Studios feel pinch of slowing DVD sales, rise in rentals (Dinosaur Media DeathWatch™)

Marketwatch.com ^ | September 22, 2009 | David B. Wilkerson

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If you're buying fewer DVDs and renting more of them -- especially from automated Redbox kiosks -- you've got the Hollywood studios scared.

DVD sales fell 13.5% to $5.4 billion during the first half of 2009, according to the Digital Entertainment Group. During the same span, DVD rentals rose by 8.3% to $3.4 billion. Digital sales and rentals -- such as those conducted over online stores like Amazon.com and Apple's iTunes -- jumped 21% to $968 million.

The studios know that DVD sales have been in decline since at least 2005. Now, however, a depressed economy, convenient rental options and emerging technology have combined to worsen the situation.

"We fear that the industry will be trading sell-through dollars for rental pennies from here on out," said Michael Nathanson, analyst at Sanford C. Bernstein, in a note to clients last week.

Another analyst -- Michael Morris of UBS -- wrote in a report Monday that investors are growing more concerned with how media companies can "monetize" their film libraries as DVDs are replaced by other delivery methods. Studios typically draw 30% profit margins from DVD sales, he said.

"Theatrical home video is an important source of revenue for the media companies, making their results highly levered to DVD performance," Morris wrote.

At issue is a major shift by consumers in how they use filmed entertainment. The economic crunch has damped spending, and consumers have found easy alternatives in buying through on-demand cable systems and online rental services such as Netflix.

In addition, kiosk services such as Redbox enable customers to check out physical DVDs for a cut-rate price of $1 a day -- which many find more attractive than buying the movie outright.

"Within physical rental, we think the advances of Redbox and Netflix are potentially understated by the data,"

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[abb]

The money continues to dry up in Hollywood. Very good news.

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ping

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[GonzoGOP]

There are some movies that I want to see on the big screen. There are some I'm willing to wait for video. Finally there are those I don't care if I never see. I'm certain I'm not the only person who rates movies in that way. Hollywood needs to start making more of the first kind and less of the latter. They keep making politically correct liberal vanity movies so their stars look good at cocktail parties, well then they go broke.

Aside from cartoons (that are not only making original films, but also making money) when was that last time you saw a film that wasn't a sequel or a remake? When they have to keep resurrecting old TV shows and remaking movies from the 80's then there is a severe lack of writing talent in Hollywood.

[bray]

Maybe they should make more America hating socialist drivel? That should solve their problem? Can only imagine the obozo the magnificent movies they’re making right now.

Pray for America

[2 Kool 2 Be 4-Gotten]

Quite frankly, the idea of watching a movie more than once makes sense to me for only a handful of movies. And even there - if the rental fee is only $1 a night renting might still make more sense even for multiple viewings.

The answer, it seems to me, is to stop with the $100 million to $200 million behemoths and starting making quality films that cost 1/10 or 1/100th of that to make. I’m sure the numbers can be made to work once they break out of their “blockbuster” mentality.

[paulycy]

I'm certain I'm not the only person who rates movies in that way.

Not by a long shot. The cinematography must be compelling to get me into a theater anymore unless it's something that I just feel like going out for.

Netflix is great.

[dagoofyfoot]

The money continues to dry up in Hollywood


It seems that a lot movies that have come out lately just plain suck, whatching them just once is more than enough.

[Gorzaloon]

Can only imagine the obozo the magnificent movies they’re making right now.

I wanna see the one where he wrestles a crocodile, like the one the other despot, Idi Amin did.

[GonzoGOP]

Netflix is great.

I wonder if that is why California is trying to make big screen TVs illegal? They say its about being green, but a 52' LCD uses less energy than an old 20' crt. However not that you can plug your laptop into your TV and get theater quality pictures and sound all in your living room it makes it very tempting to avoid anything that isn't a blockbuster.

[sirchtruth]

The money continues to dry up in Hollywood. Very good news.

I get your sentiment, however if HW goes under it would be a terrible blow to the entertainment industry and eventhough most of what it puts out these days is rubbish, there are some good flicks here and there.

State Of Play

[mikelets456]

I stopped buying DVD’s 2 years ago and kept to my word to no longer support Hollywood! I’ll either rent at Redbox for $1 or borrow it from a friend. The only Dvd’s I will buy (rarely) are those with conservatives in it or made by Christians/Conservatives.

BTW, I have 3 HDTV’s and refuse to buy a Blu-Ray player. I love the PQ but I have abandoned Hollywood! Can’t remember the last time I have been in the movie theater as well. It’s been a few years. I’d rather give my money to the Salvation Army or people in need than give it to a bunch of socialist pigs!

[dangerdoc]

Their biggest problem is that they are not producing a product that is worth more than a buck to watch.

[Mr. Blonde]

From this summer:

(500) Days of Summer
The Hangover
Public Enemies
Inglourious Basterds
Taking Woodstock
Year One

Public Enemies and Taking Woodstock are adaptations of books, but not remakes or sequels.

I missed a few original movies that I wanted to see, but never got around to while they were in theaters.

In the fall season most of the ones I have an interest in seeing are not sequels or remakes either. But the summer is the traditional season for those movies.

[mikelets456]

+++The money continues to dry up in Hollywood. Very good news.++++

I never understood why Hollywood pushes the Socialist agenda...what good movies come out of Communist/Socialist societies? Hollywood has no one to blame but itself!!!

[Le Chien Rouge]

I rent indies,classics and foreign flics.

The last several years have been HORRIBLE for main stream Hollywood releases.

[NavyCanDo]

My DVD library has about 1600 movies, and a very small portion of them where movies made in the last 5 years, because most of it has been pure garbage. Even on Netflix 9 out of 10 movies I rent are older movies, because I just can't find anything in the new release section that interest us.
This last week we had a Patrick Swayze film fest. Older movies, but great ones.

[abb]

Their biggest problem is that they are not producing a product that is worth more than a buck to watch.

And they no longer have a monopoly on the ability to produce and distribute video. See You Tube, etc.

[CIB-173RDABN]

We were buying one movie a week, then I discovered Netflix. In the two years I have had Netflix I have purchased maybe three movies (all under $20 which is my limit for a DVD).

With Netflix you also get INSTANT access to thousands of movies. With this feature I am willing to try movies I would have otherwise passed over. It it is a real stinker I simply stop it and go to another, no fuss, no muss.

Some of the great films from the 1930s and 1940s were low budget films. They did however have one thing going for them, great stories told well.

I do not see a movie because of special effects. I really do not want to know or be aware of the special effects, but it seems one movie after the other (going by the previews) is all special effects all the time.

I want a good story about people I can care for and I want good to triump over evil. I am old fashion that way.

My cable service also has a couple of movie channels that play complete movies, no commercials. For the cost of a blank DVD I can record many of the older movies for my collection.

My suggestion to the movie studios, bring your prices down and release older movies. For these I would be willing to pay around $5.

[KarlInOhio]

I wonder if that is why California is trying to make big screen TVs illegal? They say its about being green, but a 52' LCD uses less energy than an old 20' crt.

Did you bite on California Looking to Ban Big Screen TVs yesterday? It was a satire article taking California's plans to outlaw plasma TVs for being energy inefficient.