This is interesting, simply because of the discussions on the loss of value of physical media and how it will impact the growth of Digital Distribution.

"Simply said, the studios have destroyed the price-value relationship in video, particularly when low priced rental alternatives have sprung up everywhere."

That's a quote from iIndustry veteran Bill Mechanic's wide ranging keynote speech at Independent Film & Television Alliance Production Conference in Santa Monica today. In it, the exec delivered a frank assessment of everything from creativity (or lack of it) at major studios, the copycat strategies of many independent producers, the glut of films produced over the past several years, and the role the studios themselves have played in "the confused video market."

Of course, Mechanic knows that of which he speaks. He currently is president/CEO of independent production company Pandemonium LLC and was chairman/CEO of Fox Filmed Entertainment. Many in the home entertainment industry still know him best as head of Disney's video division (and pay TV and international theatrical) for a decade in the 1980s and very early 1990s.

I wasn't lucky enough to hear the speech live, but here's a transcript re: home entertainment.

"I get asked a lot if the problems [of declining DVD sales] are systemic. My answer is not necessarily. That we would reach a point of maturation in DVD is natural and logical, but too much of the downturn is completely self-imposed.

Like much of the bad decision making that has helped take a lot of the profit out of the business, the air was let out of the tires by the studios themselves. No top management of a studio really cared what was going on over the past few years other than was their budget being met.

No one asked whether their units should be pushing Blu-Ray in the face of an economic melt-down or even whether or not Blu-Ray was going to be the next big ap to the general consumer. They simply accepted the idea that they could resell their libraries at higher prices.

So no one asked what impact dropping the price on their existing DVD’s would have. I mean if I can buy TITANIC for under $5 in some stores, why am I so eager then to rush out to pay $30 or so when it’s released on Blu Ray? Is the quality difference that great? How many formats are yet to come?

No one asked what buying great movies at cheap prices would do to new releases, which may not be as great. Give a consumer with less expendable dollars a choice between LEGALLY BLONDE for $5 or ALL ABOUT STEVE for $20 or $30, which do I want to buy?

Simply said, the studios have destroyed the price-value relationship in video, particularly when low priced rental alternatives have sprung up everywhere.

http://www.videobusiness.com/blog/1120000312/post/1440049344.html

One thing he must be quite happy about though is the fact that "Coraline" seems to be selling well for anywhere between $16(dvd) to $22 (on BD) in spite of the fact that Red Box rents it for $1 and VUDU streams it for $4.

More coverage, and additional quotes:

As former chief at 20th Century Fox Studios, and before that a key figure in launching Disney’s home video efforts, Bill Mechanic has earned the right to weigh in on the current state of packaged media sellthrough, including Blu-ray Disc.

As keynote speaker Sept. 29 at the Independent Film & Television Alliance's production conference in Santa Monica, Mechanic, now an independent producer, said the maturation and saturation of DVD movies and TV DVD was a logical conclusion to the destruction of the price-value relationship in home video by the studios and low-priced rental alternatives such as Redbox.

“If I can buy Titanic for under $5 in some stores, why am I so eager then to rush out to pay $30 or so when it’s released on Blu-ray?” Mechanic said. “Is the quality that great? How many formats are yet to come?”

Mechanic said studio executives over the past few years have been more concerned about making budget than understanding changing market forces. He questioned why the industry was so intent on pushing Blu-ray onto consumers during a recession, or even if it was the next great app.

“They simply accepted the idea that they could resell their libraries at higher prices,” he said.

The executive said economically conscious consumers when faced with the choice between Legally Blonde for $5 or All About Steve for $20, will think twice about purchasing the new release.

Mechanic said the film business would always experience peaks and valleys, but great movies such as Twilight, Slumdog Millionaire, District 9 and Coraline would always prosper, regardless of the format and distribution channel.

“It’s not that the buyers aren’t there,” he said. “Consumers, TV outlets, retailers and yes, even pirates, want what works.”

http://www.homemediamagazine.com/studios/ex-studio-chief-dvd-retail-downturn-self-imposed-17174

I feel so sorry for those studio executives. This year they are having to make do with about 10% less money for hookers and blow.