Monday, January 21, 2013

Blu-ray Ekes Out 2012 SKU Growth ... By A Whisker

It took a year-end recount coupled with a tedious search for indie Blu-ray product sources (and all that entails in trying to figure out when some of these jokers actually released their stuff) to push the final Blu-ray SKU count up and over the 2011 total.
DVD & Blu-ray Release Report

In 2011 there were 1,886 confirmed Blu-ray product offerings.  Last year the number (thus far, with a few stragglers still in the wind) stands at 1,909 … that meager up-tick represents a year-over-year gain of 1.22 percent.

For a format that is just seven years into its lifecycle to suddenly go flat — in terms of new SKU growth — is an event that should be viewed with some degree of concern for those involved in the home entertainment packaged media business.  Or maybe not … perhaps suppliers are engaged in “rational” behavior.

If the truth be known, the format has never really taken off.   Oh sure the sales numbers have soared, but there’s a good deal robbing Paul to pay Peter embedded in that growth.
For consumers the marginal increase in resolution offered by the Blu-ray format over DVD has simply not been the same drawing card as DVD was to VHS.

There are other factors that have inhibited the growth of Blu-ray, again, in terms of SKU counts.   GIGO is certainly an issue.   Some stuff just doesn’t work; it doesn’t translate to hi-def.

Price is also a factor, but not just the new-to-new differential between a DVD and a Blu-ray release of the same title.   Trying to promote Blu-ray catalog is difficult when the consumer is more than willing to buy used DVDs (they’ve discovered that it is not the same value proposition as the crap shoot of purchasing used VHS) at just a fraction of the cost of the same title on Blu-ray … that’s a killer.

Unless it’s a genre-specific or a title-specific purchase, most films are simply there for consumption.   The vast majority are viewed once and it is time to move on … not everything can be Star Wars.

Throw in changes in the retail environment and a less than stellar economy and you have plenty of reasons for a go-slow approach to the Blu-ray format since its inception.

Since the focus for Blu-ray has been on New Theatrical (and hit New Theatrical releases at that) sales, this too has proven to be something of a trap.  The studios can only generate 98 to 105 of these new golden eggs per year ($25 million plus at the box office).   It’s a function of available screens and available seats at the multiplex level.

It’s hard to make a business out of two new product offerings per week on average. 
Trying to mine the catalog — it would appear — has also been frustrating.  Price (especially when you factor in all of the used product out there) versus the marginal increase in resolution seems to be a major factor in keeping SKU counts for Blu-ray from moving to ever-higher levels.    

You don’t have to sit in a sales meeting at a major Hollywood studio to see what is going on.  You don’t have to be a fly on the wall, so to speak.  All you have to do is to look at their release behavior over an extended period of time to see what works … and what doesn’t.

You either accept or reject the notion that businesses behave in rational ways; it’s not a hobby.   If it doesn’t provide an acceptable ROI … then they don’t do it.

For example, during the DVD-exclusive period of 1997 through 2005 only 14.1 percent of all New Theatrical releases have been converted to Blu-ray.   The DVD format, on the other hand, converted 92.6 percent of all those films released theatrically during that period.  That is a huge difference.    

Clearly, suppliers are not making the money they expected on converting this mass of product to Blu-ray, otherwise they would not be bouncing along at 14.1 percent conversion rate.

We suspect that the Blu-ray format will continue to focus on New Theatrical and genre-specific film library releases, while DVD will remain the workhorse for most other categories.   

Only time will tell if Blu-ray becomes more of a storage medium and less of (or in addition to) a hi-def bells and whistles format … if that happens, then we could see a significant shift in release patterns.   Stay tuned.

To download this week's complete edition of the DVD and Blu-ray Release Report: DVD & Blu-ray Release Report

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