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Wednesday, December 11, 2013
 Blu-ray Closes Gap with DVD in Revenue Generation for Video Releases
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Message Text: The Blu-ray Disc (BD) format is an increasingly potent source of revenue for movie titles released on video, with BD now accounting for half of U.S. video retail revenue for major new releases, narrowing the market share of the rival DVD format.

Based on the Top 10 video slate for the first six months of 2013, the BD format commanded 50 percent of video market revenue, up from 26 percent during the same time last year, according to a new report from the U.S. Video Intelligence service of IHS Inc. Of the BD market share total for the Top 10, 45 percent came via nine titles released in a combo BD/DVD packaging, while 5 percent came from just one title in a BD-only issue.

Compared to the increased market presence of Blu-ray, share for the DVD format retreated, down from 63 percent last year to 50 percent this year, representing a notable erosion of the once-dominant configuration among consumers.

Of the Top 10 video titles for the first half of 2013, six had a larger percentage of their video revenue coming from the BD format or the combination BD/DVD type. For instance, 65 percent of the video revenue for "Skyfall," from Sony Pictures, came from the joint BD/DVD arrangement, compared to 35 percent for DVD. The title with the second-largest percentage of BD revenue, "The Hobbit: An Unexpected Journey" from Warner Bros. Pictures, owed 58 percent of revenue to BD/DVD, with DVD making up the remaining 42 percent.

Meanwhile, the No. 1 video release during the entire period, "Twilight Saga: Breaking Dawn - Part 2" from Lionsgate, was a title in which the DVD format made up the bulk of revenue, at 69 percent, compared to 31 percent for BD. And unlike the three other titles joining the "Twilight" release in claiming a larger portion of revenue from DVD instead of Blu-ray, "Twilight" did not have a BD/DVD counterpart, but was released exclusively as a BD-only title.

Studio revenue from all new releases during the first half, whether shipped for retail sales or rentals, amounted to $1.59 billion, down 4.1 percent from $1.66 billion during the first six months of 2012. Video revenue clambered down even though box-office spending for the titles coming to video in the period was up 3.9 percent, from $4.61 billion to $4.79 billion.

As a result of those dynamics, conversion rates were also down for box-office to video - the key measure in how Hollywood generates additional revenue from a movie release after its initial run at the box office ends.

In particular, the units-per-box-office (UMBO) measure, which movie studios watch closely to gauge the effectiveness of their video sales and marketing effort, was much tougher for titles that generated less than $100 million in the box office. This was because all the air was being sucked out of the market by tentpole, blockbuster titles. Through the years of substantial declines in overall consumer spending on video from 2008 to 2011, UMBO was down steeply on all new releases, but less so on major $200-million hits.

The four titles with the highest revenue during the first half posted a massive $1.1 billion in box office behind them?a whopping 132 percent increase in combined box-office firepower, compared to last year?s two titles in the top category for movies grossing more than $200 million. The biggest hits, in turn, are making it much harder for the lesser lights to compete when they come to video.

The decline in total studio revenue on video notwithstanding, average pricing for video was on the rise. Average priced climbed, especially on the big titles, because of two factors: the continuing shift in the market from cheaper DVD to higher-priced Blu-ray versions; and the popularity of even more expensive combo packs that can include a BD, a DVD, a digital copy and a 3-D version when available.


 
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