DIGITAL OR BUST IN VEGAS? The physical media market under scrutiny
Apr 26, 2012 - 01:28 PM GMT
A realization that maybe it’s time to figure out a way to jump on the digital bandwagon dominated the proceedings at Packaged Media & Beyond 2012, reports Larry Jaffee.
Maybe it was the Association of Independent Media Manufacturers Association (AIMMA) joining forces with the Media-Tech Association (MTA) and the Colonial Purchasing Co-operative to produce a US show like the latter did in the two previous years. Or maybe it was the zany Day Two keynote presentation by Troma co-founder Lloyd Kaufman (pictured) whose oldest running US independent movie studio has been making independent, non-mainstream movies for nearly 40 years. [See below for more details on Kaufman's presentation.]
But independence and industry co-operation were recurring themes of Packaged Media & Beyond 2012 held in April at The Wynn casino and resort in Las Vegas, where MTA and Colonial mounted a similar event last spring at the same venue. In this time of less demand for physical media, all three synergistic trade organizations have recognized a need for co-operation, and in turn, strengthen their collective members’ aims (ie, remain in business, and perhaps even grow).
There was a wink-wink undercurrent to the proceedings that those in attendance embodied survival of the fittest, as everyone left back home an austerity-minded operation of working far harder for far less than they did a decade ago, yet somehow were able to muster enough funds to make the jaunt to the Vegas strip’s swankiest destinations. Although the conference featured speakers from replication Goliaths Cinram and Technicolor, both focused on non-physical disc aspects of their companies’ business, digital supply chain and second-screen applications, respectively.
The robust program included updates on progress made with UltraViolet and Managed Copy – both pro-consumer developments that give consumers more control of what they can do with their disc purchases. Other speakers covered critical aspects of the packaged media food chain such as storage, quality control, the volatility of petroleum prices impacting on plastics used in discs and packaging, and the unusual recent renaissance of vinyl. [For more on the vinyl renaissance, see the D2D article in Issue 16, page 16.]
Aaron Shapiro, CEO of New York-based digital marketing agency Huge Inc, which also has offices in London, Los Angeles and Rio de Janeiro, kicked off the day-and-a-half main conference’s ‘reinvention’ focus with his aptly titled keynote address ‘Surviving the Digital Economy.’ (The pre-show had Colonial and AIMMA holding board and member meetings, while vendors and suppliers made price-specific pitches to their media manufacturing customers.)
Shapiro, author of the recently published book Users, Not Customers, reminded the audience that these days, no matter what business you’re in, consumers or potential users of your products or services almost always check out your website first before calling. That being said, Shapiro urged, “Build up your ecosystem, customers naturally follow.” Acknowledging that he was speaking to packaged media professionals, the keynoter pointed out: “Media is everywhere, and it is no longer about ‘What do I own?’ Rather it’s about ‘How do I access it?’” He noted that brick-and-mortar Blockbuster and Borders failed to react to the changing marketplace, only to be supplanted by web-based Netflix and Amazon.
Getting into the psychology of why people buy, Shapiro advised that all successful businesses in the 21st century need to deliver digitally: “Trust, Convenience, Price and Fun.” Several speakers noted that with consumers’ thirst for digitally delivered entertainment going up, their monthly broadband bills are also going to increase.POSITIVE DEVELOPMENTS
“Guaranteed Comcast will want higher rates from us if we’re streaming everything to our TV.” Keith Nissen, Research Director and principal analyst for NPD Entertainment Group, noted that generally consumers are moving away from traditional forms of entertainment, and replacing them with digital means.
Social networking is up, as is digital music. Meanwhile, people are not going to the cinema as much as they used to. Watching movies at home is down, as a result of the Netflix hiccup last winter. Consumers are buying fewer DVDs, CDs and video games. He attributed the declines to, “The overlay of a bad economy.”
Nissen provided some statistics about DVD’s current standing among US consumers’ leisure-time activities:
• 35% of consumers are purchasing or renting DVDs • Purchasing or renting DVDs is down 8% over the past year
• Standard DVD sales account for 46% of total video spending
• Netflix (21%); Blu-ray purchases (17%); DVD/BD rentals (7%); cable VOD (4%)
“Another way to look at it is that [physical discs are] still the majority of the market, so it’s got a fairly long way to go before it goes away,” he commented.
But the movie studios are concerned about Blu-ray not compensating for lost DVD sales. The movie industry generally caters to males in their mid-20s, but disc purchases are made by older adults. Although Blu-ray sales are up year-on-year, “They’ve taken a dive in the last six months,” Nissen reported. By 2016, NPD projects that 61 million US households will have a Blu-ray player. “As long as there will be players there will be a Blu-ray market,” he said.
Another positive development borne out by current research is that despite their popularity, “Tablets and smartphones are not the primary screens that people prefer when watching full-length video. They want a big screen.” Retailers these days don’t offer as much product as they did previously, which explains diminished volumes for physical media sales, the analyst noted.
Video-on-demand subscription services offering original TV programming, such as Hulu-plus, a YouTube partnership with Disney, another from Yahoo, and HBO and Showtime deals with Netflix, are likely to further siphon DVD sales in 2012, according to Nissen.
Explaining Troma’s tendency of being an early adopter with home video technology, the self-deprecating Kaufman said, “Being a small company we can move fast – optimistically or stupidly.” Although Troma films never had major distribution theatrically or at retail, the VHS pioneer managed to get its 100-title catalogue in front of a loyal audience that still buys its bonus-packed DVDs and now rents them from Netflix. Following through on Kaufman’s libertarian approach to home entertainment, Troma will soon have a free dedicated, ad-supported channel on Comcast cable TV systems, and the studio already streams films from its website.
Prior to delivering his address on video game trends, Mark Fisher, Executive Vice President of the Entertainment Merchants Association, recounted how Troma’s biggest title The Toxic Avenger, soon to be made into a Broadway musical, was a major hit on video when the company he worked for supplied grocery stores with VHS tapes in the 1980s. Fisher reported that 72% of US households currently play video games, and, surprisingly, 29% of those individuals are over 50 years old and 42% are women.
Video games haven’t been immune to the economic downturn, coupled with digital alternatives, that has impacted negatively sales of music CDs and DVD movies. Hardware fell 35% while software fell 26% this past March, although total game revenue still totalled $1.1 billion, according to NPD numbers cited by Fisher. (For 2011, physical games totalled $9.3 billion in revenue, down 8% from 2010.) “It’s a very cyclical business,” Fisher noted, adding that EMA is projecting the overall video game market to soon bounce back, thanks to three new consoles: Nintendo Wii U later this year, and PlayStation 4 and Xbox Durango/720 next year. The good news for media manufacturers also is these new console iterations will still require a physical game disc, he added.
Victor Matsuda, representing the Blu-ray Disc Group, reported there are currently more than 36 million US Blu-ray households (roughly one third), increasing by nearly 40% over 2010 (Source: Futuresource) and that HDTV penetration is now nearly 75 million US households. Citing numbers from the Digital Entertainment Group, Matsuda reported software unit sales grew by over 30% in 2011 and that Blu-ray accounted for 40.1% of disc sales of the Top 10 titles released in 2011, up from 27% in 2010. In addition, consumer spending on software surpassed $2 billion for the first time ever.
Still, the costs involved in manufacturing Blu-ray are apparently beyond the financial means of smaller replicators in attendance at the conference, some whom quipped whether “Blu-ray is a fad?”
THE FOUNDATION OF SUCCESS
In general, Michael Weiss, CEO of Rockville, Maryland-based Video Labs and President of AIMMA, was pleased with the event: “The conference was exactly what the media manufacturing industry needed. While the death of media manufacturing has been pronounced by so-called experts, the conference’s take-away is that media manufacturing has morphed into media services. In other words, folks are no longer simply making copies, but rather businesses are distributing communiqué and using ancillary streams such as captioning and post-production to support effective distribution. The event brought together experts who provided attendees with tools and such valuable insight into the economy and technology as it relates to media services.”
Attendee Frank Loverme, Sales and Business Development for California-based Emerging Technologies, agreed with Weiss’s assessment: “The topics were relevant and presented by key industry thought-leaders. Networking opportunities were abundant. The Wynn Hotel was a terrific venue with great food. And the event smartly coincided with NAB. I give it five stars!”
Morris Ballen, Vice Chairman of Disc Makers, also praised the conference for being conducive to networking. “We get together only once a year. There was a great turnout [a sentiment echoed by Colonial President Doug Franzen] and The Wynn is a great venue,” said Ballen, praising the “comradeship” among the attendees. (Incidentally, Disc Makers is now known corporately as AVL Digital Group; thus providing an example of one company already moving in the digital direction to supplement its core disc business.)
“The industry is still alive, and in some areas we are doing better than expected, as with in CD,” commented Media-Tech Association Chairman Frank Hartwig. “It is more and more important that companies build a strong relationship between North America and Europe. With this second combined conference [with synergistic trade association partners] we showed that we are committed to this idea on both continents. We will gain more business, a better cost structure and we will expand our knowledge base. The conference was again a success story and we will do it again next year. The networking and the growth of interaction between Colonial Purchasing and the Media-Tech Association is the foundation of success for all stakeholders.”
The conference’s PowerPoint presentations may be accessed at:http://www.media-tech.net/welcome/la...erence-program
Why Kaufman’s presentation was zany
I meant ‘zany’ in that Lloyd wasn't your typical keynoter, which was exactly what I was aiming for when I invited him and put him on first in the morning to ‘wake up’ the audience. And he didn't disappoint; audience laughter was abundant. Firstly, Troma films generally are comedies that are take-offs on classics and/or genre films with pun titles like Tromeo & Juliet, infused with gratuitous violence (think Monty Python and “it's just a flesh wound”).
As Kaufman spoke, a reel of Troma's greatest hits played on the big screen behind him. But it was also what he said, provocative statements, considering the audience, such as “piracy is good”, as he displayed a Chinese Blu-ray bootleg of one of Troma's biggest titles, Poultrygeist, in deluxe packaging, better than what his own company provides, he jealously admitted.
Kaufman believes that a kid who makes copies of an un-copy protected Troma film and then gives them to his friends, is not stealing, a far cry from the traditional Hollywood studio line on home entertainment.
He ended the talk with a self-deprecating clip of him homeless on the street, hawking Troma DVDs to passers-by for $1 each so he could eat. Lloyd and his wife, Pat Sweeney Kaufman, who is the New York State Film Commissioner, then presented me with an Official Troma Diploma for “supporting truly independent art”. The audience loved it; me too. I told them how my parents would be so proud. Honestly, I was touched.
Larry Jaffee, conference program organizer and event reporter.