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| Why Netflix is splitting itself in two | |
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| Tweet Topic Started: Sep 21 2011, 06:01 PM (1,500 Views) | |
| Aqua Letifer | Sep 22 2011, 12:43 AM Post #26 |
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ZOOOOOM!
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I think you greatly, greatly over-estimate the uniformity of technological adoption in the U.S. DVDs will be around for about as much a time as VHS. Even when DVD players hit the market and the masses were clamoring to get their hands on them, VHS was still found in many small towns and rural areas. Hell you can still find them in some places. So too it will be with DVDs. |
| I cite irreconcilable differences. | |
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| Larry | Sep 22 2011, 01:48 AM Post #27 |
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Mmmmmmm, pie!
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I'll be sure to report this information to the trade magazines and other agencies who are tracking this stuff, they'll appreciate you informing them that they are wrong... First of all, you are thoroughly mistaken that DVD's are dying as a medium. You could not be more wrong it you tried. Sure, eventually they will die out - but it's not going to happen any time soon. As for Netflix streaming in HD - that's all just peachy keen, but it isn't Netflix that determines what you get, it's your internet connection speed. If you aren't getting a steady 5mps speed, you aren't getting HD all of the time. You may be getting that kind of speed, but lots of people aren't, and they will make the stop at the video store to be sure they are getting HD all the way through the movie.
Industry analysts predict that Netflix will lose around 30% of its subscribers over their recent changes, their stock is plummeting, and they have more competition coming to the table. They do not, and never have had, a "corner on the market". Even when they were just renting DVDs, they didn't have a corner on anything. Independent rentailers always have accounted for far more video rental revenue than Netflix could even begin to achieve. The demise of the big chain rental stores was a plus for independents. Getting the 4 week window back on a good portion of product was another big boost. Netflix shooting itself in the foot is another help. Video streaming? Not even a flea on the dog yet, in spite of how enamored some people may be with it. The marketplace is vastly different from your experience, and a huge number of people do not want to be bothered with it. |
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Of the Pokatwat Tribe | |
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| Larry | Sep 22 2011, 01:52 AM Post #28 |
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Mmmmmmm, pie!
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Oh - and there is one more very important factor that will assure the existence of the DVD for many years to come - "hard copy". People may be willing to stream a movie they plan to watch once and then never watch it again, but a huge number of the public want a video library of their favorite movies, and the best way to have a copy of their favorite movies is to have it on a DVD, on the shelf. People *love* bragging about the size of their video library - while they're paying me to rent movies...... |
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Of the Pokatwat Tribe | |
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| Larry | Sep 22 2011, 02:08 AM Post #29 |
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Mmmmmmm, pie!
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Now let me tell you how I money in the video business....... ![]() My store has a tanning salon. Good money maker. It has a porn room. HUGE money maker, and Netflix ain't gonna hurt me there... and it has a premium quality pizza business. Tanning: the income from tanning beds simply offsets the cost of electricity and maintenance on the beds. The money comes from the sale of tanning lotions, where you pay 7 bucks for a bottle of lotion that retails for 30 bucks, plus other skin products, bikinis, jewelry, etc. that goes along with it, all with huge markups. Averages a net income of around 8k per month. Pizza: On the worst day of the week we'll make about 300 pizzas. Average selling price of a pizza - 10 bucks. Average cost, 2 bucks. On the weekends we will average about 1500 pizzas per day. But the real money comes from the "added value" concept. "Buy your pizza from me, get your movies for free"..... This week's special - one large 16" two topping pizza, hand made dough, hand made pizza, made in a stone oven, top quality cheese and toppings instead of the mass produced "factory" pizzas you get other places.... the pizza, two new release movies, a 2 litre bottle of coke, a big tub of theater buttered popcorn, 19.95... dinner and a movie for a twenty. Now - while your pizza is cooking and you are paying, the clerk points out to you that your purchase entitles you to select 3 more older movies for a buck each, and if you do, instead of keeping the two new releases for one night, you get to keep all 5 movies for 5 nights, all for only 3 bucks more. Most do it. So they leave 23 bucks on the counter, and they get a pizza that cost me maybe 2.50 to make, a bottle of coke that costs me just over a buck, a tub of popcorn that costs me a buck fifty, and 2 new releases that will generate an average of 80 bucks during its life span, plus 3 old movies that have already costed out. So let's say my total cost including gas, movies, everything, is 8 bucks. That is a 15 buck profit on each sale. Now figure up 1500 pizzas.. per day on the weekends.... they line up for it like they were at the grocery store... Oh - and save your receipts!! For every ten pizza packages you buy, you get a pizza package free!! Plus, the computer keeps track of how many movies you rent, and every ten paid DVD rentals earns you a free new release rental... OH!! and if your paid rentals averages 3 or more new release movies per week, you are entitled to purchase previewed new release DVDs after 6 weeks on the rental shelf for 5 bucks each!! OH! if you buy a month unlimited tanning package, you get a free pizza package! OH!! For every new release you pay to rent, you get a free children's movie rental!! You see how it works? I don't care what Netflix or Redbox does. They don't have pizzas, and they do not have the ability to put together package deals that offer the kind of value for the dollar I give the customer. That doesn't even begin to include the porn room, where I buy DVD's for one dollar each, rent then for 5 bucks for 2 nights, then sell them used for ten bucks each. Three for 25, or course..... and you'd be surprised who some of my best customers are.... hehe It's not unusual for people to buy as many as ten dvd's at a time from that room. Edited by Larry, Sep 22 2011, 02:19 AM.
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Of the Pokatwat Tribe | |
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| John D'Oh | Sep 22 2011, 03:46 AM Post #30 |
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MAMIL
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I never rent DVD's, but I love buying them. I don't download music either - everything I have is on CD. I can't be the only one, can I?
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| What do you mean "we", have you got a mouse in your pocket? | |
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| Chris Aher | Sep 22 2011, 04:58 AM Post #31 |
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Middle Aged Carp
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This is a most interesting thread. I've gotten involved in this side (network capacity and back end logistics) of the telecom business over the last year from the wholesale perspective. The industry is gearing up to deliver digital content (not just films) on a very large scale from the content providers (think studios, production companies, etc) to the wholesale distributors (Netflix, Amazon, and many other outlets around the world). This will probably be my last major project before retirement from the industry. KB is quite correct in his analysis. One of the key elements that the production companies want for this is the ability to add specific content overlay targeted for very granular market segments. The current estimate is that any specific piece of digital content will need to be in as many as 60,000 different format/overlay combinations. Think language, local and customer specific advertising, etc. Think of an end customer in Tennessee being ably to watch the latest Bollywood production in Bulgarian and being able to pause the film to order Larry's pizza with a click of the remote. Larry is also correct for his market. There are many fringe (often rural) markets that will be better served (profitably!) by local hard copy distribution for years to come. In my market, in semi-rural Connecticut, this market has all but dried up. All but one video store have folded and that one is on shaky ground. On the other hand, 20 miles north, that market is doing OK for now. |
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Regards, Chris | |
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| Axtremus | Sep 22 2011, 05:45 AM Post #32 |
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HOLY CARP!!!
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"Trade magazines" are always overly optimistic about the "trade" of its focus. They have to. Who would want to have their ads in "trade magazines" next to articles predicting the shriveling and death of his type of business? That said, I agree with most of what Chris Aher wrote above. |
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| brenda | Sep 22 2011, 07:34 AM Post #33 |
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..............
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Yep, they're getting ready to sell it. That would be my guess. |
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“Weeds are flowers, too, once you get to know them.” ~A.A. Milne | |
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| KlavierBauer | Sep 22 2011, 08:32 AM Post #34 |
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HOLY CARP!!!
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When I say DVD is dying as a medium I don't mean that it will disappear from the planet. Mass production of VHS for major studio releases on VHS stopped a *long* time ago. Obsolete doesn't mean that nobody purchases them - it means that not a significant number of people purchase them. Of course people will have DVDs for some time. The plastic will last virtually forever, and unless people destroy them, every DVD that exists right now will continue to for some time. I still have a huge DVD collection, and still watch movies. Even for something I own though, I'm more likely to download a 1080 copy and stream from my computer to the TV. Larry - I understand what you're saying, and you're not wrong. I'm not wrong either though - I'm speaking for the greatest marketshare. *Most* people will have access to high speed internet. Comcast just launched a program in this area to bring $10/month broadband to poor people. Before long there will be massive WiMax networks capable of delivering massive throughput to most of the continental U.S. While not everyone has broadband today, most everyone will have it inside of 5, and certainly 10 years. Yes - there is some % of people who won't - and they'll still want DVDs - but the format will nonetheless be obsolete, and production companies will quit printing them. Even BluRay will be very short lived relative to the DVD. The need for physical media will simply cease to exist for the vast majority of the population.
Yes, I definitely see how it works. I think it's great that you've found a profitable DVD rental model. Do you see how it will work in the future? All sectors will transition this way - none faster than porn, who already 10 years ago had lost nearly half of their revenue from physical movie rental to the Internet. Today those numbers are even further apart. I'm not saying DVDs will disappear from the planet tomorrow. I'm saying that with the increased cost to publish and distribute physical media, and with the population segment concerned about the "hard copy" principle aging, it is a short time before onDemand content is the norm. At some tipping point, the studios will have to stop printing DVDs, because the sales won't justify the expense of a physical medium. If the DVD rental industry was doing well as a hole, I'd still see a Blockbuster or Hollywood Video on every street corner. I'm not sure why you think on-demand streaming isn't popular. It's incredibly popular. There's a huge movement right now to move toward this way of viewing commercial free TV, and both networks and content distributors (Comcast) are scrambling to catch up, as people cancel cable/dish left and right, in favor of a Netflix/Hulu Plus combo (or another combo of services) which cost a fraction as much. Not to mention for only another $10 or so a month, one has unfettered access to usenet, and the largest library of content ever. $20/month for HD versions of every TV show or movie I can think of? Commercial free, start/pause/fast forward as I please? Even my DVR can't do that, and I LOVE my DVR. |
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"I realize you want him to touch you all over and give you babies, but his handling of the PR side really did screw the pooch." - Ivory Thumper "He said sleepily: "Don't worry mom, my dick is like hot logs in the morning." - Apple | |
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| Larry | Sep 22 2011, 08:55 AM Post #35 |
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Mmmmmmm, pie!
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We aren't disagreeing on what will happen, we're disagreeing on when. The DVD market has another ten years of life left in it, for those who know how to market it. I won't care *what* the DVD market is like in 5 years, so I'm good. |
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Of the Pokatwat Tribe | |
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| KlavierBauer | Sep 22 2011, 09:05 AM Post #36 |
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HOLY CARP!!!
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And that's all I'm saying - inside of ten years the format is obsolete and off the shelves. Inside of 5 it's obsolete and hardly used. |
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"I realize you want him to touch you all over and give you babies, but his handling of the PR side really did screw the pooch." - Ivory Thumper "He said sleepily: "Don't worry mom, my dick is like hot logs in the morning." - Apple | |
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| Larry | Sep 22 2011, 09:19 AM Post #37 |
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Mmmmmmm, pie!
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Pardon the misunderstanding then. You made it sound like it was going to happen next week. Heck, ten years from now streaming may be obsolete. |
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Of the Pokatwat Tribe | |
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| Chris Aher | Sep 22 2011, 09:28 AM Post #38 |
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Middle Aged Carp
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Larry, Watch your timing on this one. I wouldn't trust the trade magazines for your market on this. The content producers are the driving force behind this. They are making a major investment in the digital distribution arena. The economies of scale on a worldwide basis make it an imperative for them. Your market will probably last longer than most but don't get caught unawares. (not that you would )
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Regards, Chris | |
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| Luke's Dad | Sep 22 2011, 10:00 AM Post #39 |
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Emperor Pengin
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I wouldn't be so quick to play taps for the DVD market: http://www.homemediamagazine.com/redbox/coinstar-no-22-fortune-list-25053 Remember something, there's a whole different world outside of some of the upscale technohip communities that many of us are part of. There are still large areas of the country where the idea of downloading a movie or streaming would be absurd because of how slow the connection speeds are. Eventually DVD's will go the way of the dinosaur, but not for another 7-10 years I think. |
| The problem with having an open mind is that people keep trying to put things in it. | |
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| Larry | Sep 22 2011, 10:04 AM Post #40 |
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Mmmmmmm, pie!
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You're right, I won't.... hehe I spent two whole years restructuring my business model, and the DVD rentals went from being the main source of revenue to where it is now, an add on to the pizza kitchen. That thing is making money hand over fist. I'm about to divide the store again, and partition off one end of it to build another fast food business, focused on ice creams. It will take about 40% of the current video display area, but what the heck.. |
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Of the Pokatwat Tribe | |
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| The 89th Key | Sep 22 2011, 10:05 AM Post #41 |
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Yeah I knew that, doesn't bother me in the least. I have about 500 movies on my netflix queue, so I'm sure I'll get to the newer releases eventually.
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| The 89th Key | Sep 22 2011, 10:08 AM Post #42 |
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Good points. One of my fondest memories as a kid was going to the local Blockbuster to pick out a movie from the shelves to watch later that night as a family. Definitely added some value to the movie-watching experience. |
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| ivorythumper | Sep 22 2011, 10:19 AM Post #43 |
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I am so adjective that I verb nouns!
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Which is why I asked, "How long is the question, and how long is a long time in this industry?" |
| The dogma lives loudly within me. | |
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| Larry | Sep 22 2011, 10:26 AM Post #44 |
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Mmmmmmm, pie!
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http://www.homemediamagazine.com/research/ema-disc-still-has-life-24772 "day after The NPD Group came out in defense of packaged media, the Entertainment Merchants Association backed the research firm up, providing data showing disc sales on top of every other form of video content." The EMA’s Aug. 11 report, “D2 Report: Discs & Digital: The Business of Home Entertainment Retailing,” shows consumer spending on DVD and Blu-ray Disc amounts to 42% of all entertainment spending. That compares to 25% at the box office, 27% on pay or premium TV, and 5% on VOD and electronic sellthrough, or EST." "“The home entertainment industry should be encouraged by the strong consumer support for packaged media demonstrating that discs and digital content will coexist in the foreseeable future,” said EMA president and CEO Bo Andersen." |
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Of the Pokatwat Tribe | |
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| KlavierBauer | Sep 22 2011, 11:34 AM Post #45 |
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HOLY CARP!!!
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Already addressed this - I don't think it will take anywhere close to a decade to bring broadband connections to 95% of the population. Of the % of people who don't have access to broadband, many can find provision with WISPs or Satellite providers now (though they may be unaware), and within 5 years technologies like WiMax and Power-Line will help make the number of people without access very small. LEO and MEO satellite systems in fact, don't even have the latency typically associated with satellite systems, and provide a very viable solution to most folks who can see the southern sky. Australie is currently in the midst of a project which will roll fiber out to over 90% of their population. I don't think it will be long before broadband Internet is seen as a necessity, and will be available to everyone regardless of location on the globe. |
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"I realize you want him to touch you all over and give you babies, but his handling of the PR side really did screw the pooch." - Ivory Thumper "He said sleepily: "Don't worry mom, my dick is like hot logs in the morning." - Apple | |
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| KlavierBauer | Sep 22 2011, 11:36 AM Post #46 |
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HOLY CARP!!!
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Question - since most BluRays come with a packaged DVD version as well, is the sale of the BluRay being counted twice - once for BluRay sale, and once for DVD sale? |
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"I realize you want him to touch you all over and give you babies, but his handling of the PR side really did screw the pooch." - Ivory Thumper "He said sleepily: "Don't worry mom, my dick is like hot logs in the morning." - Apple | |
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| Larry | Sep 22 2011, 11:44 AM Post #47 |
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Mmmmmmm, pie!
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Actually, most of them don't. Some do, some come packed with a digital version for loading to your computer, but the majority just come with the blu ray disc. But to answer your question, I seriously doubt they are counting the ones that do come with a regular DVD packed in it twice, since they count each package as one unit. Edited by Larry, Sep 22 2011, 11:47 AM.
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Of the Pokatwat Tribe | |
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| jon-nyc | Sep 22 2011, 11:59 AM Post #48 |
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Cheers
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Hell, I heard they now have DSL in rural Tennessee. |
| In my defense, I was left unsupervised. | |
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| The 89th Key | Sep 22 2011, 12:18 PM Post #49 |
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| KlavierBauer | Sep 22 2011, 12:24 PM Post #50 |
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HOLY CARP!!!
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Every BluRay I've purchased in the last year has had three versions - BR, DVD, and digital copy. I have to look to find ones that contain only the BR disc.
Why wouldn't they count them as both a package BR, and package DVD sale, since it is both? I have no evidence either way, but it seems logical to me that a package containing both a BluRay, and a DVD, would count as 1 BluRay sale, and 1 DVD sale. I can guarantee you that on the rights side of it, there are two sets of rights being sold - one to own/view DVD content, and the other to own/view BR content, each with separate agreements and pricing structures. I suspect that DVDs sold with BluRays as a combo are still counted as a sale. They should be. My only gripe with it would be that it's often hard not to purchase a DVD if it's packaged with your BluRay, so the number may be slightly misleading or inaccurate for the purposes of shedding light on current trends. |
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"I realize you want him to touch you all over and give you babies, but his handling of the PR side really did screw the pooch." - Ivory Thumper "He said sleepily: "Don't worry mom, my dick is like hot logs in the morning." - Apple | |
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