Paramount HD DVD payoff mentioned in Viacom financials

[sj001]

I will say with a great deal of confidence that Blu-ray will have the same levels of success as DVD. People are in the process of converting over to digital and HDTV sets, and now that there is one format, the snowball will start rolling faster, getting bigger and bigger. There is NO other format out there right now to compete, and there will not be for the foreseeable future, forget Digital Downloads, it will not compete for a very long time. I'll be an old man by the time the infrastructure is in place for all of the ISPs to offer the kind of bandwidth required for that.

Good article find by the way Max!

[Cyan]

I'm pretty sure he means 44,000 LaserDiscs as in..total physical discs ever made.

Alright, he probably didn't mean that, but..it's probably the truth :P

[WickyWoo]

I'm pretty sure he means 44,000 LaserDiscs as in..total physical discs ever made.

Umm, no

LD was around for 20 years, especially counting in foreign editions of titles, I'm suprised it's not higher than 44,000

[PepeGameblouse]

Originally Posted by Dynamo of Eternia

Somehow I doubt that to be true (the part about this hurting them more than it paid). While I understand the frustration that this gave to many Blu-Ray fans, the Hi-Def home video market at the time was (and largely still is) a very niche market.

Odds are if they had stayed neutral or gone Blu-Ray exclusive (with no pay-off for that exclusivity), they wouldn't have made up the money that they got from the HD-DVD pay off in disc sales during that time, since for the most part DVD sales during that time were still their big profit center.

And as the quote in the first post of this thread states, they had a 22% percent revenue bump because of the pay off, rather than the decline they would have otherwise expected (in theory still releasing movies on both formats in that scenario).

Now that HD-DVD is dead and they are releasing on Blu-Ray again, they will simply gradually release the movies that would have been on Blu-Ray to begin with if they had been making it all along. They may have lost a few sales here or there in would-be day-and-date releases with people buying the regular DVDs instead, but in the grand scheme of things that is very small potatoes.

Most Blu-Ray fans who want any particular Paramount movie on Blu-Ray will simply buy it when it is made available. The only ones who won't will be the very, very small handful who might choose not to buy Paramount movies in the form of some kind of futile protest that in the long run will mean nothing because the amount of people who will actually skip buying movies that they want because of a protest like this will be very few and very far between.

This may have been a terrible thing from the standpoint of Blu-Ray fans/consumers and for the format war in general (at the time they made this deal), but from a business standpoint, in the interests of Paramount, Viacom, and their shareholders, clearly this wasn't such a bad idea afterall. They got almost $30 million, and only had to stop releasing their movies on Blu-Ray for a few months. Somehow I doubt this is going to cause them a tremendous amount of hurt.

i would have to agree with that big time. they made more money right there in one day rather than over the course of a few months

[ganthc]

If Transformers is released with a lossles track, I don't see even the most die hard blu-ray fan hater of Paramount not going out and buying it. Paramount knew this, and they took a risk siding with hd-dvd. In their minds the scenarios played out as follows:

If hd-dvd wins, they got $50, and were seen as having foresight into the format war. And all the blu-ray people would buy hd-dvd and get their movies.

If hd-dvd loses, they got $50, and could switch sides and just release all their movies in blu, and get those sales anyways.

In either case, Paramount made out like bandits. Transformers with lossless audio will sell like gangbusters. Fences are mended, life goes on after the war.

[mjbethancourt]

I'm not buying it... because I have no interest in that movie.

[Kris Deering]

Originally Posted by Anthony P

so you could get all the movies on LD? you are full of BS all the time. Yes there where a few but a real fan wants to have every movie he wants. And if they where not on LD you where stuck watching the VHS, and if they won't be on BD then we will be stuck watching on DVD and I, for one, want the extra quality.

Seriously dude, what is your deal. You're right, I was a bit off on the number of laserdisc titles out there. According to the laser disc database there are 44,795 titles. Sorry I was off by a few. But you'd be hard pressed to NOT find a title on LD during its time on the market. You'd have a hell of a lot better chance finding a title for sale on LD over VHS!

And what's with the comment on "if it wasn't on LD they had VHS"? Duh, I wasn't saying anything to the contrary?? I was simply saying that I would be MORE than happy for Blu-ray to end up the niche product that LD was given its MASSIVE support by studios. I just didn't like their price point. LD was tailored to the enthuasist market and offered better audio/video and extensive supplementary content. VHS didn't bring that and even DVD took awhile before it caught up (and DVD was arguably more of a mass market format and was dumbed down a bit over time).

Anthony, before you starting letting your personal feelings get the best of you and jump all over everything that doesn't put Blu-ray on a pedestal maybe you should actually do some research or know what it is you're talking about before you go jumping on people. Especially people you don't know personally. I don't think our conversations would go nearly the same way if we were in the same room together.

[Maximus]

What's with all the arguing, i don't think anyone needs to worry about Blu-ray going the way of LD. The CE companies and studios have way too much riding on the success of Blu-ray. I think people are becoming antsy because the 'enemy' is much less obvious now that HD DVD is gone. Downloads are still mostly illegal, and DVD is a target that isn't going to be rechable for some time.

The biggest problem is that not many know what the future holds for Blu-ray and those who do can't divulge enough info to allay the fears of the worried people whe don't want to go down the LD path.

[Kris Deering]

Max,

The LD thing came up because it was mentioned that if BD didn't become as "successful" as DVD, would it be deemed a failure? I know that the CE companies certainly want BD to become the next DVD (why wouldn't they) but based on your information would they be disappointed if it didn't?

I said I would be perfectly content to have BD become a format in the same vein as LD. Of course sparks flew because it seems everything that I type is anti-Blu-ray regardless.

[CptGreedle]

I think it will take many many years for it to reach DVD, AS DVD FALLS. To actually reach this level, well who knows. DVD was at the peak of its sales recently so now it is declining. And this decline will meet up with BD by (I think) 2012, maybe as earlier as 2011. But for the next few years, Blu-ray will be that "alternate" format to DVD. Until more ppl use HD and get used to the look of HD, and crave the feel and perfection of a BD disc, we will no see BD taking over DVD. We have to change ppls mindsets now that the war is over.
I am fighting for Blu-ray almost everyday. I want people to see the beauty of Blu-ray, and see the quality it has to offer. In all actuality, it is easy to convince someone with an HDTV that Blu-ray is worth it, but I don't know very many people with HDTVs so it is impossible to get anyone to spend money on Blu-ray until they do.

Now what this all has to do with the HD DVD payoff... I have no clue. But to comment on that....
The war is over.
Dirty things happened.
It is all water under the bridge and hopefully Paramount will use that money to release an extensive High Quality Blu-ray catalogue.

[Dynamo of Eternia]

Originally Posted by Anthony P

Paramount might be in a slightly different situation (since they are owned by Viacom and not a traded company) but in the end that 30M is a one time deal (like winning a few hundreds of dollars at the lottery) so it does not add much but since they where supporting BD (unlike Universal) and they stopped stating reasons that HD DVD had better chances because of bogus reasons, it totally ruins their credibility at making decisions. The question a potential investor would be asking themselves is can the guy in charge (and his team) make the right decision and have the company take the right direction for future growth. A 30M windfall, is a luck break, but let's face it, we all know they won't get it next year (there is no more HD DVD to pay them off) and will they make other very publicized blunders? And that is what any investor would ask themselves.

I think a potential investor (if Viacom was a publically traded company) would look at the company as a whole.

As far as I know, Paramount and Viacom do not have some huge track record of terrible blunders.

Looking at this HD-DVD deal, from what was reported, the deal was for 18 months of exclusivity, or $50 million, and that's what would have happened if HD-DVD hadn't died off early.

This deal started back around August or September, if I recall correctly. That was 8 or 9 months ago. So, if HD-DVD hadn't already died off and was still going, they would only have about another 9 months of exclusivity to go, with another $20 million coming in as a result. The odds of them making THAT big of a profit from the sale of Blu-Ray media (adjusting that profit to consider that some money still would have been made from people opting for an alternate format to purchase movies on in the event of Blu-Ray not being an option) is pretty slim. And at the end of that 18 months, they could decide to do whatever they like, including releasing movies on Blu-Ray.

I think any logical thinking investor, looking at this situation objectively and not being blinded by the love of a particular format, would be able to see the logic in all of this.

It may not be the most consumer friendly decision (I mean, look at the oil companies, they are having record profits and I don't think very many average consumers are too happy with them right now), but if it's good for the company and good for any possible investors that might be involved, then it's what they have to do.

And I think when considering that Iron Man just made over $100 million, it's clear that Paramount isn't exactly in a rough spot right now.

Originally Posted by mjbethancourt

The damage to Paramount is more serious than just upsetting people by favoring a bad format. I for one was quite irritated at having to pay inflated prices (for a short time) to get "out of print" paramount blu-rays, only to learn a month later that they would be back in the game soon. It's a breach of trust, it causes serious disillusionment. Consumers hold grudges over things like that, whether you want to tag them as "Blu-ray Kool-aid drinkers" or not.

Well, as I've repeatedly pointed out ad nausium now, only a very very very few Blu-Ray owners are going to be so upset with Paramount that it effects their future purchasing decisions. Most people will let this roll of their shoulders. And I think Paramount will live through the very, very small handful of people who may hold some grudge against them (I mean, heck, if someone offered me $30 million, and said that the only catch is that a very small handful of people I will never meet will just arbitrarily not like me, somehow I think I could live with it).

What I don't understand is this. Why on earth would you have paid the insanely inflated prices for Paramount Blu-Rays in the first place? The general consensus of most people who post around here is that Blu-Ray was the clear winning choice from the get-go, and there was no way it could possibly lose the Hi-Def format war. With that being the case, why would anyone who TRUELY believed that who just didn't get around to buying those Paramount movies when they were on Blu-Ray at normal prices not simply wait until the inevitable event of Paramount coming back over to Blu-Ray happened, which of course would likely begin with the re-releasing of movies that had been on the format previously?

That sounds to me like the people who were so certain about Blu-Ray's inevitable victory weren't really THAT certain at the time, otherwise they would have come to this very logical conclusion right then and there and never would have paid anything above average Blu-Ray prices (esspecially if the inflated prices were that upsetting to them).

Furthermore, many of you are seriously underestimating the lost revenue. Not only were they out of the Blu-ray business for what will be like six months, but they also quickly found themselves out of the HD-DVD business. Also, the data clearly shows that Blu-ray sales picked up rapidly once the format war ended. Had that happened sooner, who knows what Blu-ray sales figures would have looked like over the holiday season. They will never know how much money they really lost. And DVD sales were tanking over the last year, because people stopped buying THOSE waiting for the format war to end. They cost everybody a bunch of money. It was stupid.

No, you are seriously OVERestimating the lost revenue.

See, you (and many others here) keep on equating the specific lost revenue that would have specifically come from the sale of Blu-Ray discs as being revenue that was 100% completely lost and not made up anywhere else.

Again, many people who would have bought the Blu-Ray versions of the movies that were effected by this instead likely bought the DVD version or the HD-DVD version (depending on whether or not they had machines for both Hi-Def formats). This seems to be the mental road block that many people who keep arguing about this unrecoverable lost revenue from these Blu-Ray releases can't seem to get around. The VAST majority of people who wanted to own Transformers in some home media format went ahead and bought it. Those who avoided it entirely in favor of Blu-Ray are few and far between, and are apparently still planning on getting it on BD, so those particular sales will still likely happen when the time comes.

Therefore, much of that revenue was still made, it just came in as the result of sales on other formats.

DVD sales were not tanking because of people waiting for the format war. DVD sales in general were expected to go down. This would have happened even if Blu-Ray and HD-DVD had never existed. This is largely due to the fact that DVD has simply saturated the market. Over the years most people have now repurchased the vast majority of their former VHS collections, and even TV show on DVD releases seem to have slown down compared to how rapidly they were being released a few years ago, because many older popular series have already come out in their entirety.

Newer movies on DVD are just as strong as ever, and newer TV shows (sets that come out in the fall of a series' previous season) are still selling well also. But, they alone don't make up for the saturation of catalog release sales that has already occurred.

It's not like DVD sales would have been through the roof if there was no newer formats. Sure, there are a very, very, VERY small handful of people (some of whom post around here) who have made the choice to never buy anything on DVD again, but in the grand scheme of things they are barely a blip on the radar. Most people who would prefer to buy things on Blu-Ray will still get movies and TV shows on regular DVD if a BD version doesn't exist. The vast majority aren't going to give up on watching movies and TV shows that they really really enjoy just because they aren't in Hi-Def.



The Paramount decision wasn't the most consumer friendly around, but the damage that has resulted is very, very minimal.

[Maximus]

Originally Posted by Kris Deering

Max,

The LD thing came up because it was mentioned that if BD didn't become as "successful" as DVD, would it be deemed a failure? I know that the CE companies certainly want BD to become the next DVD (why wouldn't they) but based on your information would they be disappointed if it didn't?

Yes. Definitely, the CE industry would be very upset. The studios would be worse off as DVD revenue is going to decrease at much more rapid rate than they had imagined. Blu-ray is the last hope for the studios to re-sell their catalogue.

[Alan Gordon]

Originally Posted by Maxpower1987

Yes. Definitely, the CE industry would be very upset. The studios would be worse off as DVD revenue is going to decrease at much more rapid rate than they had imagined. Blu-ray is the last hope for the studios to re-sell their catalogue.

But no pressure, right?

~Alan

[The Gnome]

I think if anythin the "resale" of much of the studio catalo will delay sudden rise in sales alot of people may have expected. For many people, with or without a HDTV, the upconvert suits them fine, especially after many of us were giolty of buying a repackaged version or "special Edition" a year after the original. I believe the shift will happen, but its going to take time. Probably as people replace there existing TV's and go LCD/Plazma/DLP or whatever, you will the an equal coralation to the purchase of BD.

[The Gnome]

Jesus Christ!!! I obviously can't spell OR type today. Sorry for making people read that!!!

[Anthony P]

Seriously dude, what is your deal. You're right, I was a bit off on the number of laserdisc titles out there. According to the laser disc database there are 44,795 titles. Sorry I was off by a few. But you'd be hard pressed to NOT find a title on LD during its time on the market. You'd have a hell of a lot better chance finding a title for sale on LD over VHS!

And what's with the comment on "if it wasn't on LD they had VHS"? Duh, I wasn't saying anything to the contrary?? I was simply saying that I would be MORE than happy for Blu-ray to end up the niche product that LD was given its MASSIVE support by studios. I just didn't like their price point. LD was tailored to the enthuasist market and offered better audio/video and extensive supplementary content. VHS didn't bring that and even DVD took awhile before it caught up (and DVD was arguably more of a mass market format and was dumbed down a bit over time).

not at all, you said if it ends up like LD (without the price) then you would be happy. I replied that "They are forgetting they could not get ALL the movies" you decie to change it to there where enough movies, then I pointed out that how many does not matter because if it is not all then you are stuck and could not have LD quality if it was not on LD. So you come back with your # is close to right. I never questioned your 44k for two reasons
1) you can always make numbers bigger (i.e. what is a release, for example many counted as different HD DVD releases the same movie released to different markets)
2) the number is more or less unimportant, in the end if you want to buy a movie and it was not on LD it did not matter if 44k other movies where on LD, you where screwed for that movie.

So unless all new movies come out on BD (and they push the old catalogue titles as well) one will be stuck either deciding to skip the movie or buy the DVD and for me (and most) that is not a good choice to face.

And unless it becomes the mainstream distribution mechanism, there is a good chance that it won't be all (and it was not for LD)

In the end I don't only love/buy Hollywood blockbusters, and even though I am not scared as much for those (and let's face it, we have not gotten so far 100% of those on BD), I also like smaller local movies and the smaller the market the bigger the chance it will not make it.

You also seem to gloss over the facts, yes as niche markets go LD fared extremely well but that was precisely because people where willing to pay an extremely high price for them so it made it worth it to studios to release some titles on LD

Anthony, before you starting letting your personal feelings get the best of you and jump all over everything that doesn't put Blu-ray on a pedestal maybe you should actually do some research or know what it is you're talking about before you go jumping on people. Especially people you don't know personally. I don't think our conversations would go nearly the same way if we were in the same room together

I think that covers you way better then me, you seem to have a problem to respond to posts and you respond to stuff that is not even posted just because you don't feal like dealing with what was actually posted.

As for my posts, I write the same way I talk, I have no problem telling my boss or my clients if they say something stupid.

[dialog_gvf]

Originally Posted by Maxpower1987

Yes. Definitely, the CE industry would be very upset. The studios would be worse off as DVD revenue is going to decrease at much more rapid rate than they had imagined. Blu-ray is the last hope for the studios to re-sell their catalogue.

Well, that is likely the cold hard fact.

Instead of wanting a mass adoption that will drive margins down toward (I'm sure they are desperately hoping against TO) DVD levels, wouldn't it be in their best interests to cultivate a market willing to pay a permanent premium?

So, make DVD basic and boring, and put ALL the extras (in HD) on BD at a nice premium. It won't lead to mass adoption, but if this is the LAST chance why blow it all?

People are all pushing for $200 players and $10-$15 discs, but what happens to the studios after this generation?

Gary

[Anthony P]

I think a potential investor (if Viacom was a publically traded company) would look at the company as a whole.

obviously, I did not say it would be they would only look at one thing, just that if someone is looking at the company as hole and they are not an idiot and just look at the last line (the kind of investor that gets caught in Enron type of fiascos a 30M$ bribe does not look good.

As far as I know, Paramount and Viacom do not have some huge track record of terrible blunders.

well there was also the Spielberg fiasco, last year.

Looking at this HD-DVD deal, from what was reported, the deal was for 18 months of exclusivity, or $50 million, and that's what would have happened if HD-DVD hadn't died off early.

it did not die early, that bribed helped prolong it a bit longer, in the end Toshiba’s investors decided since it was beyond question that HD DVD was doomed and would not survive for long it was better to cut the losses now and not haemorrhage money to continue that farce

This deal started back around August or September, if I recall correctly. That was 8 or 9 months ago. So, if HD-DVD hadn't already died off and was still going, they would only have about another 9 months of exclusivity to go, with another $20 million coming in as a result. The odds of them making THAT big of a profit from the sale of Blu-Ray media (adjusting that profit to consider that some money still would have been made from people opting for an alternate format to purchase movies on in the event of Blu-Ray not being an option) is pretty slim. And at the end of that 18 months, they could decide to do whatever they like, including releasing movies on Blu-Ray.

I think any logical thinking investor, looking at this situation objectively and not being blinded by the love of a particular format, would be able to see the logic in all of this.

not at all. I never said that in the short term it did not make them more money, but let me ask you this, let’s say there are two companies (X and Y)they both make dohickeys A decides to sell their dohickey manufacturing machine to Y. X has more money coming in (the $ from the sell) while Y has money going out. Let’s say that sale happened on the last day and until then they where equal. So X’s profits for the year are much higher then Y for the year, but if you just invested in X instead of Y (because on the higher profits on their books) you would be screwed because X mortgaged their future for those higher profits.

In the end what Paramount did might not be as obvious as the example I gave above, but it is not as simple they would not have made that much money selling BD.

[WickyWoo]

Instead of wanting a mass adoption that will drive margins down toward (I'm sure they are desperately hoping againt TO) DVD levels, wouldn't it be in their best interests to cultivate a market willing to pay a permanent premium?

No because as long as they're pressing DVDs, their content is wide open

[jdc115]

Originally Posted by Clark Kent

More Blu-ray units have been sold right now than the world wide total of D-Theater, SACD, and DVD-A lifetime units put together.

I would some how doubt this but then many people have DVD players that are also SACD players and DVD-audio players but either they do not know or they do not care. Considering the PS3 support SACD before the latest 40gig version, then I would think there are a lot of SACD players out there, just seldom used for SACD