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New Challenges Faced at Future of Packaged Media Conference

4 Feb, 2009 By: Chris Tribbey

UNIVERSAL CITY, Calif. — The second day of the Future of Packaged Media conference lived up to its name, covering all three major forms: music, video and games.

Positive things could be found for each, yet for each topic, speakers at the conference offered words of caution. “Recession resistant” was used more often than “recession proof” when discussing packaged media, and for all the upbeat consumer spending data that was shared, advice about keeping those consumers happy was just as prevalent.

“When you’re talking about physical goods that people want, when they buy a physical product, they see a great value in that [compared to digital files only],” said Dilyn Radakovitz, chief buyer for Dimple Records in Northern California.

DVD and Blu-ray Disc

John Marmaduke, president and CEO of Hastings Entertainment, said the most interesting thing his company has found in its research is that impulse buying is a very real thing.

“If you started off as a book buyer, we’d love to get you over to our Lifestyles section,” he said of Hastings customers.

And Hastings’ choice to not only be an entertainment seller, but also a used entertainment buyer, has caused customers to keep coming back.

“The most loyal customer in America is the one who has a $20 credit with you,” Marmaduke said.

Hastings made 22% of its revenue off of DVD and Blu-ray sellthrough during the first half of 2008, while DVD, Blu-ray and gaming rentals accounted for another 18%.

“There’s an unmet demand for video catalog,” Marmaduke said, adding that the studios have told him Hastings is one of the top destinations for Blu-ray sellthrough.

Eric Weil, managing partner of Student Monitor, which tracks trends among college students, said college students account for more than $100 million in monthly theatrical spending, and about half of all college students own a DVD player. In a survey covering a six-month period last year, about 25% of college students said they watched a TV show online, while 15% downloaded a movie.

That data underscored discussions of how mass media talks up digital delivery, while physical product continues to bring in the bulk of revenue for retailers and content owners.

“People are still most comfortable and most familiar with physical product,” said Jim Donio, president of the National Association of Recording Merchandisers.

Mark Fisher, VP of strategic incentives and membership for the Entertainment Merchants Association, said the reason digital delivery gets more attention is because it’s “sexy.”

“Downloading a movie is easier than it was five years ago, but it’s still problematic,” he said.

When it comes to Blu-ray Disc, Mitch Lowe, COO of Redbox, said the high-def format will need to adopt a lower price before it has a chance to supplant DVD.

Music and games

Edward Williams, senior analyst with BMO Capital Markets and publisher of GamePlay magazine, believes Sony has a double-edged sword with the PlayStation 3. The company’s choice to include a Blu-ray player has helped the format win a format war, but it’s also made it very hard for Sony to cut prices down to where it can compete with Nintendo’s Wii and Microsoft’s Xbox 360.

“Sony needs to reduce the price of the PS3 … by $100 to spur demand,” he said. “Because they chose to go with Blu-ray, the hard drive costs make that difficult.”

Because gaming still has a premium price point ($50 in many cases for a new game), Hastings has had to change its security in the gaming section several times to prevent shoplifting. Marmaduke shared stories of kids stealing games by breaking glass with rocks, and even bringing in power tools to drill past security gates. “It’s Beirut,” he joked.

For music, Weil shared data and showed college students download music much more often than any video.

Bo Andersen, president of the Entertainment Merchants Association; John Marmaduke, president of Hastings Entertainment; and Larry Jaffee, conference chairman, at the Future of Packaged Media conference in Universal City, Calif. Feb. 4.


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