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May 04, 2008
Reliving The DVD Romance
The Wall Street Journal finally found out why The Industry is so happy to be in business with Apple in the movie downloading business.
Not only is Apple willing to sell movies at a loss of approximately a buck a film… not only does a price paid by Apple of $16 per downloaded film represent more than The Industry gets per DVD from the major retailers, like Wal-Mart, Amazon, and Blockbuster… but the cost of “production” for these downloads is virtually nothing with the only significant fixed cost for the studios being residuals and payments to residuals and gross and net profit participants.
Simply put, a brand new DVD sold at Wal-Mart might represent $4 in net returns to the studio. An Apple download represents about three time that revenue.
Of course, the wet dream that execs live on is that THIS is the future. Downloading will take them back in time, to the height of the DVD business, but even more, it will do that and expand the market.
But what they all look away from is the horror of The Long Tail, a conceit that generally does not work well when discussing the film business, but in this case speaks to the problem of too many choices available to consumers. The reason long tail thinking is tough in film is that this industry is a closed one, constantly manipulating the value of both new and library product. As that control is lost to wider availability, the only reasonable expectation is that prices will drop precipitously… as they already have in the maturing DVD business.
So today’s cash cow – and make no mistake, $16 a title for digital download without the ability to personally convert to DVD quality DVDs is pants-droppingly thrilling for studios – may well be a Trojan Horse that is the beginning of some very dangerous policy that will actually devalue the studios even further in the next decade.
Posted by poland at May 4, 2008 01:48 PM
Comments
Downloads are an inferior product sold at a higher price. The convenience is enticing for an occasional impulse purchase, but that's not enough yet to supplant physical media.
And when you're locked in by a copy protection scheme a la iTunes, you'd better hope that the company that sold you the file doesn't go out of business. If they do, your files are useless.
Oh, and one more thing: no resale value.
Posted by: Eric ![[TypeKey Profile Page]](http://www.mcnblogs.com/thehotblog/nav-commenters.gif)
at May 4, 2008 02:27 PM
Gents,
Great points made by the two of you... as for me, with my myopic vision, I was only thinking that with iTunes, I most probably wouldn't be getting the extra materials like the director's commentary etc. I reckon what Eric said (copy protection scheme) is the best reason for me not to go anywhere near it.
Posted by: The Pope at May 4, 2008 03:29 PM
Eric - good, practical points.
Dave - excellent. Seriously. Concise and cuts to the core.
Posted by: Martin S at May 4, 2008 05:14 PM
Even worse than paying more for stale video on demand. If I got $16, why didn't I go to a good theater six months ago?
Posted by: doug r at May 4, 2008 06:44 PM
David,
Jobs is taking a play from Gates: Lockdown the studio/commerical market and then make another play for the 'Long Tail'...Otherwise the studio will loose everything to piracy, a la music industry.
...Too many choices? There is not enough!
I want to watch what I want when I want, not according to the dictate of some executive's window.
Otherwise, I'll just BT the entire catalogue. Heck, I'll upload my entire catalogue...As a form of 'back-up'.
And for the DVD extras, I am tired of paying a premium for crap, PTA I'm talking about you and the travesty of TWBB:SE! Instead of pricing out for each new disc, the studios will only be able to price marginally for each new supplement. If they don't like it, tough!
I'm holding out on paying for DVDs because of this 'marketing' policy. I refuse to be suckered and pay for a DVD and find out yet there is another SE, Ultimate, CE, Director's, etc....Crap!
Your libraries will become next to useless, the studios need to focus on creating good content, stories, character, otherwise I'll look elsewhere for entertainment, hello YouTube!
Posted by: leepe at May 6, 2008 09:26 AM
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