I submitted this in the insider thread, but I would like other thoughts on my conclusions.

If a small content provider wanted to produce 25,000 or 100,000 HD discs do the mandatory AACS costs for Blu-ray make a significant difference?

AACS is required on all Blu-ray discs and is listed as so here http://www.pacificdisc.com/PricingBluRay.html To pacificdisc or any insider:

Am I correct in understanding that the AACS fees that are mandatory to Blu-ray would add substantially to the to cost of Blu-ray production?

As much as 23% extra cost for a 25,000 run of SL BD25 discs with 3 check discs and a master?

Could HD DVD be as much as $19,000 cheaper for a 25,000 unit run and $36,000 cheaper for a 100,000 unit run? Here's my breakdown based on your charts, assuming 3 check discs and one master:

scenario lowest cost, 3 check disc 1 master

25,000 100,000 25,000 100,000

SL 15GB HD DVD $33,500 $129,000 $1.34 $1.29 (no AACS)

DL 30GB HD DVD $40,750 $145,000 $1.63 $1.45 (no AACS)

SL 25GB Blu-ray $52,500 $165,000 $2.09 $1.65

DL 50GB Blu-ray Not Available

Any mastering/authoring costs not included, setup included

I calculated this as follows:

http://www.pacificdisc.com/PricingBluRay.html
http://www.pacificdisc.com/PricingHD-DVD.html

If I understand things correctly: If an independent producer wanted to produce and release a 25,000 and 100,000 order, on Blu-ray, hey have to use AACS. They could choose to include AACS on HD DVD to avoid the costs but are obligated to use it on Blu-ray.

Dual layer 50GB Blu-ray discs are not available from you.

For replication of a single layer 25GB Blu-ray disc:

25,000 seems to be the run rate economic break point, with costs going down to $1.59 per disc and avoiding the mastering charges.

100,000 is the most economic rate obviously , with costs going down to $1.45 per disc and also avoiding the mastering charges.

But, every time a check disc is created, they incur a $2,500 cost for AACS fees and after they start final production the fees are an additional $0.10 per unit?

So if they have 3 check discs and one final master the Blu-ray mandatory AACS fees increase the Blu-ray replication cost by

= (4 x $2500) + ($0.10 x 100,000)
= $10,000 + $10,000
= $20,000 mandatory AACS fees for the 100,000 unit Blu-ray run

and

= (4 x $2500) + ($0.10 x 25,000)
= $10,000 + $2,500
= $12,500 mandatory AACS fees for the 25,000 unit Blu-ray run

Of course , those cost would be occurred for HD DVD production as well, if the content provider wanted to include AACS, but they could choose to avoid them if they wished.

The base replication cost for the 25,000 25GB Blu-ray discs is $1.59 for 25,000 units for a total running cost of $39,750.

The base replication cost for the 100,000 25GB Blu-ray discs is $1.45 for 100,000 units for a total running cost of $145,000.

Am I correct in seeing that the mandatory AACS requirement would add $20,000 in fees to a replication run of 100,000 25GB Blu-ray discs that would have a base cost $145,000 so that the total price would be $165,000 under that scenario?

That would equate out to $1.65 per unit.

The mandatory AACS fees with 3 check disc and a master would be alone $20,000/$165,000 = adding 12.1% of the cost of a 100,000 unit replication??

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Am I correct in seeing that the mandatory AACS requirement would add $12,500 in fees to a replication run of 25,000 25GB Blu-ray discs that would that would have a base cost $39,750 so that the total price would be $52,500 under that scenario?

That would equate out to $2.09 per unit.

The mandatory AACS fees with 3 check disc and a master would be alone $12,500/$52,500 = adding 23.8% of the cost of a 25,000 unit replication??
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So for a 25,000 unit 25GB single layer Blu-ray replication the total cost is a minimum $52,500 or $2.09 per unit.

So for a 100,000 unit 25GB single layer Blu-ray replication the total cost is a minimum $165,000 or $1.65 per unit.
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For a HD DVD 15GB single layer replication the cost would be $1.34 each for 25,000 units for a base cost of $33,500 with AACS fees optional .That would be a total cost of 1.34 per disc.

For a HD DVD 15 GB single layer replication the cost would be $1.29 each for 100,000 units for a base cost of $129,000 with AACS fees optional .That would be a total cost of 1.29 per disc.

For a HD DVD 30GB double layer replication the cost would be $1.63 each for 25,000 units for a base cost of $40,750 with AACS fees optional .That would be a total cost of 1.63 per disc.

For a HD DVD 30 GB double layer replication the cost would be $1.45 each for 100,000 units for a base cost of $145,000 with AACS fees optional .That would be a total cost of 1.45 per disc.

=========================================================

So if a content provider wanted to produce 25,000 or 100,000 discs in both format , at the lowest costs, with AACS being mandatory for Blu-ray and 3 check discs:

scenario lowest cost, 3 check disc 1 master

25,000 100,000 25,000 100,000

SL 15GB HD DVD $33,500 $129,000 $1.34 $1.29 (no AACS)

DL 30GB HD DVD $40,750 $145,000 $1.63 $1.45 (no AACS)

SL 25GB Blu-ray $52,500 $165,000 $2.09 $1.65

DL 50GB Blu-ray Not Available

Any mastering/authoring costs not included, setup included

It would seem that the mandatory AACS fees and extra costs fora small content provider would make Blu-ray substantially more expensive to produce.

Under the scenario I provided, with 3 check discs, and no AACS used for HD DVD, a small studio could possibly save $19,000 by using 15GB HD DVD discs or $11,700 by using 30GB HD DVD discs over a BD25 for a small 25,000 replication. A lot of niche content could fit on the 15GB discs using VC-1 or AVC.

They would save $36,000 or $16,000 for 100,000 discs over the Blu-ray total costs.

Would that not be possibly a significant factor in deciding whether or not to release a low volume selling product in HD or not?

Is 3 check discs a reasonable assumption? I believe RBI films said h used at least that many...

http://www.avsforum.com/avs-vb/showpost.php?p=11010647&postcount=1142

thank you I missed that

If I had to make an educated guess, I would say the average Major Studio release on HD / BD seems to be selling in the 25,000 to 50,000 unit range. Hardly enough to cover the cost of releasing these titles. Lesser titles aren't even doing those numbers I am sure.

CHRONOS sold less than 8,000 units across both HD / BD Formats which is not even enough to recoup costs.

Also, to answer you other question .... I never use AACS if I do not have to and none of my HD-DVD Releases use AACS. Same thing with my standard DVD. I never use CSS or Macrovision. I have found in the past that none of these technologies deter the serious bootlegger. Besides, in the early days, many of these technologies caused problems with DVD playback on certain types of equipment...especially PC's.

If Chronus sold 8000 units to date, its probable that 25,000 might be the production ordered since its much cheaper per unit than 10,000.

At 10,000 or 25,000 units AACS seems to be a burden for small content providers and would discourage them from releasing things in Blu-ray or from using it on HD DVD.

http://www.avsforum.com/avs-vb/showpost.php?p=11213211&postcount=1702

showing revenue scenario from RBfilms

This is a typical scenario for a smaller label like us. Larger Studios tend to get a little more margin than we do. Their discounts to retailers are typically not quite as aggressive as ours.

$29.98 - Retail Price of HD / BD Disc
- 14.99 - Average Discount of 50%
- 2.00 - Average Fees for Retail Placement
----------
$12.99 - Wholesale Revenue
- 2.60 - Average Distribution Fee of 20% Paid to Studio
(Revenue to Studio on Distribution Deal. Different structire for Royalty Deal)
----------
$10.39 - Gross Revenue
- 2.00 -
Manufacturing Costs
----------
$8.39 - Revenue before deductions for Marketing, Advertising, and Amortization of Advances, Production Costs, HD / BD Authoring Costs, etc.
----------
- 4.20
(Payments to Producers, Director, Actors, Composers, Musicians, etc, as well as Residuals, Music, Publishing, Royalties, Licensing, etc. I estimate they are 50% of the revenue on average.)
----------
$ 4.20
Once all costs and fees are covered, this is what may be left for the Content Owner, Producer, or Studio that owns the Property.

This is an oversimplified example...and there are numerous other deal structures that change the numbers a bit....as well as other factors that come in to play. However, this is a basic example of how it works.

It would seem that a $ 0.43 to $ 0.76 margin difference per disk would mean a lot in the decision to release in HD DVD or Blu-ray or not all in in HD if Blu-ray was the only option.

http://www.avsforum.com/avs-vb/showthread.php?t=851221&page=28

Insider thread comments start here , but they don't address the AACS costs IIRC