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View Full Version : DVD Plunge May Force Studios to Write Down Movies (Bloomberg)


Solothores
01-31-2009, 09:23 PM
By Andy Fixmer and Sarah Rabil

Jan. 30 (Bloomberg) -- Plunging DVD sales threaten to reduce profit for studio owners Time Warner Inc., (http://www.bloomberg.com/apps/quote?ticker=TWX%3AUS)Walt Disney Co., (http://www.bloomberg.com/apps/quote?ticker=DIS%3AUS)Viacom Inc. (http://www.bloomberg.com/apps/quote?ticker=VIA%2FB%3AUS) and News Corp., (http://www.bloomberg.com/apps/quote?ticker=NWSA%3AUS) and may force them to write down the value of movies, analysts said.

Fourth-quarter shipments fell 32 percent in the U.S. and Canada to 453.6 million DVDs, according to Los Angeles-based Digital Entertainment Group. The drop is the biggest since the industry-funded researcher started keeping track in 1997.

The decline is being fueled by viewer shifts toward rental services such as Netflix Inc., (http://www.bloomberg.com/apps/quote?ticker=NFLX%3AUS) the U.S. recession and technology that makes it easier to stream Web videos to televisions.

“Making a movie just won’t be as profitable as it once was,” Barclays Capital analyst Anthony DiClemente (http://search.bloomberg.com/search?q=Anthony+DiClemente&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in New York said in an interview. “There will be a complete bottoms-up reconstruction of the economics of the film business.”

DVD sales may fall 11 percent this year and cause studios to write down new and recent titles that miss internal forecasts, Michael Nathanson (http://search.bloomberg.com/search?q=Michael+Nathanson&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), an analyst at Sanford C. Bernstein & Co. in New York, wrote in a report this month.

Home-video sales and rentals, mostly reflecting DVDs, accounted for 68 percent of the $88.9 billion global filmed- entertainment market in 2008, according to estimates by New York-based PricewaterhouseCoopers LLP. The figures include $3.89 billion in online rental fees and digital streaming revenue.

Future Cash Flows

Films are valued based on projected sales over 10 to 15 years, from theatrical release through DVD sales, cable television and TV broadcasts outside the U.S., said David A. Davis (http://search.bloomberg.com/search?q=David+A.%0ADavis&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), managing partner of Arpeggio Partners LLC, a Santa Monica, California-based consultant to movie studios.

Studio estimates of these cash flows may prove optimistic if DVD sales continue to deteriorate, according to Nathanson.

In his Jan. 14 report, Nathanson lowered earnings estimates for Viacom, owner of Paramount Pictures; Burbank, California- based Disney; and Twentieth Century Fox owner News Corp. for this year and next. He left his 2009 projection for Time Warner, owner of Warner Bros. Pictures, unchanged while lowering the 2010 forecast.

“Dark Knight” producer Warner Bros. was the top Hollywood studio last year in U.S. box office sales, followed by Paramount and Sony Pictures Entertainment.

“It’s too early to say” how the drop in DVD sales will affect Paramount’s business, said spokeswoman Patti Rockenwagner (http://search.bloomberg.com/search?q=Patti%0ARockenwagner&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1).

Warner Home Video President Ronald Sanders wasn’t available for comment, spokesman Jim Noonan (http://search.bloomberg.com/search?q=Jim+Noonan&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said. Steve Feldstein (http://search.bloomberg.com/search?q=Steve+Feldstein&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), spokesman for Twentieth Century Fox Home Entertainment, didn’t return calls seeking comment. Disney spokeswoman Heidi Trotta (http://search.bloomberg.com/search?q=Heidi+Trotta&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) declined to comment.

Read More (http://www.bloomberg.com/apps/news?pid=20601087&sid=aDMXKb0oqb34&refer=home)

flipnap
02-01-2009, 02:14 PM
how about this: instead of making crappy throwaway movies and depend on DVD rentals for the people who werent willing to pay "theater money" to see garbage, make a beautiful film that people will pay to see in the moves AND rent or buy when its released.. everyones blaming the economy.. could it be you made one too many lousy movies? people wont buy something not worth owning

ArcticWolf
02-01-2009, 04:03 PM
The decline is being fueled by viewer shifts toward rental services such as (http://www.bloomberg.com/apps/news?pid=20601087&sid=aDMXKb0oqb34&refer=home)Netflix Inc., (http://www.bloomberg.com/apps/quote?ticker=NFLX%3AUS) the U.S. recession and technology that makes it easier to stream Web videos to televisions.


So Netflix don't pay a fee to the studios? It's scare mongering. Even if Netflix et al pay less per rental their ease of access will mean a greater consumer base increasing profits.

kelgy
02-01-2009, 05:34 PM
Big studios take less creative risks that they used to.
Seems like almost every movie today is either a remake, based on a comic or a toy.


Everything is a product, brand name, franchise.

Book publishers have been cutting back on making/promoting new titles for years(its Harry Potter or nothing), so i wouldnt be surprised if studios cut back on productions. Havent they already been doing that. It seems like the films that get the most positive attention were done by smaller production companies(Lion's Gate, Weinstein Co. etc).

If the big corporations could make a bigger profit off reality tv shows they would most certainly stop making movies altogether.

Even strikes dont bother them since they have so many other product branches, they can absorb the losses from one division.

bluemagicuk
02-01-2009, 06:51 PM
I think flip arctina nd kelgy have pretty much summed things up perfectly.
The main issue for me is the price of a dvd .... no one expects to pay £15
for a dvd, or even £9.

I use lovefilm and although i have to wait a week or 2 for new releases to
get sent through, for £19 a month i can watch around 15 films or tv series
or games a month . Why should i buy any more films ever again? Saying
that i did get Wall-e and a few others for xmas ;)

Edit
Oh and heres a thought ..... paying one person 185 million a year could
certainly do with being reduced by about 80%

Seriously i dont care how good a film or actor is, you cant justify spending
20% of the totall profit on paying one actor .... its lol ridiculous, a sentiment
I am sure many many others agree with ... and of course an elite few who wont.

http://thelongestlistofthelongeststuffatthelongestdomainnameatlonglast.com/expensive34.html

Imhotep397
02-01-2009, 07:23 PM
Yet another bunch of fat cats wearing suits that are clueless. Yes, obviously the bad economy is having an effect on DVD sales, and some people are renting more often but the major problem is just being glazed over AGAIN. I agree with everything that's been said. Horrible movies, like music, deserve and get no respect. You have no idea how pissed I was after I just rented and watched "Wanted" and "Max Payne"...just horrible films on the whole. I haven't investigated, but I'm sure I know a couple of people that worked on those films and even they probably were saying the same thing under their breath. Making better films that get people to want to go to the movies in droves is what's lacking here and I mean not gimmicks like 3D with more bad storytelling attached either.

jeremybirn
02-01-2009, 07:51 PM
So Netflix don't pay a fee to the studios?
Rental produces much less income than box office or DVD sales.

Seems like almost every movie today is either a remake, based on a comic or a toy. Everything is a product, brand name, franchise.
People don't go out to the movies much to see a new film nobody's ever heard of. Even for the best films of the year, that win the most Oscars and get the best reviews, people tend to see most of them on home video, if they watch them at all.

The "big" films that people talk about ahead of time, and decide to go see in theaters, are the ones based on brand-name franchises, well known books, or sometimes with a few bank-able stars who are "global brand names" themselves and can really open a movie.

From this year's nominees, for example: did you see Frost/Nixon or The Reader or Slumdog Millionaire in the theater yourself? If your answer is "No, I spent my movie money on well known franchises instead." then you know what forces are at work.

-jeremy

Stormy151
02-01-2009, 08:33 PM
Rental produces much less income than box office or DVD sales.


True, but the article cites Netflix and online streaming services as cutting into their bottom line. Why not Blockbuster Video? Isn't a rental a rental? Or does a retail rental generate more income than the mail-order or online? I don't see how it possibly could- as most of the retail stores sell off the rented videos secondhand after a couple months. Unless maybe the studios get a piece of THAT too? I honestly dont know.

It seems to me the movie business of late is either, A. Franchise driven, as has been stated, B. Copycatting, or C. BOTH. Every major studio is trying to get the next Harry Potter or Lord of the Rings to take off. It's becoming tiresome, really. Spiderwick-whosis? Golden Compass-whatsis? City of Ember-wha?

That's the only reason fantasy books are getting made into films anymore, people can smell that Harry Potter/LOTR pie, and they all want a piece.

It's happening in bookstores too. Go into Borders or Barnes and Noble to the Juvenile section, you'll see about a hundred different rip-off clones

kelgy
02-01-2009, 08:49 PM
Movies used to take a while to get onto video. Now it takes maybe 3 months.
So studios cant really complain that people arent bothering to go to theaters since they can catch them later. They fed their own problem.
If they want people to catch Frost/Nixon in theaters, dont have it out on video in 3 months(obviously piracy is a problem but I doubt the target audience for F/N is snooping around the torrent sites).


Also, it used to be that the big studios made quite a few movies from obscure novels or written directly for the screen(the Oscars even have a category for it).
The star was the main attraction.
I dont think the big star (or director) movie exists anymore.

Its not like the old days when STALLONE or SCHWARZENEGGER in the title was enough. ( maybe a Will Smith can do it).


People went to see Back to the Future, Gremlins, Robocop, Predator, etc, and they werent based on previous source material. And that doesnt include the large amount of suspense, drama and other large studio films that were made throughout the year.

When Star Wars first came out it didnt open big and stayed in theaters for months.
Titanic didnt open big either.
Even with the best home theater set up, you cant compete with a theater screen, and a lot of people like to get out of their houses every now and then. But the corporations that run the studios cant seem to decide if they want people to watch them at home or in a theater.

Movies cost too much to make though. I dont think its just the actors, everything is more expensive. Its too expensive to shoot a gas station set in New Mexico so they build one in Morocco.
I think that's messed up.

anobrin
02-01-2009, 10:36 PM
The reality is that it only take a small number of people to produce a large number of bootleg copies
here in new York there is a clean crisp DVD copy of "benjamin button"
thats been available for weeks. it is the internal review copy that was submitted to the oscar judges for consideration.

IN north jersey NOBODY buys a commercial copy of a DVD
bootleg movies are doing to DVD sales what Mp3 did the music CD's.
Do you Know any people who still have massive Music CD collections??

The bigger reality is that BIll gates got it right when he said it wont matter who wins the blueray/HDDVD war because the Physical Disk format is most certainly Doomed anyway.

Magnus3D
02-01-2009, 10:57 PM
Quite unusal in a way if they blame it on the poor economy in the world now, usually they blame the pirates, torrent sites and all that stuff for bad sales or if it rains in Hollywood.

/ Magnus

aaraaf
02-02-2009, 03:08 PM
There were so many shuffles of movie schedules after the writer's strike that it seemed inevitable that the studios would have problems at the end of last year and early into this year.

Harry Potter was moved from November till this spring and I remember seeing a trailer for Taken eons ago.

Movies just weren't being made for quite a while last year. If you don't make a product, there's really nothing to sell.

Imhotep397
02-03-2009, 03:58 AM
...From this year's nominees, for example: did you see Frost/Nixon or The Reader or Slumdog Millionaire in the theater yourself? If your answer is "No, I spent my movie money on well known franchises instead." then you know what forces are at work.

-jeremy

Very strange coming from someone that works at Pixar. How many people knew what a Pixar was in 1998(basically ten years ago) or considered Pixar to be a significant entertainment company? How many big name "Celebrity" likenesses have Pixar characters been modeled after? How many original and successful properties has Pixar created sequels out of instead of creating new properties? Ultimately, if your theory was correct Pixar would have collapsed had they NOT elected to be content in only making a new Toy Story sequel every other year.

Imhotep397
02-03-2009, 04:02 AM
The reality is that it only take a small number of people to produce a large number of bootleg copies
here in new York there is a clean crisp DVD copy of "benjamin button"
thats been available for weeks...

Bootleg copies of videos have always been available...In fact stolen merchandise of all kinds have always been available. The problem is that some people, justifiably, don't respect filmmakers or the industry enough based on the material that's consistently out there to really see pirating or renting as objectionable enough to change their habits. When the film industry starts making more films with integrity and more consistently more people will go to the theaters (where studios make the most money) and buy instead of rent DVDs.

soulburn3d
02-03-2009, 04:16 AM
Very strange coming from someone that works at Pixar. How many people knew what a Pixar was in 1998(basically ten years ago) or considered Pixar to be a significant entertainment company? How many big name "Celebrity" likenesses have Pixar characters been modeled after? How many original and successful properties has Pixar created sequels out of instead of creating new properties? Ultimately, if your theory was correct Pixar would have collapsed had they NOT elected to be content in only making a new Toy Story sequel every other year.

I think the idea is that it's REALLY hard to make money off of a brand new idea that's not already tied into some sort of audience, not that it's impossible. There are always exceptions to every rules. But the problem with exceptions is they are rare, and can't be counted on, and if there's one thing financial folk hate it's something that can't be counted on.

- Neil

jeremybirn
02-03-2009, 06:27 AM
Very strange coming from someone that works at Pixar. How many people knew what a Pixar was in 1998(basically ten years ago) or considered Pixar to be a significant entertainment company? How many big name "Celebrity" likenesses have Pixar characters been modeled after? How many original and successful properties has Pixar created sequels out of instead of creating new properties? Ultimately, if your theory was correct Pixar would have collapsed had they NOT elected to be content in only making a new Toy Story sequel every other year.

In that example, Pixar is the franchise. People talk about going to see "the new Pixar film" in the same way they'd discuss "the new Harry Potter film" or "the new Tom Hanks film." Watch how the trailers emphasize the familiar brand ("from the people who brought you..." the previous Pixar films), and only after that present what's new about the next one. That's the studio name being treated as the franchise, which doesn't happen with every studio.

-jeremy

Imhotep397
02-03-2009, 01:14 PM
I think we just have a disagreement here. Certainly Pixar is a known entity now, but there are a lot of companies doing feature animation at this point that have equivalent if not paramount technical and financial resources compared to Pixar. I think you over simplify the components that are in play, take into consideration the possibility that no other feature animation company has been able to establish itself as a brand because the storytelling is of questionable value and lacks consistency. That may change, but as of right now that is the common thread that runs through all of those animated features that have done ok, but not great. While people do specificly look for Pixar films the only familiarity that connects the various stories in various genres is the idea that good story telling that doesn't offend people will be at the core of the project.

fluffybunny
02-03-2009, 02:16 PM
It feels a little straying from the topic of DVD sales, but I'd have to say I think Jeremy is quite right here. I'd imagine most people here know which studio is doing which animated film, but in general I've observed that the common person has the simple association: "3D animated film = Pixar", just as I imagine people for a long time had the association: "2D animated film = Disney". I've thoroughly lost track of how many times I've said to people, "no that's by Dreamworks (or Sony or Blue Sky)" I think every major CG animated film that's come out and I've talked about in conversation with people has been mistakenly thought of as being a "Pixar movie". I suppose you could argue that all my friends are dumb...and as far as CG goes, I wouldn't argue much with you, but I think Pixar did a wonderful job establishing itself as the CG movie franchise and in spite of major films like Shrek, Madagascar, and Ice Age it still seems to persist. It may be as simple as the fact that they put a bit more time into having Luxo hop into their name than any other branding that I recall seeing.

soulburn3d
02-03-2009, 02:20 PM
In that example, Pixar is the familiar franchise.

My comments were more based on Pixar when it first started out, as opposed to the pixar of today. But I suppose even back in Toy Story days Pixar did have that Disney logo as part of the advertising, which certainly helped.

- Neil

Venkman
02-03-2009, 02:24 PM
There was just an article in USA today on how January 2009 was the best box-office January ever. Perhaps they need to pay people like Nicole Kidman a few million less (per movie!) to cut costs and put their movies back in the black before they go to DVD. Studios rely on DVD to propel poor performing movies back into profitability, while giving stars millions even on underperforming box-office bombs.

anobrin
02-03-2009, 02:38 PM
Perhaps they need to pay people like Nicole Kidman a few million less (per movie!) to cut costs and put their movies back in the black before they go to DVD. Studios rely on DVD to propel poor performing movies back into profitability, while giving stars millions even on underperforming box-office bombs.



Quoted for agreement

jeremybirn
02-03-2009, 02:52 PM
My comments were more based on Pixar when it first started out, as opposed to the pixar of today. But I suppose even back in Toy Story days Pixar did have that Disney logo as part of the advertising, which certainly helped.

I agree. Big names on the poster (like "Disney" and "Tom Hanks") probably didn't hurt the opening weekend of Toy Story, even if there were a lot of other reasons why people were interested in seeing the film.

-jeremy

kelgy
02-03-2009, 03:32 PM
Does the best January ever factor in ticket prices?


There was a time when major studios had a certain brand name value. Warners was known for crime drama, MGM for musicals. Universal for horror, etc.

I think its much harder for an audience to look at a studio logo now and be sure what they are going to get.
Animated films didnt used to do that well either. Children were not factored in very much as an audience except for matinees until Star Wars came along.

Someone at Pixar was on a Commonwealth Club show a few years ago that talked about digital filmmaking and explained the process Hollywood studios use in making a movie as being like the production of a cookie. They could make a really great cookie that appeals to a small audience, but because of the expense they want to draw in as many as they can, they water down the ingredients so you end up with something that may not be great, or all that good, but has some appeal to the most number of people.

I can think of a few movies with no obvious marquee/brand value that werent cheap to make and probably didnt do that well.
Dragonslayer. Krull. etc. But they still took the risk and made them.

jewalker
02-03-2009, 05:42 PM
There was just an article in USA today on how January 2009 was the best box-office January ever. Perhaps they need to pay people like Nicole Kidman a few million less (per movie!) to cut costs and put their movies back in the black before they go to DVD. Studios rely on DVD to propel poor performing movies back into profitability, while giving stars millions even on underperforming box-office bombs.

This is absolutely true, and I think the article acknowledges it with the quote “There will be a complete bottoms-up reconstruction of the economics of the film business.”

In the past studios could pay big bucks for name recognition in both the actors and directors because they knew they could make it up in DVD sales. This is no longer the case. Studios will have to rethink their financing of movies in every sector. This may include scaling back on expensive CG effects as well.

What ever you may think of the studios the facts are that DVD sales have been declining for several years now. The studios were hoping that HD was going to turn it around, but the format wars and slow adoption of HD in the home have stalled the transition. Consumers just don't feel like they need HD like they needed DVDs. The studios will have to figure it out because this trend is not going to change.

Ilive
02-04-2009, 09:10 PM
I think there is alot of scurrying around to find out why movies are not making as much money and very little actually changing the way movies are done.

DVD sales are down due to ease of downloading movies, going to netflix and renting a movie, piracy, and cost of buying a DVD in a bad economic time.

At the same time Hollywood has overinflated budgets and the price of going to the movies is way to much now. 8-14 dollars to see a movie....? Throw in a family in hard economic times and you have less people going to the movies.

From this year's nominees, for example: did you see Frost/Nixon or The Reader or Slumdog Millionaire in the theater yourself? If your answer is "No, I spent my movie money on well known franchises instead." then you know what forces are at work.

Nope! And as a normal person why would I watch Frost/Nixon or The Reader at the theatre. Nobody really at the end of the day cares what critics say. Most of them are out of touch with the rest of humanity and pick these pretentious movies that most people could care less about. Every now and then there is a gem that both normal people and critics can agree on like "Slumdog Millionaire" But then again something like that, no matter how good ,it is just fine watching it on my 50 inch plasma. I can wait 3 months to see it on DVD at home and save the 20 bucks between my wife and I.

This may include scaling back on expensive CG effects as well
I don't think they should have too do this. That is what is still putting butts in the seats to a certain degree. And CG should not be as expensive as it is getting. Neither should the price of actors.

Just look at the list of great special effects movies done better management of funds.

Pan's Labryinth 15,000,000
TMNT 35,000,000
The Host 15,000,000
Kung Fu Hustle 20,000,000
Advent Children: 20,000,000

For those prices in Hollywood the most you can really get is
Paul Blart $26 million very little special effects.

Cost of making movies are going up too quickly. I think it may start imploding in on itself like the US motor companies if they don't get spending in control. Great DVD , box office sales or not. If they don't start focusing on making movies without inflated budgets they will not be able to survive in that form. WE are starting to see it implode now.

With better hardware and software the prices for CG should be going down, not up. And with the problems in Hollywood and no more star draw the prices for actors should also be going down.

Interesting to start seeing how things will go in the next few years.


I think in order to survive Hollywood will need to do a few things
1) Bring down cost of production by better management and reduce management. Less money for actors. 1/3 of production should not go to 1 "name" actor. When are they going to learn they are not worth it. Jamie Foxx won an Oscar for RAY and then starred in "Stealth" one of the biggest foobars of all time. His star power brought no extra people into the movie. I think the only one actor who still puts butts in the seats is Will Smith and even he is loosing that power aka Seven Pounds.

(Example of too much unnceccessary hiring and bad hollywood management Google the "Rise and Fall of Veggietales and Big Idea, you bring in all these unnecessary "big wigs" and you crumble to the ground)

2) Cut the cost of theatre tickets. As prices go up less people go to the movies and less chances they take on unknown movies creating a bad cycle of good movies go unseen, bad movies sucker you in and Hollywood creating bad movies to make a quick buck.

3) Move to digital media but make that cost less. Why should a download cost more than a DVD or as much? You don't have physical media to contend with. Why should a DVD cost 25 bucks right out the gate? 15-20 is the sweet spot for most consumers.

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