Monday, February 25, 2008

Dep't of Unstable Business Models

by Tom Bozzo

Here's a decent, if sometimes spinful ("the Internet is perhaps the biggest enemy"), article on Peak DVD. Here's a telling quote:
Media companies, aware of investor concerns about the future of their cash cow, say the problems are overblown. Their position in part: DVDs will continue as a giant profit center because the Internet — despite the “marketing hocus pocus” of the telecommunications industry, in the words of one Fox executive — will remain too slow for widespread downloading to catch on for the foreseeable future.
Betting on the continued craptacularity of the U.S. Intertubes may have seemed a sure-enough thing while the Bushies have been content to see the Telecommunications Act of 1996 stood on its head, but all things must pass. Relatedly:
“Wal-Mart has indicated it is getting bored with older library titles,” said Stephen Prough, the co-founder of Salem Partners, a small investment bank that specializes in film catalogs. “When there is little to no consumer demand at a $6 price point, you’ve got problems.”
Depends on the meanings of "you" and "problems." The obstacles to serving consumer demand at lower price points (via those Internets) are largely contractual.

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Several of Wal-Mart's $5.99 offers (haven't been there in a while) fall into the "you want me to pay you to take that off your hands? Storage costs are not equal to zero" category.

Our local drug store offers some back catalog/obscure material at $1.00, and even then it sometimes becomes a question of "who decided to mass produce these?"

Where the authors make their first mistake is in the third 'graf "Domestic DVD sales fell 3.2 percent last year to $15.9 billion."

I'll give you odds the UNITS sold were higher, but that p*q is lower because of the general reduction in the price of DVDs.

Meanwhile, Toshiba sounds the sanest: "'Our biggest competitor was that consumers seem to be satisfied' with DVDs, [Jodi Sally, Toshiba America’s vice president for DVD marketing] said."

Markets in everything, maybe, but not everything is a market.
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