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Studio Chiefs See Green in Blu-ray

Feb 14, 2008  •  Post A Comment

After pointing to a number of reasons for a dark final quarter of 2007 for DVD sales, studio executives see universal Blu-ray adoption as the major reason to hope for a brighter 2008.
Of six studios that have reported end-of-year quarterly earnings within the past two weeks, only Time Warner’s Warner Bros. unit and Sony Pictures said their DVD sales kept pace with year-earlier revenue. Walt Disney and Lionsgate reported lower DVD sales, while News Corp.’s Fox division said strong home entertainment offset weak box office sales. General Electric didn’t break out home entertainment sales for its Universal Studios unit.
Lionsgate President Steve Beeks, whose company’s home entertainment revenue for the quarter fell 7.5%, cited a higher percentage of sequels among 2007 DVD releases as the primary reason sales fell about 2.5% last year.
Meanwhile, Disney Chief Financial Officer Thomas Staggs said in a conference call last week that the quarter’s DVD sales, down about 9% from a year earlier, couldn’t keep up with late-2006 hits such as “Cars” and “Pirates of the Caribbean: Dead Man’s Chest,” partially because animated film “Ratatouille” had a limited overseas release. The international distribution of the company’s year-earlier “Cars” was wider.
With Warner Bros. deciding last month to exclusively back Sony’s Blu-ray and drop the Toshiba-led HD DVD format starting in June, and retailers such as Netflix and Best Buy going in the same direction, executives were quick to say a single format was the key to more sales and wider margins.
Both Beeks and News Corp. President Peter Chernin estimated that 2008 DVD sales would triple to about $1 billion, largely because more customers would commit to buying high-definition DVD players and ordering films knowing that there would be a single format.
“We’re finally going to have an industry unified behind a single format this year,” said Beeks, adding that Lionsgate was on pace for a record quarter in DVD sales for the three months ending March 31.
With Blu-ray players priced north of $300, though, the studios’ ramp-up expectations may be optimistic, said Bruce Leichtman, president of Leichtman Research Group.
“To triple in one year sounds excessive to me,” said Leichtman, who said such an increase would mean customers were replacing standard-definition films they already own with HD films, in addition to buying new releases. For such a jump, “We need the hardware closer to $200,” he said.

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