player owners?
Bishop: We are finding that titles that bleed into the PlayStation 3 demographic [i.e. video game enthusiasts] are doing exceedingly well across the industry. We put Pineapple Express in the market to capitalize on that phenomenon. We will also have Nick & Norah’s Infinite Playlist with Michael Cera, and the direct-to-video animated sequel Open Season 2. Then we’ll start to roll out some key Academy Award-winning catalog titles as well.
It is also traditionally a good month because you get people back into stores with gift cards.
HM: Are you optimistic about year-end sellthrough revenue industry-wide for standard DVD? It was off just slightly at mid-year; do you expect a surge this month to at least equal 2007?
Bishop: We would be foolish to expect the standard-DVD numbers to come to 2007 levels. There are the obvious economic situations that are keeping people out of stores, and depending on the chain it can range from 5% down to 20% down in foot traffic. That is obviously going to have an effect on the business.
But that being said, the positive in all this is the momentum we are getting from Blu-ray. It is continuing to grow and 200% to 300% year-over-year, and the ratio of Blu-ray and DVD sales continues to rise. That calls for optimism. For anyone who said that people would just go to digital and skip Blu-ray that has certainly been proven not to be true. Even if you took Blu-ray separately as a revenue stream, it is probably 20 times larger than digital revenue.
HM: Will Blu-ray maintain its premium pricing or will it dissolve into commodity pricing?
Bishop: Certainly on the new-release side there is no reason to change pricing. New-release pricing has held on DVD for a while, albeit heavily discounted at retailers. But we are not likely to change that for Blu-ray.
HM: Will SPHE increase the number of titles available digitally (streaming and download) in 2009?
Bishop: We’ve been pretty aggressive already with availability of titles. The key going forward is learning the best marketing technique to maximize that revenue stream.
HM: Streaming was considered the heir apparent to packaged media. Now it appears to have hit a wall. Is that true?
Bishop: I wouldn’t say it has stopped. It is definitely growing quite nicely from a percentage standpoint. It is certainly incremental growth at best. As we said years ago when it was being compared to the music industry, which is ridiculous, people watch movies on their HDTV and 5.1 sound systems. So until you are able to deliver high-quality content to the TV, then it is always going to be a subset or a niche market to packaged media.
HM: Both Netflix and Blockbuster have launched ambitious streaming services through standalone and third-party boxes, yet streaming revenue remains incremental. Has the format caught on yet with average consumers? Or is it destined to largely remain with cable VOD?
Bishop: I think it helps their value propositions to the consumer. We want to get as many touch points to the consumer as possible. So we support the growth of that through whatever means possible. So do I think it is going to be a meaningful way people watch movies? Not today.
I think it is good for Netflix and Blockbuster when they are selling their subscription services and they have this additional value. But people are going to be paying Netflix primarily to get movies on DVD or Blu-ray.
HM: What are your 2009 projections for packaged media? Looking into the crystal ball, what do you see?
Bishop: Well, it is a bit cloudy right now. But again, I come back to the growth of Blu-ray and I think we are in for a nice ride upward. The upside on all this depends on what happens at retail. All things being equal, it should be another 150% growth rate for Blu-ray. By and large we can count on that piece of the business because there is going to be a level of enthusiasm about the format that people will recognize as a value and go out and purchase.
The unknown is what happens at the store-traffic level. A big percentage of our business is driven off of impulse sales. So, if people aren’t in stores then we could potentially take a hit. But I think the enthusiasm over Blu-ray technology will help us even in the worse-case scenario.