Blu-ray Supply Chain Challenges

This week I had the opportunity to attend the Media & Entertainment Services Alliance (MESA) annual Entertainment Supply Chain Academy (ESCA)  in Beverly Hills.  As usual most of the discussion was on digital, digital, digital, which seems to be the overwhelming focus of all entertainment supply chain discussions these days.  However, there was one session on traditional physical products such as Blu-ray and DVD, which I found to be particularly insightful.  The session was presented by FutureSource Consulting, which has an amazing wealth of data and insights about the packaged home entertainment industry.  Below are some of the notes that I recorded during the session.  All of the data is from FutureSource.

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Home Video Format Wars – The Past 15 Years

In a post of October of last year, I summarized the home video format wars that occurred between VHS and Betamax during the 1980s.  Some of you may not be old enough to remember the VHS and Betamax battle of the 1980s, but a similar showdown occurred just recently in the high definition home video sector between HD DVD and Blu-ray.  The format wars in home video are interesting, because unlike many other sectors the packaged home entertainment market tends to converge towards a single standard.

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Toy Story – The Supply Chain Edition

The Consumer Products Safety Improvement Act (CPSIA) will lead to a safer Christmas for children this year due to its tighter restrictions on the use of lead and Phthalates in toys, games and youth apparel.  But were toys really that unsafe before the CPSIA regulation?  The roots of the law can be traced back to a series of high-profile product recalls in 2007 by leading toy manufacturers.  For example, in May 2007 approximately 1.5 million Thomas and Friends wooden toy train sets were recalled by RC2 Corporation due to the use of lead paint on the cars.  A few months later Mattel announced a voluntary recall of a group of Fisher Price toys due to a non-approved paint containing lead being used by its contract manufacturer.  Mattel conducted several subsequent recalls that ultimately totaled 1.5M toys worldwide.

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Betamax versus VHS – Format Wars in Home Video

One of the most studied format wars in the history of business occurred during the 1980s between Betamax and VHS.  Although Beta was introduced to the market first and offered superior picture quality, it quickly was displaced by VHS.  Beta’s 100% market share in 1975 was reduced to less than 25% by 1981.  There are entire books and hundreds of Internet pages devoted to why VHS was more successful than Beta, which make for a fascinating read.  I will only offer a summary here. 

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Using Prediction Markets to Forecast Box Office Success

Over the past few weeks there has been battle between the Motion Pictures Association of America (MPAA) and several large financial exchanges.   The debate centers upon the proposed creation of a formal derivatives market to trade contracts based upon box office receipts for upcoming movies.   Cantor Fitzgerald and Veriana Networks are the proponents of the futures exchange which would allow participants to bet on how well a film will do when released in theatres.  The futures exchanges argue that the new trading venues would provide transparency to the entertainment industry along with a new form of risk management.  Distributors, which have concerns about a film’s potential success, could short the security on the market.  MPAA, which represents the movie studios, has concerns about market manipulation by studio employees with insider information.

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Demand Forecasting Challenges for Packaged Home Entertainment

Today James Cameron’s Avatar launched on DVD and Blu-Ray.  The film was nominated for nine Academy Awards and broke previous box office sales records making Avatar the highest grossing movie of all time.  As a result, retailers and studios are expecting strong consumer demand for the DVD.  Pre-launch indications confirm their assumptions.  Avatar Blu-Ray is was ranked #1 on Amazon.com’s US bestseller list for weeks prior to the launch while the standard definition version has been ranked #1 on the UK site.  Packaged home entertainment products such as DVDs, CDs and video game categories, have a unique set of supply chain challenges unlike any other retail merchandise category.  Continue reading

Avatar DVD Launch – The Supply Chain Challenges

Two weeks from today James Cameron’s Avatar will hit the shelves at retail stores.  The film was nominated for nine Academy Awards and broke previous box office sales records making Avatar the highest grossing movie of all time.  As a result, retailers and studios are expecting strong consumer demand for the DVD on its April 22nd launch date.  Early indications confirm their assumptions.  Avatar Blu-Ray is already ranked #1 on Amazon.com’s US bestseller list while the standard definition version is ranked #1 on the UK siteMuch as with Apple’s iPad launch, there are significant supply chain challenges for retailers to forecast and fulfill the high demand for such major product launches.  But some retailers will enjoy a natural competitive advantage over others due to their ability to better forecast consumer demand for Avatar sales through the use of web 2.0 technology.

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