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Thomas K. Arnold

September 15, 2009
Managing Expectations in an Age of Uncertainty

Ah, how we long for the days of DVDs that sold 5 million copies or more their first week in stores. That sounds about as distant a concept these days as dollar-a-gallon gasoline. There's no question DVDs aren't selling as they used to, and one of the many culprits studio executives are fingering, aside from the troubled economy, are the ubiquitous Redbox kiosks and Netflix envelopes that are making it easier than ever for movie fans to be cheapskates.

Forcasting DVD sales has always been equal parts science and art. Sure, there are plenty of formulas: A movie that grosses between $25 million and $50 million in theaters will likely sell X DVDs, while a blockbuster with domestic box office earnings of more than $100 million will sell Y DVDs. There are plenty of variables: Action movies tend to sell better than comedies, comedies tend to sell better than dramas and films with lower box office grosses tend to sell more DVDs, proportionately, than movies with higher box office grosses. We've even got fancy terminology, such as "overindexing" (when a DVD of a movie does significantly better than expected in relation to the film's box office, and "VTR ratio" (video-to-theatrical, or a film's video gross divided by its theatrical gross).

But in the end, there's an art to predicting DVD sales, and for years our studio brethren have sharpened up their forecasting skills with an ample supply of gut instinct and become quite good at it, really.

Until now. Films that were expected to do well tanked — in some cases, missing target by as much as 30%. And films that were not expected to do well — well, lots of them did even worse, while some surprised everyone and did unexpectedly well.

"It's really become a crap shoot," noted one observer, an industry veteran who asked not to be named.

When DVD sales first began to slow in the second half of 2005, studio executives began realizing that they had to manage their expectations. The days of double-digit growth, year after year, were over, and studio forecasting models had to be stripped of multipliers and essentially held flat.

But then the economy tanked, and DVD sales began sliding downward at a faster pace than anyone wanted to believe. We've all lashed out at the bogeyman, Redbox, but no amount of screaming and shouting is going to make those sales numbers come back up.

So we have to contend with a declining market, and adjust our businesses accordingly. But that's easier said than done, simply because we have no idea what's going to happen to the economy — and the DVD-buying public has become increasingly fickle and unpredictable. It's hard to manage expectations when we issue what we think is a conservative forecast, only to discover we're still 15% or 20% off — while the other studio's title, which we had pegged as a real stinker, somehow catches on and sells millions of copies its first week in stores.

What's the answer? Sadly, there isn't any. And that's what makes being a studio executive with a home entertainment division so frustrating these days.

September 11, 2009
The Thin Line

For years, the buzz in the consumer electronics world--and in Hollywood, for that matter--has been the convergence of TVs and computers. Remember WebTV about a decade back? The idea was to bring the computer, email and Web access and all, to the living room. Users had to buy subscriptions to access the Internet, and could then surf the Web from the comfort of their sofa. But the concept never really caught on, even as convergence talk continued and studios began making their movies available digitally over the Internet for easy streaming and not-so-easy downloading. The concept of digital copy also plays into convergence, under the premise people are increasingly on the go and may want to watch the rest of the movie they began watching on their high-definition widescreen on their laptop while waiting for a flight, or on the flight. And BD Live--hey, that's another convergence technology, this time harnessing the Web to make some wonderful things happen on the TV, provided you have a Blu-ray Disc player and, of course, a Blu-ray Disc.

But if you analyze what's been happening, you'll see that true convergence is no longer the goal. Rather, the goal is to bring some TV capability to the computer (watching a low-res copy of a movie, for example), and some computer capability to the TV (BD Live, which can offer the user limited chat-room or networking functions as well as the ability to grab some new content from the Web).

No one's talking about interchangeability anymore. No one's going to watch a whole movie on their home computer if there's a beautiful home theater system, anchored by a 65-inch plasma, just down the hallway. And, similarly, no one's going to check their email or surf the Web to scan CNN headlines on their TV, between Spongebob episodes. The teens among us may have a laptop with them in the family room so they can IM while watching the remake of The Last House on the Left, but one device for both? No way. We're just not culturally equipped to handle it.

And that, friends, was pretty much the message at CEDIA, as our senior reporter, Chris Tribbey, writes (to see his story, click here). The consensus at the Atlanta trade show was that while HDTVs will be connected to the Internet, they will never replace the computer. First and foremost, they are TVs.

As Dan Schinasi, Samsung's senior marketing manager for HDTV, told the traveling Tribbey, "It's a big challenge with a full Web browser, because it needs to be constantly updated. Then you have to worry about viruses, install a hard drive, licensing. That all increases the price."

So there you have it, folks. Convergence, at least from the perspective of today's paradigm, doesn't mean interchangeability. TVs will still be TVs, computers will still be computers, and while there will be some overlap they will never replace each other.

September 08, 2009
Why Aren't Computer Makers All Over Blu-ray Disc?

You've got to hand it to Toshiba. The consumer electronics giant, which was behind the ill-fated HD DVD format, has at last given up its attempt to kill Blu-ray Disc with its fancy DVD "upconverters" and is now going Blu itself. What's more, the company also is coming out with a new laptop, the Satellite P500, that's equipped with a BD-RW drive.

Kudos to Toshiba on both counts, but especially for the latter.

By coming out with a set-top Blu-ray Disc player, Toshiba is a definite latecomer. But by producing a Blu-ray Disc laptop, scheduled to hit stores in the fourth quarter, the company is returning to the leadership role it once commanded in the CE industry back in the early days of DVD.

Toshiba, you will recall, was the big driving force behind DVD, at least on the CE end, working with Warner Home Video to aggressively promote and market the format to consumers. Getting other computer makers on board, early in the game, was as significant a step as vanquishing Divx, the pay-per-play variant championed by the now-defunct Circuit City retail chain, so that there was only one type of set-top DVD player on the market.

With Blu-ray Disc, virtually every CE manufacturer is now on board. But computer makers are slow to the table this time around, and for the life of me I can't figure out why. You may recall that in early September, the technology research firm iSuppli estimated that only 3.6% of computers shipped this year, on a worldwide basis, have Blu-ray Disc drives. And even by 2013, four whole years from now, the total will only be 16.3%.

The reasons, according to various analysts, include price--computer prices are now so low that adding a Blu-ray Disc drive could easily double the total sales price--and the fact that the Blu-ray Disc picture is so good that most people won't want to watch Blu-ray movies on their computers. 

What's more, analysts note, DVD drives had a unique selling proposition because the packaged-media format DVD replaced, VHS, could never be viewed on a computer. So it was a novelty that brought added value. If you bought a computer with a DVD drive, you could not only only store a lot more data, but you could also--drum roll, please--watch movies!

Blu-ray drives, on the other hand, will have to live or die by data storage alone--and according to industry wisdom that's just not enough, at least not now, not even in 2013.

I disagree, and I urge computer manufacturers to go Blu, and go Blu in a big way, pronto. More and more people I know are burning their own home-video DVDs at home, and they're getting tired of only being able to put an hour or so of quality footage on a disc. I would argue that the storage question is a big deal; when DVD came out 12 years ago there was no such thing as a multi-gigabyte hard drive, and most of us still shot home movies on camcorders that used tape instead of enormous built-in hard drives.

And whatever happened to computers being on the cutting edge of technology? IT companies are supposed to lead us, not lag behind everyone else. The iSuppli research I saw also predicts annual set-top Blu-ray Disc player sales will rise from 9.1 million this year to 42.1 million by the end of 2013. That means a vast body of consumers will be aware of Blu-ray Disc. And you're going to tell them they can't get that in their computers?

Come on, guys. Get real. If Toshiba can suck it up and go Blu, so can you.

September 04, 2009
Blu-ray Disc Picture Quality Redux

Earlier this week I wrote a blog entry in which I said our industry needs to do a better job playing up the advantages of Blu-ray Disc over standard DVD, just in picture quality. I noted that the picture really is dramatically better, at least when viewed on a top-notch TV, and that we need to spread the word after several years of downplaying the difference in favor of hyping BD Live and other high-tech innovations.

So now, I'd like to share with you a post I unearthed from last March in which Eric Taub, a Gadgetwise blogger for the New York Times, talks about this difference, one that he frankly wasn't expecting. Taub wrote this piece when Toshiba, which just announced its first Blu-ray Disc player, was still hawking its DVD upconverters —and skeptics like Taub were saying forget about Blu-ray, DVD's just fine.

"I’m a big fan of the DVD format," Taub wrote. "It offers a quantum leap in picture quality as compared to videotape, longer-lasting media and random rather than linear access. But I’ve always questioned the benefits of Blu-ray; picture quality looks very good but I’m perfectly happy with standard-def DVDs. Unless you like Blu-ray’s extra features, like BD Live, the incremental difference in picture quality didn’t seem worth the expense. To check out my assumptions, I did two side-by-side tests. I connected Toshiba’s XD-E500 (a DVD upconverter) and Panasonic’s sub-$300 (discontinued) DMP-BD35K Blu-ray players to a 46-inch Panasonic 1080p plasma set, the TH-46PZ850U. I ran the same movie in both simultaneously, the De Niro/Pacino thriller Righteous Kill, using Blu-ray and standard DVD copies, jogging back and forth between the inputs to make instant comparisons in picture quality. Then I switched out the Toshiba for a simple Sony progressive scan DVD player that cost me $70 three years ago. The results: the XD-E image was better than the old Sony, but not by much. And both looked quite good. On the other hand, the Blu-ray machine simply blew away both standard-definition players. The difference was dramatic. The Blu-ray images were smooth, sharp and rich. Every scene “popped” with a clarity and presence never seen with standard DVD, making the scenes, whether daytime exteriors or heavily shadowed interior club scenes, come alive. The difference in picture quality between Blu-ray and standard-definition DVD was very obvious. But the difference is accentuated when you get the chance to flip back and forth between the two. Just as many owners of rear-projection DLP sets don’t notice that their picture is getting dimmer over time, many owners of standard-definition DVD players will be perfectly happy with the picture quality, and won’t notice what they’re missing, unless they have something better, such as Blu-ray, with which to compare it. Blu-ray player prices continue to fall.... The cost difference between the two is barely more than $100, and once that declines even further, there will be little reason for the average consumer not to choose Blu-ray when looking for a DVD machine."

For Taub's complete blog, click here.

September 02, 2009
It's the Picture, Stupid!

In retrospect, our industry took a big misstep back when Blu-ray Disc first came on the market, and we all downplayed the improved picture quality, telling ourselves it wasn't nearly as big a leap as the diference between DVD and VHS. I don't know what we all were smoking — and I'm as guilty of this as anyone — but now that our TVs have gotten better and more and more Americans, the economy be damned, are buying high-def TVs, it's time to revisit this. When my kids are watching a movie on my 65-inch Panasonic plasma, I know instantly whether it's DVD or Blu-ray Disc. The Blu-ray Disc picture is so much cleaner and sharper — to the point where even my kids would rather wait until a film comes out on Blu-ray Disc than watch it on DVD.

I remember the months surrounding Blu-ray Disc's launch. Everyone talked about the picture being better, and there were even side-by-side comparisons. But our collective thought was that the difference wasn't as pronounced as the difference between DVD and VHS and thus shouldn't be played up in marketing materials or sales-floor pitches. Instead, we focused on more and better extra features, picture-in-picture and BD Live, features few people could even access due to 1) the ridiculous progression of "profile" players that were obsolete almost as soon as they hit the market and 2) the CE community's failure to provide consumers with wireless Internet connectivity for standalone Blu-ray Disc players. BD Live was all well and good, but if you have to connect your player to the Internet with a cord you're simply not going to do it — not when you've had Wi-fi in your home for years.

So now we're hearing from consumers, largely through postings to tech forums, that the picture quality really is a key reason for their transition from standard DVD. And then we go back to our own TVs and, lo and behold, they're right. In fact, I would venture to say that the improvement in picture quality that Blu-ray Disc offers over DVD is comparable to the improvement DVD offered over VHS — even so-called "upscaled" DVD as seen through my Panasonic Blu-ray Disc player.

Now, it's up to us to spread the word — particularly since it's becoming clear that Blu-ray is the very best picture available, and that a lot of the cable stuff that passes itself off as "high-def" really isn't, or at least it's not 1080p, the proverbial cream of the crop.

As they say, if you've got it, flaunt it.

Insights from the "voice of the home entertainment industry." Thomas K. Arnold gives the inside scoop on entertainment news, DVD, Blu-ray releases, and what's happening at the key studios and retailers.