Home Media Magazine - March 16-22, 2009 - (Page 24) NEWS Studios Experimenting With Disc Content Continued from page 1 www.homemediamagazine.com attributed to its theatrical business. Lionsgate president Steve Beeks said digital distribution and Blu-ray Disc continue to generate significantly higher margins, with high-def packaged media representing 10% to 15% of the studio’s new theatrical release revenue. “We expect that revenue to continue growing as overall consumer revenue from Blu-ray is projected to grow significantly this year,” Beeks said. Studios are also adding features beyond typical bonus material to Blu-ray releases, including standard DVD and digital copy, in an effort to add value to high-definition packaged media. Fox’s Marley & Me (March 31) Blu-ray Disc release includes separate bonus material for the Blu-ray release, as well as a DVD copy and a digital copy. Ralph Tribbey, editor of industry tip sheet The DVD Release Report, said the moves indicate studios are throwing caution to the wind, including efforts by Sony and Fox to include digital copy on select catalog titles. He said digital rights management issues involving compatible digital copy for iTunes and PlayStation Portable also needed to be addressed for wider consumer adoption of Blu-ray. “Until they get digital copy organized, I don’t think consumers are going to be buying into that,” Tribbey said. Beefed-up BD releases, however, haven’t kept the format’s retail price from falling 14% in 2008 to an average retail price of $28.93, which still represents a $13.19 premium on standard DVDs, according to U.K.based Media Control. Analyst Doherty said Blu-ray would become even more affordable after Sony’s recent announcement it would build a disc replication facility in China. PlayStation Continued from page 1 2007, according to DEG: The Digital Entertainment Group. So far this year, disc sales alone are tracking 8% behind last year, according to Home Media Magazine market research. Take out Blu-ray Disc sales and the decline in DVDonly sales is 13%. Total consumer spending on buying and renting discs combined is expected to decline to $21.5 billion in 2009, according to Adams Media Research — which still represents a 215% premium on theatrical’s wishful thinking. Regardless, Hollywood, like Wall Street, covets the next big hit or revenue driver. When compared to significant percentage growth theatrically, the perceived diminished status of home entertainment provides a convenient fall guy, say analysts. “The studios were so used to the profits from DVD that they were willing to subsidize movie productions [regardless] of the box office take,” said Edward Woo, analyst with Wedbush Morgan Securities in Los Angeles, who tracks entertainment retail. “They need to lower production costs, which I think is the best way to manage costs in light of the lower revenue outlook.” Indeed, Sony Pictures Entertainment last week began slashing 300 positions, or 3.5% of its global workforce across all departments in response to an 8% drop in filmed entertainment revenue. Michael Lynton, chairman of Sony Pictures, said the studios would ask actors, directors and producers to shoulder more of a movie’s fiscal burden in 2009 due to the weakening economy and DVD safety net. “It’s not so much cutting salaries but making sure [they] share the risk,” Lynton told Bloomberg News. Other studios, including Lionsgate, Paramount, Fox, Universal, Disney and Warner, are in the midst of internal restructuring (layoffs), in addition to rethinking the packagedmedia business model. Disney CEO Bob Iger earlier this month told analysts at the Deutsche Bank Securities confab in Palm Beach, Fla., the studio would up its digital initiatives in an effort to generate revenue to offset DVD declines. Iger, who blamed packaged media for much of the 64% drop in Disney filmed entertainment’s operating income, said an overhaul of the entire DVD business is in order. He said consumer options for home entertainment had evolved to the point where the average household was in possession of about 80 DVDs, compared to 135-140 DVDs for hardcore consumers. “This suggests that going forward, people potentially will be more selective about what they buy,” Iger said. Richard Doherty, director of The Envisioneering Group in Seaford, N.Y., said Iger’s concern was legitimate considering Disney’s reliance on packaged media. “Disney relied on families watching Pinocchio not just once but 10 times,” Doherty said. “They made that business model work better than any studio.” Meanwhile, Philippe Dauman, president and CEO of Viacom, was more circumspect. “As it’s been widely discussed … home entertainment was hit by the soft retail environment,” he said in a Q4 financial call. But he said the economy and a poorer slate were mostly to blame. “Despite the orgy of pessimism of late, the tide of the economy and our industry will rise again,” he said. Others are looking for added income online. Time Warner CEO Jeff Bewkes, who in 2008 eliminated the release window between electronic and DVD distribution, this month unveiled a series of initiatives aimed at mining incremental revenue from online for properties such as HBO, Turner Broadcasting System and Warner Bros. Still others are tinkering with the rental/sellthrough disc model. Fox Home Entertainment unveiled a controversial retail plan that involved eliminating bonus material and select special features from new-release rental discs in an effort to add value to sellthrough copies. The studio said it developed the product variations to satisfy different consumer consumption models and behaviors. “For rental customers, we’re delivering a theatrical experience in the home while promoting upcoming releases; for retail customers, we’re offering a premium product that expands the entertainment experience of that particular property to further enhance ownership,” the studio said in a statement. Michael Nathanson, analyst with Sanford Bernstein & Co., in New York, said that in addition to cutting overhead, marketing and talent costs, studios must streamline release slates and work with retail to discount catalog titles — which he said had seen a greater drop-off in sales, compared to new releases. Blu-ray could prove a boost to the bottom line as DVD declines, analysts say. “They need to push Blu-ray harder and try to [incorporate] video-on-demand, but at higher price points,” Nathanson said. Indeed, Lionsgate, which has seen its stock value decline 50% in the past six months, reduced its 2009 release slate when $100 million in third-party financing disappeared. The Santa Monica, Calif.-based mini-major lost $93 million in the most recent quarter, which it largely Race, The Incredible Hulk, Burn After Reading, The 40-Year-Old Virgin and The Big Lebowski. Download-to-own titles are available in standard definition from $9.99. Streaming in either standard or high definition is available from $1.99 (TV) and $2.99, respectively. With NBC Universal content, the PlayStation Network now claims more than 1,300 movies and 4,500 TV shows. Users can transfer standard-definition content from the PS3 to PSP. Studios and content holders increasingly view online gaming networks as conduits into consumer households to distribute movies and TV programming for incremental revenue to packaged media. Launched in 2006 by Sony Corp., the PlayStation Network in February announced it had 20 million free registered users. By comparison Microsoft’s Xbox 360 Live has 17 million members who pay an annual $50 fee to socialize and access online games and Netflix’s streaming service (which requires a separate subscription). “The home entertainment experience continues to evolve, and families are increasingly looking for activities within the home to power their leisure time,” said Craig Kornblau, president of Universal Studios Home Entertainment and Universal Pictures digital platforms. “Sony’s gaming devices present consumers with a value proposition … and easy access to NBC Universal titles, all with a push of a button.” Alriiiighty Then! SONY PICTURES SLASHES POSITIONS By Chris Tribbey iting significant drops in its DVD, TV syndication and advertising sales business, Sony Pictures Entertainment announced March 10 that it was cutting 3.5% of its workforce worldwide. A source with knowledge of the cuts said they were made across all divisions of Sony Pictures, including Sony Pictures Home Entertainment. No senior employees were cut at SPHE, and no other details are available. The cuts amounted to about 300 positions, with another 100 vacant jobs being eliminated. Less than 150 Sony Pictures employees, mostly in Los Angeles, were among the cuts. “These economic effects have, regretfully, made it necessary to take the step we had hoped to avoid, and worked hard to minimize: reducing our head count to ensure the stability and success of our business going forward,” wrote CEO Michael Lynton and studio co-chair Amy Pascal in a letter to employees. The layoffs come following other costcutting moves by Sony in October, including cuts to executive benefits. Sony Pictures’ Japanese parent announced in December that it was slashing 8,000 fulltime jobs worldwide. Warner Home Video and Morgan Creek Productions celebrated the DVD release of Ace Ventura Jr. — Pet Detective March 8 at a benefit screening at The Springs Preserve in Las Vegas. Warner released the film on DVD earlier in the month. Pictured (L-R): Executive producer Wayne Morris with stars Emma Lockhart, Austin Rogers, Josh Flitter and Reed Photo by: 2009 Denise Truscello Alexander, and director David M. Evans. HOME MEDIA MAGAZINE (ISSN 1934-9882) is published weekly 52 times per year by Questex Media Group, Inc., 306 West Michigan Street, Suite 200, Duluth, MN 55802. Subscription rates: $49.99 for one year in the United States and Possessions; $79.99 for one year in Canada and Mexico; all other countries $99.99 for one year (by surface mail). Add $75 annually for air-expedited service. Single co http://www.homemediamagazine.com
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