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Why DVDs are duds for Hollywood

Marketplace Staff Nov 27, 2009

Why DVDs are duds for Hollywood

Marketplace Staff Nov 27, 2009


Tess Vigeland: The holidays are generally a great time for movies. You get rollicking end-of-the-year action flicks and pretentious Oscar contenders. Like, oh, “New Moon?”

This year’s box office is up almost 7 percent over 2008. Good for the movie theaters, potentially bad for DVD sales.

Why? Well, apparently we consumers are no longer willing to pay high prices for home viewing. These days DVD spells D-U-D for Hollywood. Here with some reasons why is Claude Brodesser Akner. He writes about all things entertainment and joins me here in the studio. Welcome back to the program.

Claude Brodesser Akner: Tess, it’s nice to see you.

Vigeland: And happy Black Friday to you.

AKNER: Indeed, grim, black, dire Friday.

Vigeland: Uh oh. And from what I understand that applies to the DVD market.

AKNER: It is basically a terrible time to creating be content, and a great time to be distributing it, or exhibiting it.

Vigeland: But how is this possible, because I’ve heard for the last several years that DVDs were the savior of Hollywood?

AKNER: Well, they were. For a long time Hollywood was powered by this after burner, which was the DVD, until around 2007 when it kind of stalled. And then things started to dip. Last year things went down by about 10 percent, and we can sort of thank RedBox for that. They have sort of led to the commoditization of the movie business.

Vigeland: And remind us what RedBox is?

AKNER: So RedBox is a company that basically has about 22,000 little kiosks all over America in supermarkets and retail stores and pharmacies where you can, for a $1, rent a movie.

Vigeland: Oh, that’s right. Well now I see the problem.

AKNER: Yes, in fact, not only are people not buying DVDs, because they’re renting them, thanks to RedBox, but there’s also a change in psychology that’s happening here, which is that once people get used to paying a $1 for a movie, it’s very hard to get them to pay anything else for one.

Vigeland: And that it’s very hard to make any sort of profit off of them.

AKNER: Bingo. So if you’re interested in cleaning up on DVD sales, here’s an interesting prospect for you. The studios desperate to make up this shortfall in the sales of DVDs and eager to introduce some new bell or whistle that will get you to buy DVDs have been fooling around badly with the a format called Blu-ray.

Vigeland: Right.

AKNER: Now, Blu-ray is only in about 12 percent of American homes, and that’s because it requires that you go out and buy a new player…

Vigeland: It’s pretty expensive, too.

AKNER: Well, they were for a long time, but in part because of this down economy, and in part because of these plunging DVD sales, studios have had to do what they vowed they would never again do, which is cut whole-sale prices, and that means for you dear shopper, big, big savings are coming. Retailers treat Hollywood sort of like a loss leader, it’s just catnip to get you to come and buy a big-screen TV, or whatever it is that you’re angling for in your heart of hearts. But now a full year before anyone expected this would happen, Blu-ray is suddenly a loss leader. Wal-Mart started offering $9.99 Blu-ray discs last month. Last week, Target started offering Blu-ray at $8.99.

Vigeland: And what did they used to be?

AKNER: Well, they used to be $25. This was meant to be the thing that would prop up DVD sales. So if a DVD went for $15, which already had Hollywood swallowing pretty hard, a Blu-ray disc was going to be $25, or at least $20.

Vigeland: And now we’re at $9.99.

AKNER: And players, by the way, which used to be these $400 behemoths that nobody wanted to buy, Wal-Mart is now offering a Blu-ray DVD player for $79.

Vigeland: So now we have not only the death of the DVD, but we also no longer have high profits on what is the very latest technology, which is Blu-ray. So how is Hollywood going to make any money?

AKNER: The problem with your question is that there’s not really a good answer.

Vigeland: There’s nothing in the pipeline.

AKNER: In the short term, uh, duh. And in the long term, we’re trying to figure that out. So you see companies like Sony, which is expected to make a deal with Nintendo’s Wii. The idea is to get people who are already owning video game consoles, which are enabled to connect to the Web, to download movies that way and to stream stuff. But that’s down the road, it’ll be a while before most people can get a movie that way.

Vigeland: In the meantime, bargains for the rest of us.

AKNER: Yeah, exactly.

Vigeland: Claude Brodesser Akner is an entertainment writer here in Los Angeles. Thanks so much for coming in.

AKNER: Good to see you, Tess.

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