Blockbuster Picks a Side in the HD Format Wars

[El Roranous]

You are right about it being the superior technology. However, that doesn't always equal victory in these matters. Betamax was far superior to VHS. However, the market chose VHS and the rest is history.

I won't pretend that I am backing Blu Ray because of some technophile yearning. I own a PS3 and don't want to have to shell out another 300 to 500 bucks for HD-DVD player if Blu Ray fails.

Funny you should say that because I own an Xbox 360 with an HD DVD player add on and I don't want to shell out another huge sum of money for a PS3

 

[BadMoon]

You are right about it being the superior technology. However, that doesn't always equal victory in these matters. Betamax was far superior to VHS. However, the market chose VHS and the rest is history.

I won't pretend that I am backing Blu Ray because of some technophile yearning. I own a PS3 and don't want to have to shell out another 300 to 500 bucks for HD-DVD player if Blu Ray fails.

You own a PS3................
.
.
.
.
.
.
.
.

.
.
.
.
.
.
.
.I'm Sorry!

 

[tomandshell]

I have both, enjoy both, and prefer HD DVD.

However...

Hot new titles like Pirates on Blu-ray or Matrix on HD DVD are selling in the mere thousands of units. Neither format is encountering widespread mainstream success. People on both sides are so busy fighting with each other and attempting to get an edge in the war that they seem to be failing to notice that sales totals for both formats combined are the tiniest of blips on the radar financially. The format war is generating far more publicity and debate than revenue. (Although it seems that the Blu-ray camp is always the one that comes off as far more desperate in their attempts to discredit and smear and tarnish the opposing side, regardless of truth and accuracy.) At this point, Blu-ray wants to brag about being the biggest hot dog cart on Wall Street. Fox is so disappointed with the weak sales that they cancelled most of their pending releases and have been almost completely silent about any new announcements since then.

And as far as Blockbuster goes, I haven't rented there in years. I keep expecting them to go bankrupt and close down all of their stores. They have been struggling to compete with Netflix for a long time, and people like me who prefer to purchase their movies and build a large collection left a long time before that. If they think that this announcement is going to turn things around financially then I really do feel sympathy for them.

I find it much more interesting that starting next year, all Toshiba laptops will ship with a standard internal HD DVD drive.

 

[nash]

since when were toshiba laptops the brand to own?

 

[tomandshell]

Blu-ray is a superior format over HD, due to blu-ray being able to hold a substantial amount of info on its disc. Which in the long run mean more potential for the format, more content that can be added to the movies. High technology is alway a tad more expensive when it first comes out. I rather pay 30$ for a blu-ray, if it means im getting superior quality over DVD, even HD

Increased capacity does not guarantee quality. I would take a great transfer on a 30 GB HD DVD over a crappy transfer on a 50 GB Blu-ray any day of the week. People are getting space confused with quality. The same transfer can be put on both formats and look identical, as we have repeatedly seen with Paramount and Warner titles released on both formats. It's not the space--it's how you use it.

 

[hairlesswookiee]

I have both, enjoy both, and prefer HD DVD.
I find it much more interesting that starting next year, all Toshiba laptops will ship with a standard internal HD DVD drive.

i agree with Tom!!! i want the PS3 to have both formats, its cool that laptops will have HD drives inthem.... macbook Pros are rumored to start shipping with BluRay drives next year.

 

[tomandshell]

since when were toshiba laptops the brand to own?

I don't own a Toshiba but I have in the past. I just think it's interesting that all Toshiba laptop owners will have an HD DVD drive whether they like it or not, much like all PS3 buyers were forced to own a Blu-ray player.

 

[hairlesswookiee]

Blu-ray is a superior format over HD, due to blu-ray being able to hold a substantial amount of info on its disc. Which in the long run mean more potential for the format, more content that can be added to the movies. High technology is alway a tad more expensive when it first comes out. I rather pay 30$ for a blu-ray, if it means im getting superior quality over DVD, even HD

prove it. just because you can store more stuff on a blu ray doesn't mean its better. the video quality are the same on both discs. and HD has a new way of compressing their video that is being used and some people say it looks better than blu ray.
~~i've said it before---- Blu Ray>HD DVD for COMPUTER applications. HD DVD> Blu Ray for HOME VIDEO applications.

 

[bagelsncheesey]

let the format war rage on!!!!

i have both, so i'm not worried. yay

 

[DouglasMcc]

You own a PS3................
.
.
.
.
.
.
.
.

.
.
.
.
.
.
.
.I'm Sorry!

So, the fact that I own a PS3, an X-Box 360, and a Wii, makes you the sorriest right?

When it comes to gaming, I buy all the machines and then play the best games. No need to "settle" for one system if you can afford them all. And I am no where near rich ... I teach elementary school. It's just that while some of you guys are blowing 600 bucks on a full size Greedo head bust (insert any expensive piece here you like) I am investing that in hardware. That's not meant to be a slight or anything. If that's what you want, then more power to ya. Its just that I prefer to keep my collectibles below the $100 mark and my entertainment cabinet full :chew

 

[hairlesswookiee]

i think he's referring to the idea that the PS3 has maybe.... one game thats worth playing right now?? im holding out until MGS comes out then i will drop the bills on a PS3, but until then Sony has let all their fans down big time.

 

[DouglasMcc]

I have both, enjoy both, and prefer HD DVD.

However...

Hot new titles like Pirates on Blu-ray or Matrix on HD DVD are selling in the mere thousands of units. Neither format is encountering widespread mainstream success. People on both sides are so busy fighting with each other and attempting to get an edge in the war that they seem to be failing to notice that sales totals for both formats combined are the tiniest of blips on the radar financially.

You say that like you are surprised. 85% of Americans - not trying to be US-centric, but it's the only data I know - don't own TVs advanced enough to exploit true HD-DVD. So, why should these people make the move to either HD format yet? I got into DVD at its introduction and it was the same way. People were so into VHS, I would have to order my DVDs online because no one stocked them. HD-DVD and Blu Ray are going the same route as DVD. I would imagine there will be a surge next year when the networks make the government mandated switch to complete digital broadcast - if the FCC doesn't postpone the date. Either way, both formats are "cutting edge" and Joe Smoe consumer never gets behind cutting edge til its affordable. The only slight advantage Blu Ray has over HD-DVD is that alot of people who would never have spent 600 dollars on a stand-alone player got one when they bought their PS3. I am willing to bet that's the main reason for the sales lead right now.

Fox is so disappointed with the weak sales that they cancelled most of their pending releases and have been almost completely silent about any new announcements since then.

Where exactly are you getting that info from? Because when I go to Amazon, I still see a huge number of day and date Blu Ray releases (with their regular DVD counterparts). Maybe they postponed their older catalogue roll-out, but I couldn't blame them. Might as well wait til both formats are more wide spread.

And as far as Blockbuster goes, I haven't rented there in years. I keep expecting them to go bankrupt and close down all of their stores. They have been struggling to compete with Netflix for a long time, and people like me who prefer to purchase their movies and build a large collection left a long time before that. If they think that this announcement is going to turn things around financially then I really do feel sympathy for them.

Maybe it's a regional thing, but Blockbuster has pretty much put all the other brick and mortar stores out of business around here. They also have been stealing Netflix's customers by the 1000s since they went to the instore return/ free rentals model. Can't find the place where I read it earlier in the year - so take it for hearsay - but their online service had overtaken Netflix's user base too. And, while I do buy my favorite movies (DVD collection was at 900+ last time I counted), I learned awhile back to buy what I love and rent the rest. Think about it, for 17.99 - about the cost of 1 DVD, I can see every DVD released in a month through Blockbuster online. It's win-freakin'-win to quote Peter Griffin.

 

[BadMoon]

So, the fact that I own a PS3, an X-Box 360, and a Wii, makes you the sorriest right?

When it comes to gaming, I buy all the machines and then play the best games. No need to "settle" for one system if you can afford them all. And I am no where near rich ... I teach elementary school. It's just that while some of you guys are blowing 600 bucks on a full size Greedo head bust (insert any expensive piece here you like) I am investing that in hardware. That's not meant to be a slight or anything. If that's what you want, then more power to ya. Its just that I prefer to keep my collectibles below the $100 mark and my entertainment cabinet full :chew

I myself am a big gamer. I always have to have the latest and greatest. That's why I don't own a PS3.

 

[DouglasMcc]

i think he's referring to the idea that the PS3 has maybe.... one game thats worth playing right now?? im holding out until MGS comes out then i will drop the bills on a PS3, but until then Sony has let all their fans down big time.

I won't lie, I bought the PS3 with my eyes on the future. I think it's silly to say there's only one game worth owning (I own 7 and they are all worth playing) but if you are referring to exclusives, you got a point.

I bought a PS3 earlier in the year, because A.) I got it for 400 bucks thanks to a Gamestop trade-in promotion, B.) as of the latest firmware upgrade, it upgrades all PS1 and PS2 games to 1080P - doesn't exactly make them next gen, but the high resolution makes them look nicer on a 1080P TV, and C.) PS3 will have plenty of games worth playing in the near future. I also figured I should buy it while I had the spare money ... who knows what finances will be like when the games start coming down the pipe at X-mas and beyond.

Anyone who bets against Sony is either a Sony basher or delusional. Now, am I saying they will win the "Console War"? Not necessarily. Because if the world wide Wii fade doesn't dry up, they will never catch Nintendo. However, they will continue to make great games. Even if they are not the market leader, they will continue to make great games in hopes of retaking that lead with their next console. Heck, it's what Nintendo did for 2 straight console generations and it seems to have worked out great for them.


The luxury of having all 3 systems is I can wait and buy the version of the game (the multi-format ones) that runs best on that system. There really are no disadvantages to it.

 

[DouglasMcc]

I myself am a big gamer. I always have to have the latest and greatest. That's why I don't own a PS3.

However, if you stick to that mantra, you will own one in the future ...

 

[hairlesswookiee]

i know all about the latest PS3 updates. they should have done this from the start. upscaling all their previous games and dvds is something that the 360 has had since release. not to bash the PS3, but if they are so "HD" why didn't they have it from the launch?? and even though i praise them for offering free online playing.... LIVE is so much better.

 

[tomandshell]

I had several Fox/MGM titles preordered through Amazon, including Ice Age, Mr. and Mrs. Smith, Dances With Wolves, etc. I received an e-mail telling me that all those releases have been cancelled.

Of the 49 Blu-ray titles scheduled for release between now and this fall, not a single one is from Fox. You are correct in that there are plenty of upcoming day and date releases on the schedule. But they aren't coming from Fox/MGM:

June 19, 2007
Bridge to Terabithia (Buena Vista)
June 26, 2007
Black Snake Moan (Paramount)
Hustle & Flow (Paramount)
July 03, 2007
Flatliners (Sony)
The Patriot (Extended Cut) (Sony)
The Untouchables (Paramount)
The Warriors: Ultimate Director's Cut (Paramount)
July 10, 2007
IMAX: Blue Planet (Warner)
July 17, 2007
The Fifth Element (Remastered) (Sony) JUST LISTED!
Premonition (Sony)
Waiting... (Lionsgate)
Wild Things (Sony)
July 24, 2007
Ghost (Paramount)
The Host (Magnolia)
An Officer and a Gentleman (Paramount)
Out for Justice (Warner)
Purple Rain (Warner)
Weeds: Season Two (Lionsgate)
July 31, 2007
300 (Warner)
IMAX: Roving Mars (Disney)
Shooter (Paramount)
August 07, 2007
Are We Done Yet? (Sony)
Arlington Road (Sony)
Disturbia (Paramount)
Final Fantasy: The Spirits Within (Sony)
TMNT (Warner)
August 14, 2007
Bell Witch: The Movie (Big River)
Doctor Strange (Lionsgate)
The Lookout (Disney)
Vacancy (Sony)
Wild Hogs (Buena Vista)
August 21, 2007
Immortal Beloved (Sony)
National Lampoon's Van Wilder (Lionsgate)
Perfect Stranger (Sony)
August 28, 2007
Blades of Glory (Paramount)
September 04, 2007
Nip/Tuck: The Complete Fourth Season (Warner)
Remember the Titans: Director's Cut (Buena Vista)
September 11, 2007
Face/Off (Paramount)
September 18, 2007
Deliverance (Warner)
Flashdance (Paramount)
Jailhouse Rock (Warner)
Saturday Night Fever (Paramount)
Viva Las Vegas (Warner)
We Are Marshall (Warner)
Zodiac (Paramount)
September 25, 2007
The Jack Ryan Collection (Paramount)
October 02, 2007
Top Gun (Paramount)
October 23, 2007
Meet the Robinsons (Walt Disney)
Scary Movie (Dimension)
November 20, 2007
The Santa Clause 3: The Escape Clause (Buena Vista)

As for Blockbuster's ongoing financial problems:

Blockbuster May Be on the Verge of Bankruptcy


Blockbuster released its most dismal quarterly report ever on Tuesday, so dismal that it even included a warning that it may be forced to seek bankruptcy protection. The company reported a loss of $491 million during the quarter, most of it due to a write-down related to its spin-off from former parent Viacom. In-store business, it said, continued to be down due to the elimination of late fees, and online business remained flat as the company was unable to attract more than a fraction of Netflix's subscriber base. The company said that it plans to reduce marketing costs and sell or shutter its smaller rental chains, Movie Trading, Video King and Mr. Movies.

NEW YORK -- Blockbuster's problems continue to grow.
A competitive market and its decision to eliminate late fees hammered the nation's largest vidtailer in its most recent quarter -- a period dismal enough that the company warned it may be forced to seek bankruptcy protection.

Blockbuster lost $491 million over the most recent three-month frame and also saw revenues slip slightly, from $1.41 billion to $1.39 billion.

Much of its loss was the result of a goodwill impairment charge related to its separation from former parent Viacom -- essentially writing down the value of the company. Blockbuster said it would have bled only about $25 million without the various charges. But the vidtailer was unable to make up even that smaller amount with online business. Subscriber numbers there remain flat, at just a fraction of Netflix's sub base.

Blockbuster was able to narrow its loss compared with the weak third quarter of 2004, when the company lost $1.41 billion, much of that also in non-cash charges.

The bankruptcy warning came in a Securities and Exchange Commission filing in which the Dallas-based vidtailer disclosed it is seeking new agreements with lenders. If those agreements don't come through, the company warned it might seek bankruptcy protection.

Seeking more cash, Blockbuster also said it had arranged to sell $150 million worth of convertible preferred stock to institutional holders. An over-allotment provision could raise an additional $22.5 million.

In a conference call Tuesday, the company said it would slash marketing costs and sell or close smaller chains it owns, including Movie Trading, Video King and Mr. Movies.

Company also will garner $25 million by selling direct-to-video studio DEJ Prods. and will unload several game-specialty stores.

Blockbuster has lost $606 million through the first nine months of the year.

Despite the bad news, investor confidence wasn't totally shaken.

Stock slipped by only 10¢, to $4.20, as analysts generally agreed with the move of eliminating late fees. In the conference call, Blockbuster chairman-CEO John Antioco said the firm would maintain that policy.

Blockbuster made the controversial decision at the beginning of the year to get rid of late fees, a move akin to a credit card firm eliminating finance charges. Late fees accounted for 13% of total Blockbuster revenue in the third quarter of last year.

Blockbuster took the position that it needed to become more customer-friendly to compete with Netflix, which collects monthly fees but no late charges. Netflix now has 3 million subs, three times as many as Blockbuster's member service.

Blockbuster has also gotten squeezed on its other flank by Wal-Mart and discount retailers, which often sell DVDs at prices competitive with rental fees. Customer preference for repeat viewings have also shifted DVDs toward sales and away from rentals.

Blockbuster has thus far been unable to capitalize on shrinking theatrical distribution windows, which have given a boost to the DVD rental and sale market.

Hollywood's New Zombie
The last days of Blockbuster.
By Edward Jay Epstein
Posted Monday, Jan. 9, 2006, at 1:03 PM ET
An endangered species
In 1998, at the dawn of the age of the DVD, Blockbuster made a decision that would change the future of Hollywood. Warren Lieberfarb, who then headed the home-video division of Warner Bros., offered Blockbuster CEO John Antioco a deal that would have made the DVD the same kind of rental business as that of the VHS tape, which, at the time, provided the studios with $10 billion in revenue. Lieberfarb proposed that Warner Bros. (which, along with Sony, was launching the DVD) create a rental window for DVDs during which sell-through DVDs would not be available for new movies.

With this window, Blockbuster, which then accounted for nearly half of the studios' rental income from new movies, would have had the opportunity to rent out DVD releases before they went on sale to the general public. In return, the studios would receive 40 percent of the rental revenues that Blockbuster earned from DVDs, which was exactly the same percentage they received for VHS rentals. In fact, it was Sumner Redstone, whose Viacom conglomerate then owned Blockbuster, who personally pioneered the revenue-sharing arrangement for video. Only a few years earlier, Redstone had told Lieberfarb, "The studios can't live without a video rental business—we [Blockbuster] are your profit." Yet, even though Lieberfarb was only asking that the same deal be extended to DVD, Blockbuster, perhaps not realizing the speed with which the digital revolution would spread, turned him down.

Nevertheless, Lieberfarb, determined to make the DVD a success, went to Plan B: pricing the DVD low enough so that it could be sold to the public in direct competition with video rentals. Wal-Mart, seizing the opportunity for an enormous traffic-builder for its stores, began selling DVDs like hot cakes. By 2003, the studios were taking in three times as much money from DVDs as they were from VHS videos (click here for the actual numbers). In this reversal of fortune, Wal-Mart replaced Blockbuster as the studios' single largest source of revenue. Other mass retailers followed suit, often pricing newly released movies on DVD below their own wholesale price to draw in customers who might buy products with higher profit margins, such as plasma TVs. Blockbuster, with no other products to sell, became a casualty of this cutthroat competition for traffic. Not able to match these low prices, its rental business was decimated.

The other shoe dropped with the emergence of Netflix as a major online competitor for what remained of the rental market. (Blockbuster turned down the opportunity to buy Netflix for a mere $50 million, instead entering a disastrous home-delivery deal with Enron.) Netflix signed up over 3 million subscribers by 2005 by offering DVDs that could be kept as long as renters liked for a monthly fee. To compete, Blockbuster had to do away with its single biggest profit-earner: charging late fees to customers who kept videos past the due date. It also had to invest millions of dollars in a copycat online plan.

Meanwhile, even after many Blockbuster store closings, the company was paying the rent on over 4,000 brick-and-mortar locations in the United States. Initially, opening new stores every week had provided Blockbuster with outlets for the excess inventory of used videos from old stores. The resulting proliferation of stores also provided a competitive advantage when most people rented videos and needed a nearby location to return them. But as people switched to buying DVDs or getting them by mail from Netflix, this plethora of stores proved a liability, leaving Blockbuster hemorrhaging red ink: $1.62 billion in 2002, $978.7 million in 2003, and $1.24 billion in 2004. Still losing money in 2005, Blockbuster had to renegotiate its loan covenants to avoid being forced into bankruptcy. By 2006, the company Redstone had bought in 1994 for $8.4 billion had a market value of under $700 million.

Blockbuster can "reinvent" its store business, adding new products, such as popcorn, candy, and video games, and clone a Netflix-like subscription business, but it still has the albatross of the huge monthly rent payments from its stores weighing it down. Even if it could manage to slip out of these leases, it would still have to contend with Hollywood's move to deliver its movies into homes and iPods via video-on-demand. Offering movies that could be downloaded directly by couch potatoes, as I previously pointed out, is the Holy Grail for Hollywood, since it both cuts out middlemen like Blockbuster and leaves studios in control over their own products.

As far the studios are concerned, other than collecting the money that Blockbuster owes them for past movies, the video chain has little relevance to their future. Viacom perspicuously divorced itself from Blockbuster by spinning it off to its shareholders, and, as one Viacom executive told me, "Blockbuster will certainly not survive and it will not be missed." It is another zombie in Hollywood.

Blockbuster profit drops 28 percentUpdated: 11:01 a.m. PT Feb 27, 2007Font size: Movie rental company says decline caused by increased operating costsDALLAS - Movie rental company Blockbuster Inc. said Tuesday its fourth-quarter earnings declined 28 percent on increased operating costs.

Quarterly net income dropped to $10 million, or 5 cents per share, versus $18 million, or 9 cents per share, a year ago.

Adjusted earnings, which factored in a $5.1 million goodwill impairment charge, were $20.4 million or 9 cents per share in the October-December period. That compared with earnings of $25 million, or 12 cents per share, a year earlier that were adjusted for a reserve charge.

Dallas, Texas-based Blockbuster has been spending aggressively to build its online business, weakening the company's near-term financial results with heavy spending on advertising and movie inventories. But executives believe they have no choice that the growth of movie rentals is online while the in-store rental business shrinks.

Blockbuster is losing an undisclosed amount on the online business, but Chief Executive John Antioco has said it will be profitable next year as the number of Internet orders rises.

After years of financial struggles and decreasing profits, they are betting heavily on the online rental business, and have been closing/shrinking their B&M stores while heavily investing in the battle against Netflix--one that is losing them money at this point. Their only hope is to find enough success with online rentals to keep themselves finanficially solvent. And I don't think that the total number of Blu-ray rentals will be substantial enough to turn the tide of financial losses. If they can keep on top of the battle against Netflix then they will have a chance to come out on top, but it will be standard DVD that drives that success, not high def rentals.

 

[DouglasMcc]

Tom, I was going to quote and respond ... but the sheer magnitude of our ranting could very well erase existence. I just can't bring myself to chance it

I would like to point out that all but one of your articles is from 2006 - evident because of the constant mentions of the introduction of no late fees - which began in Dec. of 2005.

And yes, they were in deep trouble back then. That's until they realized that online rentals were the wave of the future. I wish I could find the source, but I read an article back in Feb. that stated that Blockbuster and Netflix were neck and neck for market lead online and the new in-store exchange program was only strengthen that.

As for Amazon saying that the Blu Ray's had been canceled ... well, anyone who used to shop on Amazon for Star Wars collectibles (back when they were partnered with TrUs) knows how big a crock that is. Every time Hasbro would delay something, Amazon would ship out a notice canceling the order and telling everyone that Hasbro had canceled the item. I have a feeling the same thing is true. They may not have any scheduled for the near future, but they will come. They made their bed when they sided with Sony - all they can do now is enjoy the ride and pray they didn't bet on the loser.

 

[tomandshell]

I don't want to have a heated debate on our hands and so I will surrender!



Actually, the last two were from 2007.

But I do know that the bulk of the Blockbuster articles were from throughout the last 18 months, as I have been reading of their financial troubles all that time. All I'm thinking is that if they think that announcing Blu-ray support is going to turn the tide for them financially, they are overestimating the size of the BR supporters at the present time. That's all. Their financial problems have been going on for a while, and the online business is their only hope, in my opinion. Last I heard they were still losing money on their battle with Netflix, but were beginning to gain ground. Only after they emerge victorius over Netflix can they begin to think about actually turning a profit.

And Fox's title cancellation is not just an Amazon thing. They have pulled their upcoming catalog titles from the calendar and have announced no other new released. I personally WANT to see Fox support Blu-ray, as there are many Fox/MGM titles I want to own in high def. But for now, they have pulled back into a "wait and see" mode. When they begin to make new announcements again or put their cancelled catalog titles back on the schedule, I will be among the first to place my order.

 

[hairlesswookiee]

this is where i usually get my news and information about the HD material:
https://www.highdefdigest.com/