Sounding a bit like newspaper publishers or record labels, technology chiefs from the studios said content producers can still make a lot of money from sales of DVD/Blu-ray disks.
They met this week at their Entertainment Supply Chain Academy conference in Seattle. Its theme was “Maximizing Home Entertainment Sales & Profits in Turbulent Times” with session titles like “Go green!” “Build Blu (Ray)!” and “Stay out of the red!”
They acknowledged that consumers can get a lot of content for free on the Net but pointed out two disadvantages to Internet-delivered video; that downloads and video streams, so far at least, are not compatible with as much hardware as DVD/Blu-ray players and that downloads are subject to being lost or damaged by computer failures.
The CTOs might have added that only about 60% of homes in most first-world countries have broadband with a speed high enough to stream video, and even fewer that can stream HD video. And probably fewer than 1% have their TV set connected to the Net, even via a PC or set-top box like Apple TV or Xbox 360.
“When we put out downloads, it was like the equivalent of VHS,” said Andy Hair, CTO at Walt Disney Studios. “And we improved portability and permanence when we went to DVD. We went backwards; we went to electronic sell-through.”
The CTOs looked ahead by acknowledging the difficulty, even impossibility, of playing downloads and streams on many devices. Studios could increase their revenue by making it easier and spreading the technology to more devices.
“We want to create an environment that can play on any player in any environment,” said Chris Cookson, president of Sony Pictures Technologies. “If you go to a different bank ATM than your own, people charge you to get your own money. But there is convenience in that. If you make content readily available for people, they will think it’s easier to access than figuring out how to steal it.”
Also discussed was the convergence of physical and online media players so as to avoid a format war. Cookson, whose company is the biggest booster of Blu-ray, suggested a serialized Blu-ray disk that when placed in a Blu-ray player (almost all of which will come with an Internet connection) would automatically register into a digital rights cloud or download storage locker. Once registered online, he said, the user would get a call on his iPhone (what else?) that said, “You’ve got a movie!”
That, Cookson said, gives the consumer the best of both worlds.
Attendees doubted that user-generated video will ever replace professionally produced shows in revenue. Andy Setos, president of engineering at the Fox Group, said Google loses $500 million on YouTube. “It’s fun,” he said, “but there is a distinction between self-expression and business.”
Perhaps ironically, a main theme of the meeting was how to “green” their operations. They discussed such topics as using 80-pound paper stock instead of 100-pound for DVD and Blu-ray packaging. The industry uses almost 500 million wraps per year, causing an estimated 10 million pounds of carbon emissions; using a different plastic for the jewel boxes would make the cases biodegrade in a landfill within five years; use a new ink technology that could replace foils and holographic films on packages that would make the packaging 100% recyclable.
None of those concerns is associated with downloads, although the net, with its always-on servers, switches, modems and such, uses a lot of electricity.
The studios have unquestionably done a significantly better job than the labels at a) continuing to improve the quality of their media; b) protecting it; and c) seeking and testing ways to make it profitably available online. The labels are still selling last-generation media quality on unprotected CDs and have lost control of distributing their content on the Net. They have developed no new technology to solve their problems and increase revenue since the original Napster first appeared.