DVDs – Causing Mass Disruption in Hollywood
UPDATED [Nov. 28]: Click here to download the article mentioned below (.doc file).
In a recent NY Times Sunday Magazine article (Box Office in a Box Nov. 14, 2004), I was struck by just how much DVDs have moved from playing a supporting role in driving revenues for studio released feature films to playing the leading role. I had no idea DVDs now claim 63% of a film’s revenue (as generated through wholesale DVD sales to retailers) while box office receipts only account for 21% of a feature film’s revenue.
Other interesting takeaways from this article include:
For consumers buying DVDs, 30% saw the movie in the theater, 30% saw it on cable, and 40% have never seen the film.
Despite being a critical purchase factor for consumers, the DVD extras (actor commentary, behind-the-scenes footage, deleted scenes, alternative endings, etc.) are only viewed by 20% of DVD buyers.
‘Eventize’ is the marketing idiom du jour being used in Hollywood. Eventize … as in, “We need to eventize the hell out of this release.”
Studios generate around $9.00 cash flow per DVD sold. [COST BREAKDOWN: Studios incur about $6.00 in costs (from production to marketing to royalty fees) to produce one DVD and they charge retailers a wholesale price of approx. $14.95 … leaving slightly more/less than $9.00 as positive cash flow per DVD sold.]
Given the profitability of DVDs, an unnamed Hollywood executive referred to DVDs as being, “… the corporate A.T.M. machine.”
Mega retailers dominate the consumer sales of DVDs with Wal-Mart capturing 22% of all DVD sales in the US. Best Buy, Target, Costco, Sam’s Club, Circuit City, and Blockbuster combined are responsible for 42% of DVD sales.
With greater frequency, more films are receiving only a two-week theatrical run and then disappear only to reappear on the DVD market to exploit the ‘home-cinema’ market.
The emergence of the ‘home-cinema’ market is having a profound effect on how consumers experience motion pictures. Mark Rance, a DVD producer, explained this effect by saying, “What we’re used to is the 19th century theatrical experience: you go to a theater with a large group of people, you see a movie and enjoy it with a crowd. That’s being replaced now by, like, 20 people in your living room, like a book club watching a film they might not have heard of.”
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This Box Office in a Box NY Times article by Jon Gertner was fascinating. Too bad the NY Times charges for access to this now archived article.
Now, what's the likely impact on this of massive P2P movie exchange? What's plan B for the movie studios?
You call this massive disruption? wait for P2P to really hit them.
Posted by: Julio Alonso | November 23, 2004 at 09:38 AM
You can get the NYT article at this link
Posted by: Oliver | November 28, 2004 at 03:32 AM
Oliver - thanks for the link
Posted by: Rose | January 26, 2005 at 02:24 PM
There is a P2P DVD company that is really taking off called Peerflix (www.peerflix.com). For $0.99 you can trade DVDs you have for ones you want.
Posted by: sembalance | April 05, 2006 at 10:29 PM