Tuesday, July 12, 2005

Hollywood's business model threatened ... once again

It looks as if every 15 years Hollywood faces an inminent threat: MP4, video, foreign films, TV. However it has managed to reinvent itself. ¿What is the treatment doctor for a pacient hooked on DVD sales and facing substitution? ¿Maybe to leave blockbuster medicine and embrace low-budget films innovation?

FT.com: DVD sales slump proves more is less
"DreamWorks added to the gloom on Monday when it disclosed that retailers
were continuing to return copies of its DVDs, and predicted a loss for the

This spate of bad news for DVDs is a blow not just to the individual studios that have warned but also to Hollywood: DVDs have been the industry's lifeblood in recent years even overtaking box office receipts. PwC says Hollywood generated a record $15.2bn in DVD sales in 2004 an increase of more than 30 per cent. That compared with just $9.4bn in box office revenues last year.

One of the main attractions of DVDs has been their low manufacturing costs providing bigger margins to the studios than the VHS tapes they replaced. Their contributions are all the more important at a time when the box office has been mired in a record slump that has stoked fears that consumers are turning to the internet, video games and other sources of entertainment.

The studios are suffering in part from a long-anticipated slowdown in DVD sales as the market matures. Tom Wolzien, a media analyst at Sanford Bernstein, has predicted that sales will drop from double-digits to 9 per cent this year, and 4 per cent in 2006."

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