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Media Missing the Point About Disc Decline

21 Oct, 2009 By: Thomas K. Arnold

I sympathize with President Obama’s frustration with Fox News over what he perceives to be the network’s not-so-hidden agenda to “get” him.

Our industry has been fighting similar battles for years, but in recent months the rhetoric has been stepped up by such big mainstream media outlets as the Wall Street Journal and the Los Angeles Times, both of which seem to consider it a preordained destiny that packaged media is on life support and will soon disappear altogether.
The Wall Street Journal, for example, just published a story on the Walt Disney Co.’s latest venture into electronic delivery, a quasi-secret project (dubbed “Keychest”) that would allow consumers to pay one price for permanent access to a movie across several different digital platforms or devices. The headline: “Disney Touts a Way to Ditch the DVD,” which paved the way for the writer to proclaim, “the decline in DVD revenue has undermined the business model Hollywood has relied on for more than a decade.”

Reality check: We’re in the midst of a format transition, and it’s going to take a little while for Blu-ray Disc to fully compensate for the decline in DVD. Blu-ray is, however, making significant gains, particularly in light of the troubled economy, and remains the only way for consumers to watch movies and other programs in true high-definition on their expensive new HDTVs, which are now in nearly half of all U.S. homes.

Moreover, Disney and the other studios that are aggressively going after digital delivery options aren’t trying to “ditch the DVD,” but, rather, broaden the home entertainment market to include on-the-go users armed with iPods, laptops and smart phones. Convenience is the primary selling point; the quality just isn’t there for proper viewing in the home, especially now that everyone and his brother is getting a high-def TV and snazzy home theater system. 
Not to be outdone, the Los Angeles Times took a decidedly negative spin on third-quarter home entertainment numbers issued by DEG: The Digital Entertainment Group, maintaining that “Hollywood’s biggest and most profitable business shrank a little slower in the third quarter than in the first half of the year, thanks entirely to rentals.” As for the dramatic gains in Blu-ray Disc sales that were duly noted in reports in our magazine and other publications, the Times had this snotty reaction: “In its news release with the data, DEG attempted to highlight sales of Blu-ray disc sales, which rose an impressive 66.3% in the quarter. That’s a substantial slowdown, however, from the category’s 91% growth in the first half of the year.”
Reality check No. 2: Blu-ray’s first-half growth rate was bigger because HD DVD only gave up six weeks into the first half of 2008, which held back sales. So it’s really an unfair comparison. What the Times should have noted is that in an economic climate where everything is down, Blu-ray is one of the few products that’s selling better than it did a year ago — and that’s a significant accomplishment, by any measure.
The Times also failed to even mention what I consider the key point in the DEG release: That the number of consumer transactions to bring entertainment into the home rose 6.6%. That tells me that consumers have hardly lost interest in home entertainment; indeed, they’re snapping up more discs than ever, which translates into a tremendous vote of confidence for packaged media.
But then again, that’s apparently not the sort of analysis the Times wants to hear.

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