Sony pacts with Hewlett-Packard for manufacturing-on-demand

By Jennifer Netherby -- Video Business, 1/24/2008

JAN. 24 | UPDATED: Sony Pictures Home Entertainment has inked a deal with Hewlett-Packard to make smaller films from its library available through DVD manufacturing-on-demand, making it the first studio to enter the MOD business.

Terms of the deal, announced today by both companies, were not disclosed. Sony said it is still reviewing which titles will be offered through MOD, but said it’s possible some deeper catalog titles that have never made it to DVD because of low demand will get a release.

“HP’s MOD service provides us with a viable means of delivering a broader range of niche and library product to consumers,” SPHE president David Bishop said. “We know there is strong consumer demand for these titles, and by working with HP, we may now monetize our deep product library and enable retailers the opportunity to bring a wider offering of Sony Pictures product to consumers without a significant investment in inventory.”

HP is in negotiations with other studios to offer on-demand content, as well as video distributors and retailers. It currently has a deal with Trans World Entertainment, which sells MOD titles on Web sites FYE.com, SamGoody.com and Suncoast.com.

Under HP’s deal with Sony, Sony chooses where its product will be sold. Sony senior VP of strategic development Jason Spivak said the company plans to offer its MOD releases to all retailers.

“Our hope is that retailers will embrace the service as both an economical form of distribution and a complement to what they keep in their physical inventory,” he said.

Through its DVD manufactured-on-demand business, H-P presses a disc when a title is ordered, allowing suppliers to offer deeper catalog films that don’t usually sell enough to score shelf space at retail or warehouse space at distributors.

Amazon similarly runs a DVD-on-demand publishing business, CreateSpace (formerly CustomFlix), which has deals with TV networks, including NBC, CBS and A&E Networks, to create DVDs of certain programs on demand.

Sony is the first major studio to make its film library available through MOD.

In addition to Sony, HP has DVD MOD deals with more than 40 suppliers including Arts Alliance America, First Look Studios and Gaiam Americas to publish more than 5,000 different movies.

HP Digital Content Services VP of business development Doug Warner said the company views DVD MOD as the most immediate growth area for home entertainment.

“In our view, only centralized manufacturing does not require a change in consumer behavior—all the others do—so that is where we’ve decided to focus our energy,” Warner said.

The company had operated a movie download service for Wal-Mart, but exited that business in December because of little consumer interest.

The company estimates that of the 70,000 movie and other types of content released on DVD, only a small percentage is actually in circulation, something that it hopes to remedy with its MOD business. The company estimates the industry loses $500 million each year in sales due to product being unavailable when a consumer tries to purchase it online.

HP believes that smaller titles that studios and other suppliers haven’t ever released on DVD could add another $1 billion to $1.5 billion in annual sales.

The company wouldn’t say how many copies it sells of a typical on-demand title. But most on demand content sells a small number of units since it’s used for niche content.