July, 2009

Red flag for Blu-ray

This can’t be good news for Blu-ray: Singulus Technologies, a leading manufacturer of Blu-ray replication equipment, said Friday that sales of complete Blu-ray production lines fell sharply in the first half of 2009 and show no signs of improving over the second half.

“[T]he optical disc market shows little impulses for the remaining months of the business year 2009,” the company said in a press release announcing its first-half earnings. “The orders usually placed by major customers towards the end of the 2nd quarter have failed to appear so far. The expected total number of Blu-ray disc production machines in the business year 2009 will therefore remain below the sales realized in 2008. A recovery in the entire business activities has not yet materialized and we also expect a difficult 2nd half of 2009.”

blu-ray-eyeLast year Singulus sold 31 Blu-ray lines, according to Bloomberg News, but sales have fallen by roughly two-thirds this year. If the current trend continues, Singulus would end up selling about 12 lines this year.

That doesn’t augur well for Blu-ray replication demand, despite industry efforts to sound bullish about the format.

It’s also not good news for Blu-ray IP owners Sony, Panasonic and Philips, who have been gearing up a licesning program to start collecting Blu-ray royalties from replicators. The three companies recently created a one-stop shop for device makers to license essential Blu-ray technology, and are planning to start knocking on replicators’ doors later this year, The Media Wonk hears.

Replicators in general are facing a difficult year. DVD sales are falling sharply, which is hurting revenues. Gearing up for Blu-ray production, meanwhile, is expensive. Blu-ray machines from Singulus go for about $1.8 million a piece. Putting in any significant Blu-ray capacity represents a significant captial investment, which is tough to justify when demand is uncertain and revenues are falling.

Many replicators are are likely to try to get by for now with racks of less expensive Blu-ray burners, using finished discs, and defer the larger capital investment in Blu-ray molding and production equipment until greater demand is locked in.

When that demand eventually materializes, of course, perhaps sometime in 2010, the capacity to handle it likely won’t be in place, which will create a whole new set of problems for the industry, but I suppose a problem in meeting demand is better than no demand.

The Taking of Section 1201

I managed to catch an uncut version of the original Taking of Pelham One, Two, Three on cable the other night and stayed up to watch it despite having seen it upteen times. It’s still one of the all-time great New York movies, especially for anyone who lived in the city around that time (the less said about the 2009 version the better).

One of my favorite bits of cynically comic dialog comes about half-way through, when Walter Mathau’s transit police lieutenant character reminds Dick O’Neill’s harassed and short-tempered train master that if they don’t get all the track signals cleared soon, as the hostage takers were demanding, they would start killing the passengers on the hijacked subway car.

“Screw the passengers,” O’Neill’s character barks. “What do they expect for their lousy 35 cents–to live forever?”

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I couldn’t help thinking of that classic exchange as I was reading through the responses to the Copyright Office’s written questions to participants in its DMCA section 1201 exemption proceeding, particularly those submitted by Steven Metalitz of Mitchell Silberburg and Knupp on behalf of the MPAA, RIAA and other copyright owner groups. Rejecting the Office’s proposed language for an exemption to allow circumvention of DRM used in connection with authentication servers in the event those servers are ever turned off (e.g. Wal-Mart’s music service), Metalitz practically channels O’Neill’s train master: Read More »

Finally singing the right tune

For those with a deterministic view of digital technology’s impact on information economies, Brad Stone’s piece in the NYTimes this morning is a good read. Stone reports on the efforts of Polyphonic Music, the new venture formed by Radiohead manager Brian Message to invest directly in the careers of budding musicians.

recording-studioPolyphonic typically invests a few hundred thousand dollars in unsigned artists and then helps them create direct links to their audience, mostly over the Internet. Each act then functions as its own small business, funding its own recordings and using outside contractors to handle promotion, merchandising and touring. The musicians and investors then share in all revenue from sales and touring.

It’s essentially a complete reversal of the traditional music-industry arrangement, in which an artist is signed exclusively to a record company, which handles all sales, promotion and merchandising while paying the artist a royalty on record sales.

In an even more critical reversal of the traditional model, the artists Polyphonic invests in retain ownership of their own copyrights and master recording, rather than assigning those to the record company for up to 35 years, as is standard industry practice now. Read More »

Missing data points in the IIPA copyright study

A couple of data points I would have liked to have seen but could not find in the study released Monday by the International Intellectual Property Alliance on the copyright industries’ $1.5 trillion contribution to U.S. GDP:

1)  What portion of the economic activity in what the report classify as “non-core” copyright industries is being counted toward that $1.5 trillion? Following classifications established by the World Intellectual Property Organization in 2004, the report divides Copyright-symbolthe copyright industries into four categories: Core industries (movies, TV, books, newspapers, recorded music, computer software); Partial copyright industries (industries in which a portion of their output is eligible for copyright protection, e.g. fabric, jewelry, furniture); Non-Dedicated Support industries (transportation, telecommunications, etc.); and Interdependent industries (CE manufacturers, wholesalers and retailers, blank media etc.). Together, the four make up the report’s “total copyright industries.”

According to the report the core industries contributed $889 billion to U.S. GDP in 2007, the last year for which data are available, while the non-core industries contributed $636 billion. Not all economic activity in those related industries is related to copyrighted works, however, as the authors of the report acknowledge. So how much are they assigning to the copyright category? “A portion,” according the report. How big a portion? The report doesn’t say. Read More »

Toshiba climbs aboard the Blu-ray lifeboat

Now we know why Toshiba is apparently ready to swallow its corporate pride and begin selling Blu-ray players: According to new projections by the Consumer Electronics Assn., sales of CE products are expected to drop 7.7% in 2009, to $165 billion, as the recession continues to grind away consumer spending.

The one CE product category expected to show positive growth this year? Blu-ray Disc players. Unit shipments of stand-alone (i.e. non-PlayStation 23) Blu-ray players are expected to grow by 112% this year, to nearly 6 million, while revenue is expected to grow by 48%, even in the face of price cuts, to top $1 billion.

Any port in a storm. Even in formerly enemy territory.