Alarm bells come too late for Sony Pictures

The memo Sony Pictures co-chiefs Michael Lynton and Amy Pascal sent to employees Monday announcing massive layoffs, most of which will fall in the home entertainment and IT divisions, obviously wasn’t meant to be made public. But it’s fitting that it was leaked when it was, the same day that Bernstein Research analysts Michael Nathanson and Peter Choi published what amounted to an obituary for packaged media as a profit driver for Hollywood.

According to Bernstein:

  • For 2009-2012, we [previously] forecast overall U.S. home entertainment industry revenues to decline at a -2.1% CAGR. This underscores the mature nature of the industry, plus the importance of share gains for individual players. Over this time frame, aggregate operating profit declines of low single digits are also expected.
  • Now one year later, looking at the cold hard facts of 2009, retail spending on sell-through DVDs and Blu-Ray discs dropped by -18% while rental of these products actually increased by 4%. As a result, the sell-through of physical discs declined from 63% of the market to 57%.
  • This massive change in behavior continues to have negative implications for studio profitability as every home video executive would rather book the $16 of profit contribution per transaction from selling a disc vs. the $3.50 to $1.40 per disc profit contribution from rental.
  • [snip]
  • Our analysis also shows that the Blu-Ray format is having a more modest acceptance rate that traditional DVD. In 2009, three years after its introduction, Blu-Ray’s penetration of TV households stood at 4.4%, compared to 13.0% for DVDs in 2000. We also find that Blu-Ray [sic] has seen lower numbers of titles shipped per converted household relative to DVD. We don’t see Blu-Ray stemming the decline of physical sales. Read More »

Another strike against three-strikes?

More from the be careful what you wish for files: As The Media Wonk noted in a previous post, there is more to France’s three-strikes law than just three-strikes. One less-discussed provision is the strict regulation of movie release windows by the government, taking a key strategic decision out of the hands of the studios. One early victim of that provision appears to be Twentieth Century-Fox, which has scheduled the release of Avatar on Blu-ray and DVD in France for June 1–several months earlier than ordinary business considerations would dictate but necessary to comply with the law.

That provision isn’t the only booby-trap in the law for content owners, however.

The Creation and Internet law, after all, which went into effect on Jan. 1, wasn’t passed only to crack down on digital piracy. It was also intended to promote the legal availability of “multimedia” content on digital platforms. As it turned out, content owners probably should have paid more attention to that end of the deal.

In the spirit of promoting availability, France’s Minister of Culture, Frédéric Mitterrand, ordered up a commission to study and make recommendations on ways to facilitate availability. To head the commission, Mitterrand named Patrick Zelnik, CEO of Naive Records, which happens to be the label for which French First Lady and pop chanteuse Carla Bruni-Sarkozy records (that’s just the way they do things in France).

The Mission Zelnik, as the commission came to be known, issued its recommendations in early January, and they included a number of surprises. Topping the list was a proposal to implement a collective rights licensing scheme for music on digital linear platforms (i.e. webcasts), in effect a compulsory license. The commission also recommended a “voluntary” collective licensing scheme for non-linear platforms (downloads and on-demand streaming), with the stipulation that if the industry can’t come up with a satisfactory “voluntary” scheme within a year the government should mandate one. Read More »

'Avatar' blogging blues

My post the other day on the Blu-ray Disc release of Avatar in France generated quite a bit of traffic and commentary on other web sites (thank you Engadget HD), as well as attracting a few comments here. Alas, most of it has been critical.

While it’s always tempting to blame the critics for missing your point, as a general rule if a large number of people appear to have missed your point you probably didn’t do a very good job making it in the first place. So: mea culpa.

Let my try to clarify some issues:

Notwithstanding Ben from Engadget’s diligent research in IMDB, there really aren’t other movies comparable to Avatar. True, there have been other blockbusters in the past five years, most or all of which may have been released on DVD/Blu-ray within six months. But there haven’t been others with a $450 million negative cost and an inherently longer theatrical cume period due to the still-limited number of 3D screens. Read More »

For 'Avatar,' three-strikes means a quick out

From the be careful what you wish for file: Twentieth Century-Fox’s Avatar, which is rapidly approaching the top spot among all-time global box-office grosses, and would likely be the biggest selling Blu-ray title to date when released at Christmas time, will actually be released on June 1st, at least in most of the world. Amazon France is already taking pre-orders, for 28.99 euros.

Why not wait until the most propitious time of year to release such a monster title in order to maximize sales? Because it would be against the law in France to wait beyond June 1. And if you release it in France, under EU rules, you’ve effectively released it throughout the EU. And if you release it in the EU, you’ve effectively released it throughout Blu-ray’s Region B, which includes Africa and the Middle East as well as Australia and New Zealand, where they speak a version of English. And if you’re going to release a movie with an English soundtrack in Region B, you might as well release it in Region A, which includes the United States, because it’s going to end up on the Internet sooner or later, probably sooner.

Welcome to life under France’s new three-strikes regime.   Read More »

TV vs. Cable

The Media Wonk spent last week in Las Vegas at the Consumer Electronics Show where, everybody said, 3DTV would be the big story. And sure enough, nearly everywhere you went on the show floor folks were sporting either polarized shades or the full Geordi La Forge wraparounds and squinting at the new 3D displays tucked into carefully light-controlled alcoves of the display booths, like so many bug-eyed NFL refs going under the hood.

Yet for all the hoopla over 3D, the really important TV story out of CES was the explosion of embedded applications on Internet-capable HDTVs and Blu-ray players for bringing over-the-top (i.e. Internet-delivered) video into the living room. A year ago at CES there were only a few such TV sets on display, from a handful of manufacturers, and about all you could do with them was run a few Yahoo widgets and stream Netflix movies. At this year’s show, it was hard to find a home entertainment device that wasn’t Internet-ready, and if it didn’t come with its own app store it came embedded with one of the growing number of online content platforms from the likes of Vudu, DivX, Rovi and Boxee, among others.

Far more than 3D, set-makers’ growing commitment to enabling over-the-top video delivery to HDTV screens holds the potential to shake up the future evolution of the TV business. Read More »