Why Is Blu-ray Quality Overlooked?

Last week I wrote a column about the loss of quality in the digital delivery realm, and since then I’ve received some assenting feedback.

“I agree with you 100%,” said one respondent. “I’m in the custom integration business and I have to spend time with each customer explaining to them the quality difference between streaming and Blu-ray. Sometimes I get the glossed over look when people think disc is dead and streaming is high-definition. It’s a war and the Blu-ray disc Association, Hollywood, etc., had better treat it that way. My kids have no problem with physical media so I know that isn’t a stumbling block.”

Others chimed in as well, pointing out the compression of digital files.

My question is: Why isn’t the industry doing more to drive home the quality of Blu-ray as opposed to the current state of digitally delivered files?

Last month we published a comprehensive white paper on Blu-ray Disc at 5, extolling the format’s quality and continued growth despite the headwinds of a terrible economy and a worthy predecessor in DVD. We, as an industry, should be doing more of that.

The digital delivery market naturally will have a cheering squad on Wall Street that is willing to repeat over and over again, “Disc is dead! Disc is dead!” After all, investors are always looking for the newest thing and tend to shun established and mature businesses. They just aren’t as exciting and won’t produce the kind of outsized stock growth that Wall Street craves.

But their (somewhat self-interested) enthusiasm for digital delivery doesn’t mean Blu-ray isn’t the best way to see a movie in the home.

Recently, I discussed this question with an industry observer who noted that many catalog titles actually are doing quite well on Blu-ray. He, too, wondered why the industry isn’t putting more effort into pushing and growing the market for the format.

Certainly, these aren’t flush times at many studios, which have instituted layoffs in recent weeks. But not promoting a quality, growing product won’t make things any better. There’s only so much cost-cutting studios can do to boost the bottom line. I agree that selling catalog at a hefty price to streaming services that go to consumers’ iPads and cell phones will help plug the profit hole, but so will selling consumers on the big-screen quality of Blu-ray.
 

The Heat Is On

August is a most anxious month for home entertainment suppliers. They gear up for the all-important fourth-quarter gift-giving season when sellthrough discs are expected to shine and the summer slate of big-budget theatrical films hits the home entertainment market.

The heat is on — and I’m not just talking about the weather.

Early in the summer, the fathers of blockbuster film, Steven Spielberg and George Lucas, speaking at the opening of a new media center at the University of Southern California, predicted a Hollywood “implosion” of blockbuster flops that would change the industry.

“There’s going to be an implosion or big meltdown where three or four or maybe even a half-dozen megabudget movies are going to go crashing into the ground, and that’s going to change the paradigm,” Spielberg said.

Various pundits have weighed in on just how many big-budget films (some terming the number unprecedented) will turn out to be flops at the end of the summer.

Regardless of the final number, the home entertainment market will have to struggle with marketing them, flops or no. Some films will make up revenue in the international theatrical market, where lots of action and very little dialogue always plays well. But other big-budget behemoths will look to home entertainment to make up for lost revenue.

And, thus, the heat is on.

Home entertainment divisions will be expected to be cleanup hitters for titles that underperformed theatrically. Conversely, they’ll be expected to realize in the home entertainment market the promise of films that hit a home run in the summer theatrical contest.

But home entertainment divisions have another element to deal with: increased competition for consumers’ limited leisure hours from subscription video-on-demand services.

A colleague told me recently that the entertainment business is all about creating desire. That job falls squarely on the shoulders of the home entertainment marketing team this fourth quarter. How can we create desire for the summer blockbusters and for classic collections?

The heat is on.

Blu-ray Saves the Day – Again, and Again, and Again

One of my favorite things about my job as publisher of Home Media Magazine is getting the chance to play reporter again. Writing the weekly chart story, blogging about industry issues and digging into a meaty news story is about as good as it gets for this old dog, and one of my personal goals is to free up more of my time to jump back into the trenches more frequently.

I’m a journalist first, and a businessman second — and I guess it’s always going to be that way.

A highlight of my editorial duties is writing the quarterly “state of the industry” story based on consumer spending numbers compiled for, and distributed by, DEG: The Digital Entertainment Group. I had the misfortune of being on vacation, out of the country, when the half-year numbers came in, so I grudgingly took a pass this time around, with senior reporter Chris Tribbey taking up the mantle — and doing a fine job, I should add.

That said, I’ve noticed a pattern in our quarterly numbers stories — a pattern that holds true regardless of whether total spending is up, down (as it’s been until recently) or flat.

The pattern is this: DVD sales continue to decline, but Blu-ray Disc and digital sales continue to post impressive increases, with the biggest lift, in terms of sheer dollars, always coming from Blu-ray Disc.

In our latest story, the headline — at least for the online version — reads, “DEG: Blu-ray, Digital Making Up for DVD Revenue Declines.”

I’d bet that same headline, with minor variations depending on whether overall spending is up or down, could have been used for virtually every quarterly numbers story we’ve run in the last five or so years.

Putting all this in perspective, it appears to me that had it not been for Blu-ray Disc, the home entertainment industry easily could have nosedived when our entertainment options proliferated like mushrooms with the emergence, mostly post-2005, of YouTube, MySpace, Facebook, online gaming, apps, the iPhone and the iPad.

And yet what do we keep reading in the mainstream press about Blu-ray Disc? I can’t even count the times Blu-ray has been lambasted as a failure and lampooned as a relic of the pre-digital era.

Clearly, the facts speak otherwise. Blu-ray Disc sales is a healthy, thriving and growing business. And instead of looking back on the gaga days of DVD, when the packaged media business was posting double-digit gains, year after year, we should marvel at Blu-ray Disc’s own success story: coming of age in the Great Recession and consistently posting significant gains quarter after quarter, year after year.
 

‘The Bible’ Miniseries’ Global Reach Is Undeniable

I was one of the 100 million people who viewed the 10-part, five-episode event that was The Bible: The Epic Miniseries. Religiously, I tuned in to the History Channel on Sunday nights in March, my eyes fixed on my TV screen, excited to see how exactly husband-and-wife team Mark Burnett’s and Roma Downey’s vision would come to life.

The series gives accounts of such notable biblical tales as Adam and Eve in the Garden of Eden, Noah and the ark, Moses and the burning bush, Abraham’s test of faith with Isaac, David slaying Goliath, the feeding of the 5,000, Jesus and Peter walking on water, Lazarus being raised from the dead, Jesus’ triumphant entry into Jerusalem on a donkey, and, ultimately, Jesus’ crucifixion, death, burial and resurrection culminating appropriately on Easter Sunday.

I, for one, would have liked to see the stories of Joseph and Jonah told for their inspiring and teachable moments that have resonated with me throughout the years, but overall The Bible is an exhaustive collection of the book’s greatest hits. I’m sure Burnett and Downey had a hard time trying to pin down which parts to highlight.

The couple addressed their challenges and even the controversy that blemished the series (some seeing a resemblance of Satan in President Barack Obama) during the “Oprah’s Next Chapter” interview that aired on OWN this past Sunday, accompanied by Diogo Morgado, the 33-year-old Portuguese actor who was given the role of a lifetime as Jesus Christ.

It’s not a surprise that Burnett and Downey, who identify as Christians, were met with skepticism when some of their colleagues in Hollywood heard of their daunting endeavor to tell The Bible. I’m just glad that they were able to stand on their faith and prove the naysayers wrong. In doing so, they have touched so many people.

Now that the series is out on Blu-ray Disc and DVD from 20th Century Fox Home Entertainment, I can’t help but think of all the places The Bible will go and all the other people it will reach, including some who have never read the Bible or don’t know about Jesus Christ. The series’ global impact is undeniable.

Personally, it made me think of these stories in new ways and, most importantly, made me want to dig in to the Bible for myself to see how their portrayal stacked up to the written word. The beauty of having it on disc is to catch some of the things we may have missed the first time around. Burnett and Downey alluded to a few thought-provoking parallels made in the series during the Oprah interview.

The Bible: The Epic Miniseries could very well be this generation’s The Ten Commandments. I guess only time will tell.

Blu-ray Is Big in Deutschland

I just got back from Germany, and aside from the wonderful Weissbier I wish I could have brought back with me some of the German peoples’ enthusiasm for packaged media.

My cousins live in an 18th century farmhouse in the small resort town of Ubersee, on the Chiemsee, about 50 miles southeast of Munich and 30 miles northwest of Salzburg, Austria.

We stayed in an apartment in the attic of the main house, and to make us feel comfortable Peter – the grandson of my cousin – brought the boys a PlayStation 3 and an armload of video games.

Turning to me, he said, “I’ve got a big collection of Blu-ray Discs – so let me know if you want to see a movie.”

We talked a little about what I did for a living – I haven’t seen him since my last visit to Ubersee back in 1991, when I was a newlywed and he was 3 – and he said he ditched his DVD collection a long time ago in favor of Blu-ray, which he absolutely loves.

“And I’m not the only one,” he said. “Blu-ray is big in Deutschland. Just go into any store and you’ll see.”

I did. And in every general merchandise store I visited the Blu-ray Discs were laid out in prominent locations, often face up. I hardly saw any DVDs. And there were always people checking out the latest Blu-ray Discs, picking them up, turning them over, reading the backsides, and then marching off to the cash register.

When I got home, I visited the Blu-ray Disc Group Deutschland’s website, and chuckled to myself as I read the introduction, which quotes French poet Victor Hugo – “Nothing else in the world...is as powerful as an idea whose time has come.”

These words, the website said, apply to technology as much as anything, and they have certainly rung true for Blu-ray Disc.

They certainly have. As Home Media Magazine noted in a December 2011 article, European BD sales ballooned 42% to 63 million, driven chiefly by “strong adoption in Germany.”

Futuresource analyst Jim Bottoms told Home Media, “Sales of discs in Germany are outstripping sales in the U.K., which is almost unheard of.” Among the reasons he cited were strong retailer support and little HD programming on German TV.

I’m still too jet-lagged to discern whether there’s a lesson somewhere in all of this that we could apply in the United States, or perform an indepth analysis of the German home entertainment market in the hopes of possibly adding to, or expanding on, Bottoms’ conclusions.

So for now, at least, take this as a cheery little tale – a positive note at a time when studio executives here in the United States are becoming increasingly nervous as another fourth quarter draws near.

Business Diversifies to Move Up

Consumer spending on home entertainment is growing despite the economic headwinds, according to the latest first-half numbers from DEG: The Digital Entertainment Group, but home entertainment is a multifaceted business. It encompasses physical rental and sellthrough spending and digital spending on subscriptions and individual title rentals.

Certain sellthrough segments are growing, such as Blu-ray Disc sales and electronic sellthrough (EST), albeit coming off a very low base and boosted by Walmart’s disc-to-digital conversion (those $2 and $5 fees consumers have been paying to get digital copies of their disc libraries).

Meanwhile, subscription (Netflix) and kiosk (Redbox) rentals continue to grow, taking over a market, for the most part, ceded to them by brick-and-mortar stores.

Digital is making strides in both rental and sellthrough, which shows the business is moving into the virtual world on both fronts. It is particularly important that EST is starting to make it off the mat, thanks in large part to the boost from UltraViolet.

Packaged-goods sellthrough — a particularly profitable segment for the studios — is holding up pretty well, down 3.6% in the first half from the same period of 2011. Adding in EST — also a studio priority — sellthrough is down less than 2%. As UltraViolet conversion gains momentum, EST may prove an even bigger boost to the all-important sellthrough business in the future.

While growth in consumer spending on home entertainment is always encouraging, having stability or growth in diverse markets — sellthrough, digital and rental — is key to the overall market’s health. The fact that that’s happening shows consumer spending on home entertainment is on more solid ground.

It has often been said that the entertainment pie grows even as new businesses — from television to VHS to DVD to rental and digital — each take a slice. Recent DEG numbers seem to show that may indeed be the case in the multi-slice home entertainment market.

‘Indiana Jones’ Films Due on Blu-ray in Fall 2012

Paramount Home Media Distribution has confirmed what most industry watchers had suspected: The Complete Indiana Jones Blu-ray Collection is coming in fall 2012.

The set will include all four films. Though 2008’s Indiana Jones and the Kingdom of the Crystal Skull was released already as a standalone Blu-ray, this will be the first time 1981’s Raiders of the Lost Ark, 1984’s Indiana Jones and the Temple of Doom and 1989’s Indiana Jones and the Last Crusade will be available for the high-def format.

According to Paramount, the set will include a “best of” collection of documentaries, interviews, featurettes and a few new surprises.

Paramount hasn’t confirmed a release date, box art or pricing, so the announcement likely was just to whet our anticipation a bit. The timing makes sense, though, since Lucasfilm released its Star Wars: The Complete Saga Blu-ray set in fall 2011.

With this being the 100th anniversary year of the studio, there is speculation that Paramount will release more of its catalog classics on Blu-ray, such as James Cameron's Titanic, which is being re-released in theaters in 3D in April to commemorate the 100th anniversary of the ocean liner’s sinking.

Quality Getting Lost in Digital Future

Every day as I do my walk with my iPod in tow, I lament the quality of digital music.

Sure, it’s convenient to have a small device that holds thousands of songs, but I miss the resonance of the old records I grew up listening to, or even the quality of the digital CD.

Something seems to be missing; the sound is tinny, kind of lifeless.

The same is true with digitally delivered video, which is Wall Street’s darling. If I want to watch a blooper on YouTube, I’m not too concerned with the quality of the picture and sound. (Often, based on the content, I’m kinda glad the picture is grainy.) But a truly great film with superior cinematography or a sci-fi or actioner with lots of special effects deserves the best quality video and audio. The same is true for such TV shows as “Lost” with its beautiful locations.

Recently, I received a letter from a reader who lamented the quality of both audio and video content in the digital delivery realm:

“I will NEVER depend on streaming for watching a movie. Why? I want the best picture and sound experience there is. I believe if more people had a Blu-ray player, they would not even consider streaming as their only option in watching movies and TV shows. Streaming will never be able to equal the performance of Blu-ray in either picture quality or sound.”

He rightly makes the point that while many digital services will tout HD quality, the fact is the picture — and especially the sound — often don’t really measure up to Blu-ray Disc.

I understand many consumers like the convenience of digital files. Heck, I love my iPod and wouldn’t want to do without it on my walk. But as you get over the initial convenience factor, that quality loss starts to become more apparent. I recently got fed up with bad audio quality and decided to take out my old CDs and play them in the car instead of listening to my iPod. What a difference! How I missed the fuller sound of a quality product.

Certainly, there is room for both convenient services and high-quality viewing in the entertainment business. I applaud Netflix’s decision to again focus on its physical media business. Consumers would lose out if the whole video world turned to streaming at this point.

While convenience is great, so is quality, and the best video quality around right now is Blu-ray Disc.

Creativity a Tool to Revive Catalog Business

Studio marketers have a difficult challenge ahead of them. They need to push Blu-ray Disc sales to make up for continued consumer disinterest in standard DVD. And yet at the same time they have to figure out ways to make DVD, as mature a format as it is, appealing to consumers again, at least until Blu-ray Disc truly becomes a mass-market item.

With new releases the strategy is pretty simple — and the results, increasingly hit or miss. Promote the title as much as you can, both among the masses and among specific niches. Tie it in with anything that makes sense, and don't let up until several weeks after release. Week one simply isn't as critical as it once was.

For theatrical catalog, the most common strategy is simply to slap an anniversary tag on the package and lower the price — with steadily diminishing returns. Consumers will only buy the same movie over and over again to a point — then they throw up their hands and cry, “Enough.” Why isn't the 25th anniversary edition of Movie X selling? Maybe because the film's fan base already has bought the initial DVD release, the 15th anniversary edition, the director's cut, the ultimate edition and the 20th anniversary edition. In the meantime, consumers have amassed hundreds of other DVDs as well, so many that there's simply no more room in their homes for more.

And yet as any good marketer knows, consumers will buy that 25th anniversary edition if there is a compelling reason for them to do so. And price just isn't one of those reasons.

The folks at Warner Home Video's theatrical catalog department are fully aware of the need to create a compelling reason for consumers to buy their library titles. That's why the division, under the direction of Jeff Baker and George Feltenstein, has created an incredible product line with its Ultimate Collector's Editions — lavish boxed sets that command premium price tags and come with all sorts of extra content and additional goodies, like books, postcards, reproductions of programs and, in the case of The Wizard of Oz, even a watch.

MGM Home Entertainment, under the guidance of veteran executive Eric Doctorow, also deserves a callout here. MGM's is mostly a catalog business, and time and time again, the studio has come up with truly captivating packages or programs to remarket old movies. Celebrity gift sets, each with four movies in collector-quality packaging, are breathing new life, and respectable sales, into deep-catalog movies that on their own wouldn't attract much attention. The Decades Collection, with iconic films from a specific decade packaged with a nostalgic booklet and CD with eight hit songs, is another remarkably clever marketing tool. And let's not discount the United Artists brand's 90th anniversary campaign, with a flagship collection of 90 UA films and a series of successful retail-driven anniversary events.

I should mention that both Warner and MGM also were pioneers in MOD (manufacturing on demand), a creative new business model that provides studios with a viable way to exploit titles that otherwise would not be available to consumers through regular retail channels.

By developing these and other clever initiatives to drive catalog sales, both Warner and MGM have kept their market shares relatively stable over the last four years even as the overall theatrical catalog business has tanked.

There's a lesson here, my friends ...

How Much of Neflix’s Green Is Blu?

While most of the headlines about Netflix’s boffo fourth quarter emphasized the growth of streaming, a little-reported footnote is that the company held the line on revenue-per-subscriber via Blu-ray premiums.

The chain’s Blu-ray subscribers increased to 1.23 million in 2009 (There are 12.3 million overall), each of which paid a surcharge of $1 to $3 per month based on the number of Blu-ray Disc titles rented. The surcharge helped increase gross-profit-per-average-paying-customer to almost $5, the highest in two years, CEO Reed Hastings said.

Now, on the streaming front, quantifying profit is a little more elusive. There’s a feeling that Netflix customers like streaming. Hastings says it’s a draw that has helped the company add millions of subscribers (many at the low $9 a month price). He said he expects two-thirds of subscribers will be streaming at least 15 minutes per month in the next 18 months. But he can’t quantify the value of streaming.

“We don’t have a good control set of subscribers that don’t get streaming,” he said.

What does that even mean? What’s with the “at least 15 minutes” measure? That’s not even enough to watch a single TV episode. And speaking of TV episodes, I’d like to know how much of the streaming is TV episodes rather than movies. If Netflix is merely competing with linear episodic television, it’s like shooting fish in a barrel and really has no bearing on the movie or packaged media business.

Is most of the profit Netflix realizes because it offers packaged media rentals, too, especially Blu-ray? Or is streaming as important as the analysts make it seem? Is Blu-ray disc a kind of unheralded Cinderella that is doing all the work with no credit?

In Netflix’s next report, I’d really like to see how Blu-ray measures up against streaming — and whether subscribers would pay for streaming only. Then we’d know which is the real princess of profit and which is just the ugly stepsister wearing a shoe that doesn’t fit.

When Netflix offers a streaming-only option, we’ll know it’s true value — and whether Netflix can profit without packaged media. Without the crutch of packaged media, it’s hard to say whether Netflix’s streaming service can stand on its own.