Although the studios behind those movies haven't had about what's going on, Jeff Baker, senior VP-general manager of theatrical catalog and sales, said “It’s unprecedented to see national retailers outside of the fourth quarter promote $3.99 DVDs. It’s a negative precedent in the business to do that type of lower budget pricing outside of the fourth quarter. You would need to see some uplift in unit volume velocity to compensate for that lower pricing to maintain profit margins, and I have not uniformly seen at retailers the necessary uplift in volume.”
Regardless of how studio executives feel about the move, it's become clear over the last couple of years that DVD sales are dropping steadily, and it's not a trend that's going to reverse on its own. However, it's questionable how good a solution bargain basement pricing is.
Like the decline of CD sales, there are likely many factors for reduced interest in DVDs. One factor that's been cited in many recent studies is the proliferation of DVRs, especially among HDTV owners. Many HDTV owners have expressed a preference for time shifting hi-def content over watching DVDs. While lowering prices will certainly make them more attractive than they were at a higher price point, it's hard to imagine them competing with content consumers are already paying for, like cable and satellite services.
Also much like the CD industry, a significant portion of early DVD sales were for existing titles that consumers may have had owned in another format and needed to update to the new technology. However, as more people have "completed" their DVD collections, it's hardly surprising that they're buying fewer discs. Unlike music however, movies are often seen as a single use item. Once someone has seen a movie they're much less likely to watch it a second time, meaning they have little or no incentive to own it on DVD. Right now the only real bright spot seems to be television series box sets.
Recent trends in set-top boxes may make the outlook for DVDs even bleaker. As boxes become available that are capable of getting content directly from an internet connection to a television, instead of downloading to a PC, possibly bypassing DRM measures, and converting to TV friendly format, and burning to disc, it seems unlikely that hollywood will improve their fortunes significantly until they really embrace technologies like streaming and downloads, which seem to be the future of digital entertainment.
Source: Video Business
Written by: Rich Fiscus @ 30 Sep 2007 8:56
