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Studio Presidents: $1 Billion is Magic Number for Blu-ray in 2008

16 Jun, 2008 By: Chris Tribbey



CENTURY CITY, Calif. — One billion dollars.

That's the magic number for Blu-ray Disc sales this year, according to a majority of the home entertainment studio presidents at transFORMATions, the seventh annual Home Entertainment Summit, held June 16-17 at the Hyatt Regency Century Plaza. If they can hit that number, they'll start opening the champagne.

And you can make that $2.5 billion by the end of 2009, they said.

Seven home entertainment presidents — from Disney, Fox, Lionsgate, Paramount, Sony Universal and Warner — presented a unified voice for the high-definition format on one stage. And Blu-ray's success is around the corner, not years down the line, they believe.

With American household Blu-ray player penetration forecasted at 2.5 million to 3 million by year's end, the studios don't believe the figures to be that far-fetched.

“It shows consumers are really embracing the format,” Lionsgate president Steve Beeks said of the 7% to 10% market share that Blu-ray's been taking away from DVD every week.

“The transition to Blu-ray will be much quicker than DVD because people are already familiar with digital,” said Mike Dunn, president of 20th Century Fox Home Entertainment.

Kelley Avery, president of Paramount Home Entertainment, was a bit more conservative in her 2008 Blu-ray sales estimates, saying she'll be happy if the industry hits $750 million. But with a giant slate of summer blockbusters looking at fourth-quarter Blu-ray street date, who knows, she said.

“When you look at the first half of the year, the business is slightly down,” Avery said. “When we look at the summer slate of films across all the studios, you see that they can be a great bridge to introducing people to Blu-ray in the fourth quarter.

“I think this fourth quarter we need to get [players] to an affordable price,” likely under $200, Avery said, noting that no such thing as upconverting VHS players existed when people were transitioning from VHS to DVD.

“We have our first sub-$300 machine, which will fuel growth,” Beeks said of the Wal-Mart $298 Magnavox Profile 1.1 Blu-ray player being offered. “We all said that's what we need.”

David Bishop, president of Sony Pictures Home Entertainment, said that when Toshiba Corp. threw in the towel on HD DVD in February, the hardware manufacturers were caught “flat-footed,” pushing back the prospects of more heated Blu-ray competition, and hence, cheaper players. And the competition from cheap upconverting DVD players doesn't help.

“Upconverters, we think, are a huge problem,” said Ron Sanders, president of Warner Home Video, adding he expects significant price drops in standalone Blu-ray players in 2009. “Those houses [that buy one] are out of the market for several years.”

But there's a silver lining among all those DVD homes, Bishop noted.

“Every consumer will be in the marketplace at some point to replace their DVD player,” he said, referring to a reason why lower-priced Blu-ray players will sell.

The future of Blu-ray

Studio executives, including Craig Kornblau, president of former HD DVD backer Universal Studios Home Entertainment, expressed excitement over the possibilities of Blu-ray and BD Live, the Profile 2.0 software that allows for Internet connectivity.

“We've got the best creative minds in our company right now thinking about what we can do [with BD Live],” Kornblau said, adding that soon all of Universal's Blu-ray Discs will be BD Live enabled. “Years from now, we'll laugh at the things we did with HD DVD.”

“Three years from now, when they put in Men in Black, it'll be a different experience than what they have today. We've never had that direct connection, that direct dialogue, with the consumer,” Sony's Bishop said.

But the presidents acknowledged that DVD is still bringing in the most revenue, and protecting that revenue is a high priority.

“We learned from the mistakes the music industry made,” Beeks said. “Every studio is saying the same thing: Embrace choice. … There will be challenges, but there will be opportunities. Standard-definition DVD has matured, but it's steady. And let's not forget, that digital delivery is part of home entertainment.”

“It's a very different landscape from what we saw 10 years ago,” Paramount's Avery said. “It's much more fractured. There are a lot of different ways consumers are accessing entertainment.”

“It's a balancing act, absolutely,” Warner's Sanders said. He noted that while theatrical and DVD sellthrough is down this year, catalog sales are up.

“By and large, standard def is holding up pretty well,” he said.

“We had a similar thing when we launched DVD: VHS was a viable format,” said Sony's Bishop. “The Blu-ray numbers are very exciting right now.”

Chapek said that the lines between physical and digital are blurring more every year, and that the studios need to stay ahead of the curve.

“We can't start believing the rhetoric we read in the press. If you just read the headlines, it's all digital … and it won't be for a really long time,” he said. He predicted a very “fruitful period of Blu-ray dominance.”

Part of the reason Blu-ray can stay dominant is by including digital copies. Chapek predicted that the studios' experiments with including digital copies on Blu-rays and DVDs will pay off in the long run. “It's a nice Trojan horse for getting digital to consumers,” he said. “Eventually, you may find that the best way to get the digital file to someone is with that Trojan horse digital copy. Consumer say they will buy more DVDs if that digital copy is offered.”

Competing with free

“Let's be really clear, that's the ‘F' word: ‘free,’ Universal's Kornblau said. “We need to stay away from that.

“The key to us is managed [content], so it's available ubiquitously. I think it's crucial to understand we want to be there for the consumer however they want to consume it.”

He got no argument from his peers.

“If you look at the 8 to 24 audience, they're very different from anything we've ever seen,” Fox's Dunn said. “They're a group of people you must deliver your content to in different ways.

“We need to keep pushing the value of owning the content, rather than just having access to it.

Paramount's Avery added, “We certainly want to keep pace with technology, and clearly delivering our movies in a physical package medium is the backbone of our industry.”

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