High-Def Discs Could Feel Shelf-Space Squeeze22 Jun, 2006 By: Jessica Wolf
Competing high-definition disc formats were top of mind at the recent Entertainment Supply Chain Academy 2006 conference in Los Angeles.
The first HD DVD players, from Toshiba, arrived in stores in mid-April, as did a selection of software titles from Universal Studios Home Entertainment and Warner Home Video.
The first seven Blu-ray Disc releases, all from Sony Pictures Home Entertainment, came June 20. The first set-top Blu-ray player, from Samsung, was scheduled to go on sale June 25, but retailers were already selling it the day Hitch and the six other Sony titles went on sale, breaking street date by about a week, according to Walter Engler, SVP of operations for Sony Pictures Home Entertainment.
“But we are less than satisfied in how [Blu-ray] is being presented at retail, how it's being differentiated from HD DVD,” he said.
Engler spoke on a panel about the challenges in the packaged-media business alongside fellow Blu-ray backer Steve Dahl, SVP of Buena Vista Home Entertainment, and John Quinn, EVP of service management for Warner Home Video, which is releasing product on both high-def formats.
The HD DVD launch is going well so far, Quinn said.
“It will be net-profitable by this year, and we'll see significant growth next year,” he said.
Both camps have aggressive fourth-quarter campaigns planned, he added.
“I think merchandising efforts will improve,” he said.
For years, backers of both formats have called for a concerted effort in high-definition messaging, one that will help retailers hype the benefits the new generation of discs can bring to consumers hungry for product to feed expensive HDTV sets they are eagerly purchasing.
Nearly 20% of U.S. households will have HDTV sets by the end of the year, Dahl said.
The time is now to seriously communicate with retailers who are on the front line of the high-def transition, he said.
The next generation of discs could well come with a flood of SKUs in an already tight retail market.
Suppliers who support both formats, like Warner, could ostensibly have six different SKUs of the same title hitting the market at the same times. A growing number of studios, Warner included, already release new DVDs in three configurations: a widescreen edition, a full-frame edition, and a premium DVD that lists for a dollar or two more but comes packed with special features so it can command a higher store price than the deeply discounted regular DVD.
With high-def now in play, that trio in some cases could soon be joined by an HD DVD disc, an HD DVD/standard DVD combo, and a Blu-ray Disc.
“At some point, won't the retailer throw up his hands and say, ‘Enough!’ quipped moderator Thomas K. Arnold, editorial director of Home Media Retailing.
“I almost wish they would,” Warner's Quinn retorted. But seriously, he said, retailers seem to want all the different choices because that's what consumers want. Anywhere from 40% to 60% of DVD buying is on impulse, he said, so it's important to have everything they might want available.
Inventory management, however, will become increasingly critical once all the new next-gen product starts hitting already bulging store shelves, panelists said.
Alison Casey, business director for research company Understanding & Solutions, quantified the retail shelf-space crisis by noting that studios have already taken back 20% to 25% of DVD product shipments so far this year. In January, in the wake of the holidays, return levels were close to 30%. And on some titles, returns were as high as 60%.