Loss-Leadering Coming to Blu-ray Disc17 Nov, 2009 By: Thomas K. Arnold
My, my, how times have changed. Studio executives used to cringe at newly released theatrical DVDs selling for below $15 their first week in stores, generally at big discount chains like Wal-Mart and Target. The mass merchants were using DVDs as loss leaders to drive traffic into their stores, devaluing the product in the consumer's eyes and later coming back to the studios and complaining about margins. Studio executives were reluctant to lower wholesale prices, even though that's what their big retail customers wanted, and all of a sudden that taboo word that's not supposed to be discussed in public — pricing — was on everyone's tongues.
Now, we're finding loss-leader pricing has come to Blu-ray, a year before anyone expected it to. Wal-Mart and several other mass merchants are advertising, and selling, hot new Blu-ray Disc releases for less than $20 — and this, mind you, is before Black Friday, when we traditionally see the lowest prices all year for everything from digital cameras and computers to kitchen sinks (I mean that literally).
Studio executives, frankly, don't know what to think. They're stunned to see it happening so soon, and worried that in the future not only will their visions of incremental profits fade away faster than those visions of sugarplums we keep hearing about each Christmas, but that retailers will start pressuring them for lower wholesale prices and, before you know it, Blu-ray Disc will suffer the same price erosion that plagued DVD within several years of that format's launch — something studio executives have vowed to not let happen again.
While I was among those decrying the race to the bottom in DVD pricing, in this case I'm singing a different song. With apologies to the Beatles, "Let It Be." Given the economy and the slump in DVD sales, we had better do something quick to pick up the slack and take Blu-ray Disc to the masses — and there's nothing better than making the format affordable to everyone, particularly when low-end Blu-ray Disc players are expected to sell for as little as $75 come Black Friday and even final-spec players should be available in the low $100s.
If you think about it, the fact that Wal-Mart and the other mass merchants are using Blu-ray Discs as loss leaders is a tremendous vote of confidence in the format. It means they believe Blu-ray Discs are hot enough to lure people into their stores, as long as the prices aren't out of whack with what they're used to paying for DVDs.
Sure, down the road we might moan and groan about "leaving money on the table" (one of Hollywood's favorite laments), but in this economy, when more and more people are going back to their old habit of renting movies instead of buying them, we need to do something, anything, to get people back in the habit of buying and collecting movies and TV shows.
Let's worry about the potential fallout later. If we don't get Blu-ray Disc to the masses now, regardless of the price, there might not be a later.