Many people have asked us lately, what the deal is with Fox and Paramount - even more so after the “Independence Day” menu screens we have been showing recently. Well, Paramount have announced their DVD support on April 27, but Foix is still holding out. Obviously the studios is not publishing DVD right now and no announcements have been made as to whether they will start sometime soon, or at all. I would like to take the chance here and simply comment on the situation, the way I see it these days, and frankly, to me it is not a question, if Fox will publish DVD. The question is when? This is even more true with Paramounts momentous announcement earlier.

While reading this commentary, please bear in mind that all of this is simply my personal take on the situation and speculative. The reason I publish it here is to help you understand, what could be a possible and likely scenario.

In the current situation, it seems that Fox is holding out, waitinguntil the market has grown a little further. Even though rumors are spread, they would not release titles to the DVD platform because of their commitment to DIVX (a proposed pay-per-view version of DVD), I think this is highly unlikely for various reasons, which I do not want to discuss here - mostly because I do not wish to stir up any fears and second-thoughts about DVD’s bright future and also because I believe any kind of additional exposure of this format is just making it stronger. I’d rather have people forget about it.

Fox will join the DVD publishers sometime, there I have no doubt, the real question seems to be, when. The reason for their stance and the matter of the problem the way I see it, is called “product sell-through” and “shelf live”. Whenever a studio publishes a title on DVD, or VHS for that matter, only a few weeks later, the product is considered a back-catalog by both, the studio and retailers and most of the time the public as well. As a result the product will not receive a lot of attention and pretty much no marketing any more, because there are new titles waiting already, that need and deserve exactly this attention and exposure. In practice this means that most titles usually don't sell big or even steady numbers after their initial release sales.

What would supposedly happen if Fox published, let's say"Star Wars", now? They’d release it and maybe 200,000 people would buy it, because that seems to be what the size of the DVD market currently allows. Only a month later, it would be considered a back-catalog title and would most likely not receive any more focused attention. These products usually end up somewhere on the shelf without much exposure from retailers, because of all the hot and new titles coming in now.

If new customers join DVD in the next months, "Star Wars", while still available, will not be hot property any longer and you might even have trouble finding it between all those hundreds of other back-catalog titles. This might not be true for online stores, but since the majority of people is buying discs in retail outlets, the title's sell-through would decline and there would be an end to the product's life at maybe 250,000 units - just for arguments sake.

Okay, let's take a look into the future for a minute and suppose Fox holds out until Christmas 1998. The DVD market has grown in themeanwhile and now allows an initial sell-through of, say 800,000 titles, as opposed to the meager 200,000 it currently holds. It is a lot more advantageous for them to wait until the market has more potential, because if they launched "Star Wars" now, they’d have a huge sell-through on the very first day and even though the product dies after a few weeks, they have reached many, many DVD owners. Much more than they could possibly sell to if they released the disc now. I am by no means happy with the situation and would wish Fox to have joined months ago, but it is unfortunately a fact of market mechanics that products have limited shelf lives and no matter how big the movie is, its sales will fizzle eventually - that by the way is the reason why many studios release their movies over and over again on VHS or Laserdisc. With a new box, in a Platinum Edition, in widescreen, in a Gold Edition, with a trailer, in a Silver Edition and so on. I believe you know the game. They could theoretically do the same thing with DVD - and I am sure they will eventually - but here comes yet another problem into play. Customer expectations. If Fox released "Star Wars" now, everyone wants to see the new Special Edition, right? Of course. And since DVD users are spoiled anyway, they want all the gimmicks like international trailers, the 16:9 enhancements, the documentary, the “Making of”, four commentary tracks and an Easter Egg on top of it - otherwise people simply cry bloody murder. If Fox wants to re-release "Star Wars SE" in, say, two years from now, simply to reach the now bigger DVD market, they will have quite some problems on their hands finding enough material to get people excited yet another time, simply because it is all out there already! It is an intrinsic problem with DVD and the rich supplements people have come to expect from those discs.

The whole problem is amplified by the fact that Fox have a relatively small market share, compared to the Warner, the Sony or the MCA conglomerates. They have a limited amount of titles, but most of them are, shall we say, jewels and very hot property. They need powerful sell-through on those few titles they own in order to make enough money to carry a whole DVD department. Warner on the other hand has such a huge catalog that they create their cashflow to maintain a DVD department simply by the sheer number of releases, because cumulated they move quite a bit of units producing money for them, and that’s what counts in the end.

Having said all this, let’s support the publishers that currently publish to DVD to signal to Fox how big a market there is and how much money they could make in the meanwhile, bolstering up their profits.

As you can see there are many pros and cons in this field and many of them are evaluated by people in the studio’s marketing department. Those people usually know their job well enough to make sound suggestions to the studio’s executives, who then make the final decisions. While these decisions might not always seem sound to us as customers, believe me, they will always be in the studio’s best interest, which somewhere down the line also means in our own best interest. If the studios don’t make money, they won’t be able to create the next $200 mio blockbuster we are drooling over so much.

There is not much we can do at this point but wait until Fox will hopefully announce their first DVD titles and in the meanwhile, why don’t we take this discussion over to our chat forums to hear what everyone has to say about it. I am very happy however that Paramount have finally decided to give DVD their attention and us customers their top-notch titles.

April 29, 1998

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