Is $20 The New Norm for Blu-ray Titles?

[Woochifer]

An interesting article pointing out the recent price drops on new release Blu-ray discs that now have a lot of the in demand titles selling for around $20. Even though it's factually correct about the price drops, it doesn't make note of the steeper price cuts seen on some new release DVDs (down to as low as $10 on Amazon, Walmart, and Target's websites). It should be noted though that these heavily discounted DVDs are generally stripped down versions with none of the extensive bonus features found on the Blu-ray or two-disc DVD (when available).

http://www.thehdroom.com/news/Is_20_...ay_Titles/5961

What is most important about these price cuts is where Blu-ray now measures against DVD. In most cases the Blu-ray and DVD prices are now identical or a few cents higher for Blu-ray. That leaves the only real price advantage for DVD in single-disc sets when studios offer multiple skus for the same film.

These new prices will move a lot of product between now and Christmas. For Blu-ray to further penetrate DVD pricing, they will need to hold into 2010 and beyond with hardware prices following suit. Otherwise DVD will continue to be good enough and Blu-ray will have to settle for second fiddle.

[Sir Terrence the Terrible]

An interesting article pointing out the recent price drops on new release Blu-ray discs that now have a lot of the in demand titles selling for around $20. Even though it's factually correct about the price drops, it doesn't make note of the steeper price cuts seen on some new release DVDs (down to as low as $10 on Amazon, Walmart, and Target's websites). It should be noted though that these heavily discounted DVDs are generally stripped down versions with none of the extensive bonus features found on the Blu-ray or two-disc DVD (when available).

http://www.thehdroom.com/news/Is_20_...ay_Titles/5961

I think it is the norm. In our surveys we take at Disney, we found that our customers see $20 and below as the price point that would make them dump DVD's for Bluray disc. I think Warner and Universal used the same survey, and got the same result.

[Woochifer]

I think it is the norm. In our surveys we take at Disney, we found that our customers see $20 and below as the price point that would make them dump DVD's for Bluray disc. I think Warner and Universal used the same survey, and got the same result.

My understanding is that the retailers have driven the current round of price cuts on both DVDs and BDs. The wholesale costs have not changed, but the retailers are engaging in a price war to drive traffic to their stores/websites in hopes that shoppers pick up other items. The studios are making out well, and an article I read indicated that the studios are hoping that the price points go back up after the holidays. With the retailers taking a loss on their high profile DVD and BD titles this holiday season, I can see them ramping up the pressure on the studios to lower the wholesale costs.

I mean, I like that I was able to get Monsters, Inc. and Up for less than $14 each after all the discounts, coupons, and price matches got tallied up. But, it's also ridiculous that those titles got released with a $45 list price, which means that the store lost close to $20 on my purchase. Loss leader pricing is the norm on new release DVDs, but I don't think the huge losses retailers are currently taking can continue indefinitely.

After this holiday season, Blu-ray will truly be past the early adopter phase and if the normal street price dips below $20, then the growth will accelerate and everybody will come out ahead. But, if prices revert back to $25 to $30, then that will blunt a lot of momentum that Blu-ray will have heading out of the holiday sales.

[Sir Terrence the Terrible]

My understanding is that the retailers have driven the current round of price cuts on both DVDs and BDs. The wholesale costs have not changed, but the retailers are engaging in a price war to drive traffic to their stores/websites in hopes that shoppers pick up other items. The studios are making out well, and an article I read indicated that the studios are hoping that the price points go back up after the holidays. With the retailers taking a loss on their high profile DVD and BD titles this holiday season, I can see them ramping up the pressure on the studios to lower the wholesale costs.

Wooch, actually it was the studios that slightly lowered wholesale costs, and least Disney has. So the losses are not as steep as it would seem. I know the company that advises us told us we should loosen the price if we expected Blu sales to counter DVD's losses. We were told expressly that it was our pricing structure that was holding back mass adoption, and we responded to that. However you are right, the retailers are definitely in a price war, and they are selling even below our cut wholesale price.

I mean, I like that I was able to get Monsters, Inc. and Up for less than $14 each after all the discounts, coupons, and price matches got tallied up. But, it's also ridiculous that those titles got released with a $45 list price, which means that the store lost close to $20 on my purchase. Loss leader pricing is the norm on new release DVDs, but I don't think the huge losses retailers are currently taking can continue indefinitely.

There is one thing that is expected from a Disney title - it will always be priced a little higher than the industry norm. It has always been that way - through every home video format that has ever existed.

After this holiday season, Blu-ray will truly be past the early adopter phase and if the normal street price dips below $20, then the growth will accelerate and everybody will come out ahead. But, if prices revert back to $25 to $30, then that will blunt a lot of momentum that Blu-ray will have heading out of the holiday sales.

I agree with this. There is also a challenge to the studios that if they want to see their disc income return to the black, they are going to have to be more aggressive in their pricing structure, or it is not going to happen.

[Woochifer]

Wooch, actually it was the studios that slightly lowered wholesale costs, and least Disney has. So the losses are not as steep as it would seem. I know the company that advises us told us we should loosen the price if we expected Blu sales to counter DVD's losses. We were told expressly that it was our pricing structure that was holding back mass adoption, and we responded to that. However you are right, the retailers are definitely in a price war, and they are selling even below our cut wholesale price.

Interesting that the wholesale costs did come down a bit. That would explain at least some of the massive discounting I've seen. For Up and Monsters, Inc., the big discounts came if you bought both titles together.

The market's definitely at a point where a lot of collectors like me have largely stopped buying DVDs and focused on Blu-ray. But, with some Blu-ray prices around $10 more than the DVD, I'm a lot more selective about what I buy. $15 to $20 is fine for a blind buy (still cheaper than two movie tickets). $25 to $30 is not.

There is one thing that is expected from a Disney title - it will always be priced a little higher than the industry norm. It has always been that way - through every home video format that has ever existed.

Bastards! Taking advantage of those of us with young children! You know we're basically hostages to whatever price we have to pay for those "Disney vault" titles!

I agree with this. There is also a challenge to the studios that if they want to see their disc income return to the black, they are going to have to be more aggressive in their pricing structure, or it is not going to happen.

I can see the Blu-ray pricing structure working fine in the early adopter phase where volumes are relatively low. But, I think we're arguably past that phase already, and the price points probably should have dropped earlier. The YTD sales increases are impressive, considering the economic conditions, but that growth rate has tailed off since June and I think the pricing has a lot to do with that.

The DVD format really hit its stride in the 4th year, with the disc sales taking off by ~300% that year. No coincidence that the pricing structure settled into its current pricing points around that time. Blu-ray is now in the 4th year and it needs the pricing to inch even closer to the DVD price points if the format's going to even come close to matching the DVD's sales performance in the 4th year.

Up to this point, Blu-ray has been tracking fairly close to the DVD format's growth trajectory, and as the format moves mainstream, the disc pricing needs to reflect that. It just doesn't look good to have BDs sitting on the shelf at Target or Best Buy with a $30 price tag.

[kexodusc]

The DVD format really hit its stride in the 4th year, with the disc sales taking off by ~300% that year. No coincidence that the pricing structure settled into its current pricing points around that time. Blu-ray is now in the 4th year and it needs the pricing to inch even closer to the DVD price points if the format's going to even come close to matching the DVD's sales performance in the 4th year.

What will be interesting to learn is the effect of 2 sources DVD didn't have to compete against in year 4:

1) DVD! - sure VHS was there - but the reason to upgrade was so compelling on so many levels - I don't get the impression that HD a/v is being perceived to be quite as big a deal as the initial benefits of DVD were over VHS - the ol' revolutionary vs evolutionary card again...

2) VOD/downloading/pirating - I don't see it as a legit threat to over take BluRay for a decade at least, but I could see it introducing some drag into year-over-year growth. Some people have become used to getting what they want for free (or legit pay-for VOD) for almost 10 years now...has to count for something.

That said - the DVD was billed as the most successful CE product ever...There would be absolutely no shame in BluRay finishing somewhere in the top 10 even...

[Woochifer]

What will be interesting to learn is the effect of 2 sources DVD didn't have to compete against in year 4:

1) DVD! - sure VHS was there - but the reason to upgrade was so compelling on so many levels - I don't get the impression that HD a/v is being perceived to be quite as big a deal as the initial benefits of DVD were over VHS - the ol' revolutionary vs evolutionary card again...

2) VOD/downloading/pirating - I don't see it as a legit threat to over take BluRay for a decade at least, but I could see it introducing some drag into year-over-year growth. Some people have become used to getting what they want for free (or legit pay-for VOD) for almost 10 years now...has to count for something.

That said - the DVD was billed as the most successful CE product ever...There would be absolutely no shame in BluRay finishing somewhere in the top 10 even...

Very valid points, which is why I doubt that Blu-ray will more than triple its disc sales next year. For one thing, consumers simply aren't going to completely upgrade their DVD collections. Some coveted titles here and there, but certainly not every DVD they already own. That trend alone ensures that Blu-ray's uptake will fall short of the DVD format (which indeed was the most rapidly adopted consumer electronics product ever -- faster than the CD, cassette, VCR, Laserdisc, color TV, cable TV, satellite TV, PC, internet access, DVR, HDTV, et al).

But, I think that the format is now positioned for some big growth numbers in the next year. Everything is lining up to make it happen -- the average player prices beginning to dip down to that $150 price point, HDTV household penetration going above 50%, 100% studio support with day and date releases, and disc prices beginning to hit the $20 and below mark.

Aside from the pricing, the studios are also trying different approaches to try and stoke the demand for Blu-ray. Disney has been bundling DVD and Blu-ray discs together. And now, Universal is going to begin selling DVD/Blu-ray combo packs as well. Several studios also include digital copies with the Blu-ray.

You also have some releases including a lot of interactive BD-Live features, though I'm skeptical about how much demand that creates.

There are also potential changes to how the release windows are done. For example, Disney released the Blu-ray for Snow White back in early-October (the set includes a DVD copy of the movie). The two-disc DVD version doesn't come out until next week. You also have the home video releases occurring a much shorter time after the theatrical release. And you also some PPV releases coming out the same time as the theatrical release.

Lots of things are in play right now, and it remains to be seen which combination will yield the highest revenue streams. No matter what though, Blu-ray's a big (and the fastest growing) part of the puzzle. Digital distribution is the future, but it remains a highly balkanized market with no unified standards or universal content providers. Blu-ray has already fought through the growing pains, while downloading/streaming options remain unsettled.

[kexodusc]

I'm seeing more and more of my BluRays with digital copies...is that going to be the norm for BluRay titles? They're great for my iPod but I wonder how many people actually see it as value added?

[pixelthis]

i saw quite a few at walmart for ten to thirteen bucks.
A new twist, on the standalone racks with the older titles, a bunch of older stuff on
Blu, like MIB, Fifth Element, etc.
I'm stocking up.

[Woochifer]

I'm seeing more and more of my BluRays with digital copies...is that going to be the norm for BluRay titles? They're great for my iPod but I wonder how many people actually see it as value added?

It has rapidly become the norm at least for high profile new releases. Data from a year ago indicated that the redemption rate for digital copies ranged from 5% to 13%, and that digital copies included with Blu-rays were redeemed at twice the rate as those included with DVDs. I think some of this has to do with the fact that most computers still do not have BD drives, and the digital copy is the only way to transfer a movie to a computer or portable device if the purchaser buys it on Blu-ray (unless the title also comes with a DVD copy).

Those redemption rates don't indicate massive throngs of people using the digital copies, so it's not exactly a huge selling point for the majority of buyers. But, I think for the studios it allows them to float higher price points on Blu-rays compared to DVDs. It's much the same way that studios use the bonus features as a means by which to maintain higher prices on catalog or re-release titles. It basically gives additional incentive for the buyer to opt for the Blu-ray, and justify the higher price tag.

Even though digital copies are also sometimes included with special edition DVDs, those two-disc DVD sets have become an endangered species. Many of the bonus features are now exclusive to the Blu-ray version. And when a two-disc special edition DVD is available, the Blu-ray now carries virtually the same list price and might still have some additional supplemental features that even the special edition DVD lacks.

[Woochifer]

A new column in Home Media Magazine seems to indicate that the trend towards loss leader pricing on Blu-ray came a year sooner than anyone in the industry expected. But, the author seems to accept that the downward price trend is necessary in the current economic climate.

Now, we're finding loss-leader pricing has come to Blu-ray, a year before anyone expected it to. Wal-Mart and several other mass merchants are advertising, and selling, hot new Blu-ray Disc releases for less than $20--and this, mind you, is before Black Friday, when we traditionally see the lowest prices all year for everything from digital cameras and computers to kitchen sinks (I mean that literally).

Studio executives, frankly, don't know what to think. They're stunned to see it happening so soon, and worried that in the future not only will their visions of incremental profits fade away faster than those visions of sugarplums we keep hearing about each Christmas, but that retailers will start pressuring them for lower wholesale prices and, before you know it, Blu-ray Disc will suffer the same price erosion that plagued DVD within several years of that format's launch--something studio executives have vowed to not let happen again.

He also points out that Walmart and other retailers using Blu-ray as a loss leader sale is actually a vote of confidence for the format, because they now see the format as strong enough to pull large numbers of shoppers into their stores.

http://www.homemediamagazine.com/tks...g-blu-ray-disc

If you think about it, the fact that Wal-Mart and the other mass merchants are using Blu-ray Discs as loss leaders is a tremendous vote of confidence in the format. It means they believe Blu-ray Discs are hot enough to lure people into their stores, as long as the prices aren't out of whack with what they're used to paying for DVDs.

Sure, down the road we might moan and groan about "leaving money on the table" (one of Hollywood's favorite laments), but in this economy, when more and more people are going back to their old habit of renting movies instead of buying them, we need to do something, anything, to get people back in the habit of buying and collecting movies and TV shows.

Let's worry about the potential fallout later. If we don't get Blu-ray Disc to the masses now, regardless of the price, there might not be a later.

[Mr Peabody]

Out to Costco today, noticed some additional Blu-ray movies prominently displayed in a main isle. Still not completely competitive on price though. A few were $7.99. Stuff like Young Guns, Total Recall and a few other older titles. Regular titles like the Harry Potter and such were $16.99 which is bettered by places like Amazon. The new Harry Potter was $18.99 and others even higher. Interestingly enough I bought the new Harry Potter on Blu-ray at Wal-Mart for $15.46 which is right with Amazon.

[Woochifer]

Out to Costco today, noticed some additional Blu-ray movies prominently displayed in a main isle. Still not completely competitive on price though. A few were $7.99. Stuff like Young Guns, Total Recall and a few other older titles. Regular titles like the Harry Potter and such were $16.99 which is bettered by places like Amazon. The new Harry Potter was $18.99 and others even higher. Interestingly enough I bought the new Harry Potter on Blu-ray at Wal-Mart for $15.46 which is right with Amazon.

Walmart and Amazon though do a lot of loss leader pricing -- using the low prices on specific titles in hopes that you will buy other items before you checkout. And a lot of their other titles are not as discounted. I picked up This Is Spinal Tap last week on Blu-ray for $15, whereas Amazon currently sells it for $19 and Best Buy sells it for $23.

Costco functions largely as a wholesale warehouse (about half of Costco's sales are to other businesses for resale), and doesn't do loss leader pricing. They will get volume discount deals with manufacturers, which they pass along as coupon specials.

But, my understanding is that the items in Costco are typically priced around wholesale cost plus 10%. The wholesale cost on new release BDs is supposedly around $22, and Costco sells most of them for around $25, so Costco's Blu-ray pricing is more in line with what it should cost if a store expects to make a small profit on that particular title.

[Mr Peabody]

I wonder if Amazon and Wal-Mart don't get a larger volume discount. $5.00 per unit give or take would be a huge loss. It would be hard to imagine that paying for itself.

[Woochifer]

I wonder if Amazon and Wal-Mart don't get a larger volume discount. $5.00 per unit give or take would be a huge loss. It would be hard to imagine that paying for itself.

They can easily make that up through sheer volume this time of year. The whole purpose of loss leader pricing in retail is to get bodies through the doors or clicked into the website. Obviously, the retailers seem to think that it works. Once they have the consumer's attention, they got opportunities to make multiple pitches for other products before the consumer can navigate over to the checkout.

During the holidays, you're looking at consumers dropping hundreds of dollars at a time during one shopping trip. That's why the retailers are matching one another with these steep price cuts. If that $5 loss on a BD leads to hundreds of dollars worth of other purchases, then they've made up for it.

That's also why I don't think this will continue indefinitely after the holidays unless the studios implement their own wholesale price cuts.