Keyes: Studios need to mitigate retailer cost on Blu-ray
HOME MEDIA EXPO: Panelists say digital is growing, not shifting spending
By Marcy Magiera -- Video Business, 6/24/2008
JUNE 24 | LAS VEGAS—The potential of Blu-ray Disc to extend the life of packaged media and the challenges to getting mainstream consumers to quickly adopt the high-definition format dominated the opening business session at Home Media Expo here.
(L. to r.) Panasonic's Eisuke Tsuyuzaki, Forrester Research's James McQuivey, Blockbuster's Jim Keyes and Fox's Mike Dunn.
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Keyes subtly challenged studios, however, to make it easier for retailers to stock the format in sufficient quantity to make an impression on consumers and stimulate demand among groups beyond early adopters.
Keyes showed the hardware and software display kiosk that Blockbuster has in 2,000 stores and is rolling out more widely and a potential wall display that showed a large in-line new release display of National Treasure 2—half in DVD and half in Blu-ray.
“We want to put the copy right in front of their faces” in the places consumers traditionally gravitate to in stores, like the new release wall, said Keyes. “We think the rental model can help Blu-ray,” he said, noting that Blockbuster customers have “clearly demonstrated a preference for rental,” perhaps because of the relatively high price of Blu-ray.
But it’s a challenge for retailers to make the product available in sufficient quantity, given the relatively high price and low demand for Blu-ray at this point, he said.
In an interview after the panel, Keyes told VB that Blockbuster wants to “encourage studios to find ways to mitigate the risk associated with the early demand curve.” Those ways range from revenue-sharing to “a scan-based trading model” in which studios get paid when consumers purchase the product. Currently, “retailers can’t afford to oversupply,” he said, but supply chain "technology is changing the rules” of what can be done.
“The real challenge is the industry and our practices,” he said. “Retailers have little incentive to give shelf space to new products” because of the investment required up front.
“If we’re slow in doing this, all it does is stimulate demand for digital,” Keyes warned.
In the panel, 20th Century Fox Home Entertainment president Mike Dunn predicted that U.S. Blu-ray software sales this year will be “very close to $1 billion.”
Dunn shared statistics that showed Blu-ray hardware penetration growing from 11 million units, including set-top boxes and PlayStation 3, in 2008 to 52 million units in 2011. In the same time, software sales will increase from 32 million units to 366 million units, he said.
Digital forms of movie delivery, including the Internet, cable and telcos, will grow from $1.15 billion in 2007, to $3 billion in 2011, Dunn estimated, while packaged media will remain more than $22 billion.
“There is no market shift to digital, there is market growth with digital,” EMA president Bo Andersen said in his opening remarks.
The panel positioned disc-based digital copies that are transferable to portable devices as key in keeping packaged media relevant.
Digital copy “puts DVD and Blu-ray at the center of the digital revolution, if you will,” said Dunn, noting that it takes four to six minutes to transfer a file from the disc, versus one hour to download a movie from the Internet.
Other panelists included Forrester Research analyst James McQuivey and Panasonic’s Eisuke Tsuyuzaki.
