The console losses discussion thread (or 'how companies blow billions on products')*

[patsu]

Blu-ray is now tracking about 5-10% of DVD sales every week (considering only top 20 titles, with and without promotion). You can find the latest weekly number in Home Media magazine: http://www.nxtbook.com/nxtbooks/questex/hom365581NLK/#/2 (Top right hand corner; 7% last week).

Movie-wise, I believe they have out sold 2007 in May 2008.

One of the best places to look for Blu-ray news is: http://www.blu-ray.com
You can also find the Blu-ray release schedule there.


Blu-ray news this week (so far):

China development...
* http://www.blu-ray.com/news/?id=1494 (CESI opens first Blu-ray testing center in China)
* http://www.blu-ray.com/news/?id=1493 (DRA one step closer to Blu-ray)

Some sales hype...
http://www.blu-ray.com/news/?id=1487 (Blu-ray sales up over 500% in UK)
http://www.bloomberg.com/apps/news?pid=20601100&sid=a0nFWAKjLdoA&refer=germany (Singulus Technologies Exceeds Blu-Ray Machine Sales Forecast)

Some technological advancement...
http://www.blu-ray.com/news/?id=1484 (Pioneer reveals 400Gb Blu-ray discs)


As usual, apply your own hype filter.

too bad they canned all the 2 for 1 deals

You mean the buy one get one free deals and 50% off promotions ? We just had one for Father's Day last month.

 

[AlphaWolf]

You can also see in that corner that DVD sales are up more than Blu-ray sales, so its not exactly gaining ground.

You mean the buy one get one free deals and 50% off promotions ? We just had one for Father's Day last month.

As opposed to the promotion that ran for 6 months straight starting last fall?

 

[patsu]

You can also see in that corner that DVD sales are up more than Blu-ray sales, so its not exactly gaining ground.

I don't really care, but it has certainly gone up compared to last year. You can't say anything about trend by looking at one snapshot anyway.

As opposed to the promotion that ran for 6 months straight starting last fall?

Still, it's not gone. It was a one month+ deal, with Walmart offering US$100 gift cards too. I remember Circuit City also had its own promo. They will probably plan for something for the holidays.

The fact that it is doing well/better without promo is good news for BDA.

 

[Shifty Geezer]

You can also see in that corner that DVD sales are up more than Blu-ray sales, so its not exactly gaining ground.

That's not exactly the issue though. Much like people perceive the console market as a 'race', it's not about beating rivals so much as making money. Sony sunk a whole load of cash into PS3. If that investment is paid back in many billions on BRD productions, even if BRD never beats the DVD market before download/streaming movies takes ascendency, it'll have been a success for Sony.

 

[betan]

You can also see in that corner that DVD sales are up more than Blu-ray sales, so its not exactly gaining ground.

Which corner? (as in which link?)

 

[patsu]

Which corner? (as in which link?)

Top right: http://www.nxtbook.com/nxtbooks/questex/hom365581NLK/#/2

 

[AlphaWolf]

I don't really care, but it has certainly gone up compared to last year. You can't say anything about trend by looking at one snapshot anyway.

I just took a look through their archives for the last 10 or so weeks where they've compared blu-ray to dvd. It's fair to say using Home Media's numbers, blu-ray is not trending up. It's it had one week where it had a big jump in relative performance to DVD. Mostly it has been even or down relative to DVD.

Still, it's not gone. It was a one month+ deal, with Walmart offering US$100 gift cards too. I remember Circuit City also had its own promo. They will probably plan for something for the holidays.

The fact that it is doing well/better without promo is good news for BDA.

but bad news for consumers?

 

[patsu]

I just took a look through their archives for the last 10 or so weeks where they've compared blu-ray to dvd. It's fair to say using Home Media's numbers, blu-ray is not trending up. It's it had one week where it had a big jump in relative performance to DVD. Mostly it has been even or down relative to DVD.

http://forums.highdefdigest.com/showpost.php?p=1061079&postcount=1894

Even though June US number shows a higher average than May, we still won't be able to gauge the trend without knowing what happened during those weeks (promo ? new titles ?). The top 20 DVD titles differ from the top 20 Blu-ray titles.

but bad news for consumers?

It's simple demand and supply. If consumers don't like the price, they don't bite. So far some are willing to accept the current price (or rather the discounted price).

The vendors need the extra margin to offset their initial Blu-ray setup cost.

 

[AlphaWolf]

http://forums.highdefdigest.com/showpost.php?p=1061079&postcount=1894

Even though June US number shows a higher average than May, we still won't be able to gauge the trend without knowing what happened during those weeks (promo ? new titles ?). The top 20 DVD titles differs from the top 20 Blu-ray titles.

I'm sorry now you're gonna have to find 6 sources so I can throw out the highest and the lowest.

It's simple demand and supply. If consumers don't like the price, they don't bite. So far some are willing to accept the current price (or rather the discounted price).

The vendors need the extra margin to offset their initial Blu-ray setup cost.

sure whatever, enough of this, offtopic anyway.

 

[PARANOiA]

That's not exactly the issue though. Much like people perceive the console market as a 'race', it's not about beating rivals so much as making money. Sony sunk a whole load of cash into PS3. If that investment is paid back in many billions on BRD productions, even if BRD never beats the DVD market before download/streaming movies takes ascendency, it'll have been a success for Sony.

Sure, but what's that number? I don't know if any of us are in a position to say, but taking 6 years to achieve 50% of the distribution market is a long ways off in my mind. That 50% is based on the quote above estimating BR to exceed DVD sales in 2012, and BR launching in 2006 (PS3 release date). Maybe they can turn a profit with 20% of the market - I don't know.

Possibly, though, if they didn't dump $3b+ into BR however they may have been financially worse off, since Toshiba would have had the rule of the roost, while DVD sales would theoretically decline over time. It would be interesting to see some (unbiased) analysis of the different scenarios, here, along with projections for time to profitability.

 

[patsu]

Just to note that Sony makes money from multiple aspects of Blu-ray, not just movie sale. Today, they already sell Blu-ray products such as the diode, read head, standalone player, juke box, burner, BR laptop, blank disc, mastering service, professional Blu-ray authoring software, movie and the royalties. They also use it to promote HD TV.

Sony calls Blu-ray one of their trillion yen businesses (About US$9b I think). Don't know what the trillion yen entails. So far, they have produced more than 100 million Blu-ray discs in Indiana. By end of this year, they hope to hit a total of 47 million discs/month.

It certainly is a risky move due to the heavy investment, but then again, they can compete better (or rather earn together with) low cost Chinese players here. There are also opportunities for BD software play.

 

[PARANOiA]

Just to note that Sony makes money from multiple aspects of Blu-ray, not just movie sale. Today, they already sell Blu-ray products such as the diode, read head, standalone player, juke box, burner, BR laptop, blank disc, mastering service, professional Blu-ray authoring software, movie and the royalties. They also use it to promote HD TV.

Sony calls Blu-ray one of their trillion yen businesses (About US$9b I think). Don't know what the trillion yen entails. So far, they have produced more than 100 million Blu-ray discs in Indiana. By end of this year, they hope to hit a total of 47 million discs/month.

It certainly is a risky move due to the heavy investment, but then again, they can compete better (or rather earn together with) low cost Chinese players here. There are also opportunities for BD software play.

Sure, but my post is still 100% relevant. They can make money in all sorts of ways, but it's all dependant on people actually buying BRs, driving demand for all of the knock-on businesses.

 

[patsu]

Yes, where movie demand is concerned, the two main concerns are price and differentiation. At the same time, the game business also helps to drive the Blu-ray economics.

If the manufacturers (including the Chinese vendors) push Blu-ray players over DVD players, more consumers will move to Blu-ray players over time (and digital download). I think they have some room to play with. HD DVD players sold 90,000 units @ $99 over 1 weekend. They probably don't need to be so aggressive, but it can be a reference data point.

I feel that content is the more uncertain part. I have heard everything from Portable Copy (Yay !) to 3D movies (Nay !). The Blu-ray platform differs from past formats in one major way -- It has a client software layer. Hopefully they can find truly useful services to make a difference.

EDIT: Oops, forgot about HD camcorder in Blu-ray related businesses. Panasonic and Sony HD camcorders use AVCHD, the same structure as Blu-ray.

 

[RobertR1]

Just to note that Sony makes money from multiple aspects of Blu-ray, not just movie sale. Today, they already sell Blu-ray products such as the diode, read head, standalone player, juke box, burner, BR laptop, blank disc, mastering service, professional Blu-ray authoring software, movie and the royalties. They also use it to promote HD TV.

Sony calls Blu-ray one of their trillion yen businesses (About US$9b I think). Don't know what the trillion yen entails. So far, they have produced more than 100 million Blu-ray discs in Indiana. By end of this year, they hope to hit a total of 47 million discs/month.

It certainly is a risky move due to the heavy investment, but then again, they can compete better (or rather earn together with) low cost Chinese players here. There are also opportunities for BD software play.

You're assuming Sony is not subsidizing encodes and BD50 media anymore. Just because the war with HD DVD is over doesn't mean they just can void the contracts they had with the studios. The subsidies and marketing overhead likely easily offset any revenue they're making from other aspects of BD.

I'm more interested in when Sony launches their Movie service and offers a HD alternative to Blu Ray. I recall people slamming MS for trying to "kill off optical media" clearly they'll sing the same tune for Sony, right? Who knows many Sony will 1up MS and even offer 1080p encodes. That'll really go after BR's throat!

 

[standing ovation]

The fact that PS3 has a very large Flash implied that they were/are prepared to invest in software from the get go.

Sure they were going to invest in software. But had they planned on pouring MORE resources into software/services than in hardware? To win any sort of battle with a programmable device, this must necessarily be the case. Content is what gives your product value; monetizing a killer app is what builds equity.

Secondly, they also sank in large sum of money building their own first party IPs.

Everybody does this. It's called job security.

Third, they won the HDM war by roping in the content owners early.

Sony has won the right to fight on the frontlines. The REAL battle is with the older DVD format.

 

[standing ovation]

They can make money in all sorts of ways, but it's all dependant on people actually buying BRs, driving demand for all of the knock-on businesses.

Exactly! Even if Blu-ray players were free, the market would not be saturated BD buyers overnight -- or the following year for that matter. DVD is just too ubiquitous.

 

[eastmen]

Can we even say that the hdm war is over. There are many choices out there. Download services are getting better all the time and now sony is introducing their own service

 

[patsu]

You're assuming Sony is not subsidizing encodes and BD50 media anymore. Just because the war with HD DVD is over doesn't mean they just can void the contracts they had with the studios. The subsidies and marketing overhead likely easily offset any revenue they're making from other aspects of BD.

Earlier on, there was a rumor about Sony throwing US$500 million to buy Warner over. Personally, I assumed it was the amount of money Sony was going to invest in Blu-ray subsidies and marketing (Don't quote me on that though). The Sony execs are certainly taking big risk for their dream trillion yen business, but other BDA members chip in too. They are not alone in this.

I'm more interested in when Sony launches their Movie service and offers a HD alternative to Blu Ray. I recall people slamming MS for trying to "kill off optical media" clearly they'll sing the same tune for Sony, right? Who knows many Sony will 1up MS and even offer 1080p encodes. That'll really go after BR's throat!

Yes. Sony is a different animal from MS. They may evaluate the offline and online distribution opportunities differently. Sony already has a physical distribution arm and a content arm. They may not distinguish between both channels in the grand scheme of things as much as a pure-play company.

 

[patsu]

Sure they were going to invest in software. But had they planned on pouring MORE resources into software/services than in hardware? To win any sort of battle with a programmable device, this must necessarily be the case. Content is what gives your product value; monetizing a killer app is what builds equity.

Not true. It depends on the lifecycle (and probably a few other factors). Pouring relatively more resources in software may simply mean someone is under-budgeting the hardware expense. Hardware and software have their own independent needs. No one knows how much Sony is spending on revamping its software arm anyway. It cost more than just money. It is also a culture change.

Everybody does this. It's called job security.

Still ? It shows that Sony has an active interest in software. If it's just job security, they don't have to acquire studios to grow the investment.

Sony has won the right to fight on the frontlines. The REAL battle is with the older DVD format.

Blu-ray does not need to beat DVD. It only needs to establish a large enough pie in the market. Clearly both DVD and Blu-ray proponents are going to evolve their businesses, but there is no longer confusion about the HDM format.

EDIT:

Can we even say that the hdm war is over. There are many choices out there. Download services are getting better all the time and now sony is introducing their own service

Sony's view is that there are room for both to survive. The HDM war is mostly coined to describe the skirmish between HD DVD and Blu-ray. Downloadable movies are mainly going after rental market and convenience. I believe HD movie download represents the minority right now (compared to SD downloads), but it can certainly increase over time.

 

[RobertR1]

Yes. Sony is a different animal from MS. They may evaluate the offline and online distribution opportunities differently. Sony already has a physical distribution arm and a content arm. They may not distinguish between both channels in the grand scheme of things as much as a pure-play company.

I'm not talking about how they evaluate the business. I'm talking about the public perception. Personally, I think DD for movies is a bad movie for Sony until BR is well established. Releasing it now will create doubts.