Studios hope high-def, Blu-ray pick up numbers
The worst may be over, but the homevid biz is not out of the woods yet. As promising as last month’s next-gen developments were, the vidbiz must still overcome major hurdles to bounce back from its first significant decline in consumer spending ever.Studios need high-def and digital delivery to take off soon to counteract eroding standard DVD sales. Vid execs are feeling more optimistic about their odds in the wake of Warner’s Blu-ray endorsement and the massive studio support for Apple’s iTunes rental service, but they admit that the ongoing writers strike and an underwhelming summer B.O. slate could throw a monkeywrench in their turnaround plans. After all, boffo December disc sales couldn’t make up for earlier weakness last year, and consumer spending drooped. The actual decline wasn’t that steep — 3.1% to $22.9 billion — but it spoke volumes about studios’ need to jumpstart next-gen formats, pronto. “We are in a mature business, and we really felt that in 2007, it was more of a struggle to hit the numbers we used to hit in the height of the marketplace,” says Sony home entertainment topper David Bishop. With the high-def format war moving closer to resolution, “we can put that behind us and move on.” “Nobody likes to be part of a category that has a decline, but I think the worst is behind us,” says Matt Lasorsa, New Line Home Entertainment exec VP of marketing. Sony was so heartened by Warner’s announcement the studio revised earlier projections of a 3% to 5% decline to a slight gain for the year. Other studios also revised their projections upward, and are likewise predicting a slight gain for the year. A return to growth is by no means assured, however. Here’s a look at the year’s big issues:
- Far and away, the biggest question mark surrounds high-def formats. Will Warner’s decision to back Blu-ray exclusively prompt consumers to enter the high-def fray as the studio — and every other Blu-ray supporter — hopes? HD DVD sales immediately slumped after Warner’s Blu-ray endorsement, but Toshiba countered by slashing prices of its HD DVD players and went ahead with a pricey 30-second ad touting HD DVD during the Super Bowl.
- This summer’s box office slate is the other great unknown. This lineup is less sequel dependent than last year — and that may be a good thing for the vidbiz; fresher tentpoles tended to outperform sequels relative to box office last year. “Spider-Man 3” and “Fantastic Four” sequels fell short of previous levels, but non-sequels such as “Transformers,” “Superbad” and “Knocked Up” cleaned up.
- The third major variable is the writers strike. The WGA strike decimated this year’s TV season, leaving homevid arms with fewer episodes to market on disc, and viewers fewer options to watch on TV.
- Execs don’t expect digital downloads to be a major factor this year, although Apple’s iTunes rental service could invigorate the tiny digital arena. The Apple deal covers rentals under the traditional video-on-demand window only, but several majors are negotiating with Steve Jobs to join Disney in allowing permanent downloads through the service.
- Execs are far more bullish about digital copies embedded on DVDs. This way, they pocket coin from a disc sale, then give consumers the portability they want. Fox, Warner and Sony have all experimented with this strategy; others are expected to follow suit. At this point, only Fox has worked out a deal for its digital copies to play on Apple devices.